Spielberg working on $1 billion plan for DreamWorks

Analysis

Steven Spielberg aims to raise more than $1 billion in third-party financing to reinvent DreamWorks as a separate company that once again owns the movies it makes.

As for the distribution of the films, Spielberg wants to bolt his roost at Paramount - which acquired DreamWorks in December 2005 - for Universal, which would like to land Spielberg and DreamWorks after losing out to Paramount in that quest a couple of years ago.

But on the recommendation of his advisers, Spielberg has allowed a bidding war to begin among studios for the right to distribute future DreamWorks movies.

A window in Spielberg's personal contract with Paramount opened May 1, allowing him to discuss potential offers for his services from rival studios. Since then, Spielberg or such advisers as DreamWorks chairman David Geffen and attorney Skip Brittenham have held several meetings with prospective studio suitors and financiers.

The chief suitors other than Paramount: Universal, Disney and Fox.

Warner Bros. has sat out the competition so far. Industry betting runs heavily against Spielberg's staying put at Paramount, with the related question of where he and the DreamWorks film label land considered a simple matter of who will offer sufficiently attractive terms to attract Spielberg, chief Stacey Snider and their brand.

“Stacey is the next generation, and Steven is very committed to her,” said one participant in DreamWorks strategy meetings.

Spielberg's contract runs until 2010, but he can terminate it early at year's end. Snider and Geffen have similar escape clauses in their deals with Paramount.

Spielberg will wield considerable leverage in any exit negotiations with Paramount and could insist on taking additional executives with him as he reconstructs DreamWorks elsewhere. Although Paramount owns “Transformers” and other films produced by DreamWorks while it was housed at the studio, Spielberg's rights regarding involvement on sequels could trigger negotiations over which films he brings with him and which would remain under Paramount's control.

There is the argument that early ill will between DreamWorks brass and their Paramount overlords has been smoothed over. The studio boosted DreamWorks' production funding and even credit on DreamWorks/Paramount releases during the former's residency on the lot.

But barring a complete revision of his arrangement at Paramount, only bolting the studio would allow Spielberg to stake actual ownership claim to his future films. He participated in just that through the original DreamWorks SKG, but at Paramount Spielberg essentially is a producer and director of films owned by others.

DreamWorks-produced movies have helped fill distribution pipelines at Paramount. The loss of such content would put severe demands on remaining production executives.

Even this summer, Paramount has been consigned to a distributor-only role in its highest-profile releases, such as the Lucasfilm-produced “Indiana Jones and the Kingdom of the Crystal Skull,” the Marvel-produced “Iron Man” and the DreamWorks Animation-produced “Kung Fu Panda.”

“Crystal Skull” has forged a worldwide cume of $579 million through its first three weekends, including $326 million in foreign coin. Yet industries will be watching for whether the film manages to get to the magical $300 million domestic threshold.

A failure to reach that benchmark would be construed by many - fairly or not - as a significant disappointment and could further undermine the tenuous relationship between Spielberg and company and their current corporate bosses at Paramount. (Reuters)

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