DreamWorks Desperately Seeking $250 Million
DreamWorks’ deal with Disney is done. But wait, didn’t DreamWorks already hype a distribution pact with Universal only four months ago? I can report exclusively that financially desperate DreamWorks needed $250 million — $100 million immediately and $150 million later, in the second tranche — to save its foundering Bollywood partnership. So Stacey Snider and Steven Spielberg demanded to change the terms of their deal with Universal so it would now include straight distribution and dough.
But Universal was reluctant even to invest $100 million. Universal wanted something in return. Spielberg was irritated when the studio came to him asking to renegotiate his long-standing consulting deal for 2 percent of the theme parks dating back to the days when Lew Wasserman/Sid Sheinberg controlled them. These days, that’s worth $50 million a year to the director.
And Universal also asked to delay for five years Spielberg’s “put” — his right to have the studio buy him out of the parks deal in a year. But it was also just one of a laundry list of blue-sky terms Universal and DreamWorks sought on the very first day of negotiations. When Spielberg balked, Uni took back the proposal within 24 hours.
The negotiations then dragged on for weeks. Which is when DreamWorks began secret talks with Disney. When I was alerted on the night of February 6 that a deal between them was “imminent” — to my amazement, given the rancorous history between both companies dating back 15 years — DreamWorks suddenly began ducking my calls. Snider/Spielberg had been moving heaven and earth to make sure no one in the media found out the true details of just what a fiscal crisis their company is in. I confirmed that Universal didn’t even know the DreamWorks/Disney talks were going on, much less in the final stages. You see, on February 6, DreamWorks had hoped to play Disney and Universal off one another and snag the best deal for itself during the next 48 hours.
That night, a flurry of memos and calls were exchanged between Universal and DreamWorks. By the morning of February 7, Universal pulled out. “We weren’t going further. This deal got to the point where it’s not in our interest,” a furious Universal bigwig told me. “And then when you learn they’re negotiating behind your back, it reflects upon what kind of partners you’re getting into business with.”
A DreamWorks insider replies, “Everybody has the right in business to change the rules of the game. Universal is understandably upset. But there are no victims and no villains. It became very clear at the end of the day that DreamWorks had a better deal with Disney.”
Snider phoned Universal Studios prez/COO Ron Meyer to apologize: “We had to do this. Our backs were against the wall. We couldn’t tell anyone about our discussions with Disney.” To which Meyer replied, “What you did was wrong on every level. You guys behaved like pigs.” I have since heard that Snider, who was once Meyer’s lieutenant, is deeply offended that he called her that.
But that’s a relationship torn asunder even though they, like Uni and DW, used to be the best of pals. Then again, this was the third time in their 15-year relationship that DreamWorks has gone behind Uni’s back. The first was when Spielberg hired away Snider. The second was when DreamWorks negotiated until the eleventh hour and then sold itself to Paramount. And we all know how disastrously that turned out. This time, Paramount sat back, quietly watching the Universal/DreamWorks mess unfold. As one insider told me: “You have to know that Brad Grey and Rob Moore must be the happiest people in the world.”
DreamWorks has been haunted by the worldwide financial crisis, which delayed the bank financing it needs to complete its big Bollywood deal and raise a total of about $1.25 billion in debt and equity. Right now, DreamWorks claims it has half the lender commitments it needs — $150 million, in the first phase of the $325 million bank syndication — before it can secure a matching contribution by biz partner Reliance Big Entertainment, based in Mumbai, India.
DreamWorks insiders hope the other half of the money will come in by March 31. But that is much later than originally planned, and in the meantime Spielberg is personally funding half his new company’s overhead. Yes, the guy is beyond rich, but like most Hollywood moguls he wants to use Other People’s Money. So DreamWorks was desperate to lay its hands on cash by any means possible.
DreamWorks’ demands of Universal kept changing day by day to include overhead, production, and ultimately investment money, as well as distribution. Then DreamWorks couldn’t make an HBO pay-TV deal so it now wanted some of Universal’s pay-TV slots. Finally, DreamWorks settled on a $250 million figure — “a lot more money than the studio is willing to give them,” one of my sources said, before the proverbial shit hit the fan. Another told me, “The deal for Universal isn’t as attractive as before. What was once free is now going to cost.”
But, after a lot of hemming and hawing, Uni came back with an offer of just $100 million. Here’s the thinking that went into it: that Spielberg gets the richest gross deals in Hollywood, “so rich that when he finally does a movie with you, you can’t make any money,” one insider complained. And that he was offering no collateral. And that Universal’s analyses of probable returns on a future slate of DreamWorks motion pictures did not look very favorable. It would not, and could not, give DreamWorks more.
By contrast, Disney looked to DreamWorks like a more enthusiastic and strategic partner. CEO Bob Iger has wanted to be in biz with Steven Spielberg and Stacey Snider since they started thinking about leaving Paramount. Spielberg/Snider planned to make six films a year, and Disney now rolls out just 12 pics annually — the fewest of any of the majors — so it could use more product. Whereas Universal already puts out a slate of 17 films annually, so it has more than enough in the pipeline.
Plus, Spielberg personally has always embraced Disney’s family fare and admired Disney’s worldwide marketing machine. Even better, Disney has a Starz deal for almost unlimited pay-TV slots.
All in all, this is a scenario that no one, least of all me, could ever have anticipated. One of the reasons DreamWorks began was because Jeffrey Katzenberg was passed over for the presidency of Disney by then–chairman/CEO Michael Eisner. After that, the two companies competed bitterly for bragging rights in animation.
Now, Katzenberg is ensconced at DreamWorks Animation, which is a completely separate and publicly held company. And Steven Spielberg’s Amblin offices will probably stay at Universal, where they’ve always been. Go figure.
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