Friday, September 19, 2008

DreamWorks, Reliance close deal

Articles from Variety and Wall Street Journal below.

DreamWorks, Reliance close deal. Pact completes
Paramount exit - Variety


DreamWorks has finally closed the deal with India-
based Reliance to leave Paramount Pictures and
create a stand-alone production company.

DreamWorks principals Steven Spielberg, David
Geffen and Stacey Snider are severing ties with the
Melrose studio. Though the deal has been anticipated
for some time, what had been unclear was the fate of
DreamWorks' executives, who would have been
contractually obligated to remain employed by
Paramount. In a surprise move, Paramount waived its
right to keep DreamWorks' execs in its fold.

"To facilitate a timely and smooth transition,
Paramount has waived certain provisions from the
original deal to clear the way for the DreamWorks
principals and their employees to join their new
company without delay," Paramount said in a

It remains unclear which executives DreamWorks will
take with them to their new venture. It is unlikely the
new company will keep its current roster given that it
will be working under a tighter budget. Prior to
DreamWorks' exit, Paramount was paying $50 million
a year in overhead for DreamWorks, according to

"We congratulate Steven, David and Stacey, and wish
them well as they start their newest venture,"
Paramount added. "Steven is one of the world's great
story-tellers and a legend in the motion picture
business. It has been an honor working closely with
him and the DreamWorks team over the last three
years and we expect to continue our successful
collaboration with Steven in the future."

DreamWorks Team, India's Reliance In $1.2 Billion
Film Company Deal - Wall Street
Journal (


The principals of DreamWorks SKG have completed a
long-anticipated deal with one of India's largest
entertainment conglomerates to set up a new $1.2
billion film company, according to people familiar with
the matter.

The deal gives DreamWorks co-founder Steven
Spielberg and DreamWorks Chief Executive Stacey
Snider the financial support they need to leave Viacom
Inc.'s Paramount Pictures and start their new venture.
Under the signed agreement, Mumbai-based
Reliance ADA Group will invest $500 million equity
and provide another $700 million in debt through J.P.
Morgan Chase & Co. toward the new venture, which
will produce a slate of about six films a year.

The new film company will be led by Stacey Snider
and Steven Spielberg. News of the talks between
DreamWorks principals and Reliance first surfaced in
June, but an agreement wasn't finalized until now,
these people said. The new company will be headed
by Mr. Spielberg and Ms. Snider.

A DreamWorks spokesperson had no comment.
Rajesh Sawhney, head of Reliance Big Entertainment,
also declined to comment.

Now that the DreamWorks team has sealed the
agreement with Reliance, attention will quickly shift to
the question of where the new company will distribute
its films. General Electric Co.'s Universal Pictures,
where Mr. Spielberg began his career, is thought to be
a top choice, though an agreement has yet to be
reached. The DreamWorks team also plans to strike a
new deal with HBO.

Once those deals are in place, DreamWorks principal
David Geffen is expected to resign from Paramount,
where the DreamWorks camp has been stationed
since DreamWorks was sold to Viacom in 2006. Mr.
Geffen isn't expected to be part of the new venture.

Even after Mr. Spielberg and Ms. Snider depart
Paramount, they will continue to work with the studio
on a number of movies. The two parties share rights
to many projects, including upcoming "Transformers:
Revenge of the Fallen," a sequel to the blockbuster hit.
While it was once thought that the DreamWorks team
would try to take some projects with them to the new
venture, it is now more likely that those films will
remain at Paramount, with Mr. Spielberg receiving rich
compensation for his involvement.

The marriage between some of Hollywood's biggest
names and an Indian conglomerate is less surprising
than it seems. The new deal comes in the wake of a
financial drought in Hollywood, with the industry
looking to foreign investors to replace some of billions
of dollars that Wall Street poured into film financing in
recent years but has since evaporated with the
crumbling credit markets.

In Reliance, Mr. Spielberg and his DreamWorks team
have found a willing investor more immune to the
problems on Wall Street. But Reliance, which has
interests in telecommunications, financial services,
and entertainment, is hoping to use the new
partnership to create a name for itself in Hollywood,
and then build that out into a global media empire. At
the Cannes Film Festival earlier this year, the
conglomerate's entertainment division, Reliance Big
Entertainment, announced it would invest $1 billion
over the next 18 months to help create that empire.

The divorce between the DreamWorks team and
Paramount will conclude one of Hollywood's most
closely watched battles. Since the DreamWorks
principals sold the company to Viacom for $1.6 billion,
Messrs. Geffen and Spielberg have clashed with
Paramount's Chief Executive Brad Grey. Tensions
boiled to the surface last fall when, hearing rumors
that Messrs. Geffen and Spielberg might depart,
Viacom Chief Executive Philippe Dauman publicly
called any such departure "completely immaterial" to
the financial outlook of the company.

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