August 1, 2005

The egos have landed.

Saturday's news that the negotiations with DreamWorks went to the G.E. board for approval removed all doubts… DreamWorks, as conceived, is over.

Make no mistake. There will be no outside bidders. If there is an exclusive negotiation window created, it will be done primarily so Ron Meyer can throw some extra dough at SKG.

This has been coming for a long time.

THB, Dec 8, 2004
What will the future of DreamWorks be, with Walter Parkes and Laurie MacDonald apparently leaving the nest they claimed they were going to leave two "studio chiefs" ago, the animation division on its own and Geffen focused on little more than Dreamgirls: The Motion Picture? There is only one non-animated film on the DreamWorks schedule for next year. With all my love and respect for the breakout company that DreamWorks wanted to be, and the many gifted people who have been part of making that happen, I am telling you… they are going. It's the best thing they'll ever know. There's no way though that they can't go.

No no no no way… no no no no way they're staying in business. They're not staying in business. There's just no enough money. They're going, they're going, and I, and I, I'm gonna miss them. Ooooh! I'm gonna miss them.

Sorry… couldn't help myself.

But seriously…

DreamWorks may not disappear as a studio brand and there may never be a formal announcement of a shut-down. In fact, Spielberg's Amblin Entertainment produced about 35 feature films in the decade before DreamWorks started up. DreamWorks produced or picked up about 67 films in their decade in existence. Add in a couple of animation titles a year and DreamWorks/Amblin can be almost exactly as prolific as DreamWorks… with a lot less overhead.

The truth is, Spielberg can afford to keep as many people on board as he wishes. The only bottom line the business has to answer to is his own… so long as Paul Allen doesn't want all of his money out at once.

And no one is less happy that my expectations became true than I.

But there was no doubt. The Island accelerated the situation. But they were that close for the last couple of years. It could have been Sinbad in 2003 or Lemony Snicket in 2004. But in the end, it was The Island.

Far more so, it was the television business that killed DreamWorks. And most of that money was lost seven and eight and nine years ago when they got into TV at the absolute wrong time and lost hundreds of millions.

After that, it was the slow deterioration of the plan to build DreamWorks into the conglomerate it was originally meant to be.

The Animation IPO was a brilliant idea as a last ditch. With Shrek 2 easing cash flow issues for a moment and Shark Tale doing enough to get the IPO launched, it was the only area of the business that was a sure bet. It was also the only area of the business on which an S, K, or G was completely focused. But the endless hunger of Wall Street and the Christmas 2004 downturn in DVD sales of feature films (studios with television product milked the cow harder than ever this Christmas, exposing another reason why a one-dimensional studio is a modern impossibility) meant that DreamWorks animation was stable, but not a high flier in the new year.

With animation unable to deliver the gold ring -- a total payout to Paul Allen after a decade - the focus returned to live action, where the year started with the release of the six-month delayed the The Ring 2 to mediocre business. The next Reese Witherspoon film was a highlight to look forward to, but there was The Island in the way. And as much as marketing tussled with this thing, it just never found its legs. But no one ever expected it to be as badly attended as it was. If the movie gets to $40 million domestic - and that's an "if" - the rentals returned to the studios will not cover the marketing costs, forget about eating into the $70 million or so in production investment. Some will be made up in DVD, but even there, such a weak gross really undermines the enthusiasm in pushing the title when it hits the shelves. Pearl Harbor may have sucked and been seen as an underperfomer, but it was still nearly a $200 million movie at the domestic box office. Not only did the worldwide box office put the film in the black before it left theaters, but it fueled the excitement that made it a DVD hit as well.

There are five films left in the DreamWorks live action tank. None of them represent major investments. Red Eye and Just Like Heaven could both be nice wins. Woody Allen's Match Point closes the year… and perhaps the company.

In 2006, David Geffen will produce Dreamgirls, Steven Spielberg will start the year by attending awards dinners and Jeffrey Katzenberg will be hard at work getting Over The Hedge ready for summer release. Win… win... win… by the standards of anyone's dream.

THE DEAL

People are hedging about what DreamWorks is worth, but it's not quite that complicated. The library and animation distribution is worth between $650 million and $750 million, two-thirds of that being for the library, which is considered pretty fresh by industry standards.

After paying out Paul Allen - and I am guessing that the payment will be made through DreamWorks Animation SKG, eliminating Allen from all but a minor interest in that ongoing concern - that would leave a few hundred million to pay out other investors and to cover other obligations of the company.

Then the question is, how to proceed from there?

One thing seems clear… DreamWorks Distribution is going to have to go away. There may be some repurposing of talent on the Focus and DreamWorks teams to strengthen Universal's international position even more. But duplicating talent and big salaries is not going to happen.

Marketing is a little more complicated. Not only has Terry Press' team had experience and success, especially with animated product, that the current Universal team really hasn't had much experience with, but large production companies often have their own in-house teams these days.

Press was offered the Paramount job repeatedly in 2003 and 2004 and my guess is that they would love to have her there now. But the likelihood is that Ms. Press is not very interested in working for the very hard core management team now in place, nor do I expect that she is anxious to deal with the endless politics of a cross-pollinated studio culture that is all about integrating MTV, Nickelodeon, BET, Paramount, Paramount Classics, etc.

My guess would be that Press stays in business with SKG. Money is just money. But Press is an asset that the boys are unlikely to want to lose and there are few, if any places, where Press can be Press the way she's been able to at DreamWorks.

Anyway…

Will DreamWorks become an Imagine-like part of the Universal family, with the big studio funding DreamWorks to the tune of its $200 million or so annual production budget?

Will Spielberg want to just put the DreamWorks brand in his rearview mirror instead of looking at the brand for the rest of his life, forever reminding himself of the rise and fall?

The truth is, DreamWorks can become the best part of what Miramax/Dimension was to Disney. Four or five films a year, one an Oscar chaser, a couple of tight star-laden thrillers, a couple of cheap genre films.

It is possible that DreamWorks coming on board could mark the end of Imagine's relationship with Universal, the threat of Grazer wanting to team with Brad Grey no longer dangling over Ron Meyer's head.

Five from DreamWorks, three from Stuber/Parent, four from Working Title, and six from Donna Langley's in-house team and Universal is actually a little overloaded. Imagine's four or five becomes way too much.

And there is still plenty of grist waiting for the milling. The Weinstein Bros are looking for money and distribution. Can they fit into Warner Bros and could they actually replace Mark "The Penguin Master" Gill? Are Freston & Grey crazy enough to go into the Weinstein business/ Doubtful. Fox… no. Sony… no. Disney… duh. Lions Gate? Oy!

Peter Rice is mid-negotiation on his next contract. It seems impossible that he'd make a lateral move to Paramount, but it also looks like Rothman and Gianopulis have re-secured their positions yet again and, though he needs no champion anymore, his closest Murdoch, Lachlan, is on his way back to Australia as we speak. The only door that might still be open is at WB. But the smart money is on him staying put with a somewhat bigger budget to play with at Fox.

Lions Gate would love to sell, but no one seems prepared to pay the price right now.

If Par Classics' Dinerstein & Vitale make it to Toronto, you can be pretty sure they will get another six months or so, albeit still under threat, with nothing much to do if they don't pick up some films.

And on and on and on…

DreamWorks released its first film, The Peacemaker, in September of 1997. Just Like Heaven will be released 11 days before the eight anniversary of that landmark.

Coincidentally, the eighth anniversary of this column will arrive a month before the DW landmark. The first ever Weekend Preview included a passing comment on "Batman & Redhead."

A deal will be done by the anniversary, even if it's not yet announced. And the first major studio born in my generation will pass on while I'm still on the beat. A sad moment indeed.

E-ME.