Archive notice: This article was originally published on February 10, 2009. Links and embedded videos are preserved as part of the historical record.
The credit crisis has long since reached Hollywood film-production companies. DreamWorks, Steven Spielberg’s production company, is now seeking new partners to escape its shortage of capital. Observers believe the company will probably approach Disney after talks with Universal Pictures ended without result last week. DreamWorks had been negotiating a distribution agreement with Universal, but the talks ultimately failed over Spielberg’s demand for an additional US$100 million in financing. Spielberg is now in discussions with Disney on a distribution agreement for the four to six films DreamWorks produces annually, the Wall Street Journal reports.
DreamWorks and financing partner J.P. Morgan Chase & Co. have encountered capital shortages as a result of the financial crisis. Spielberg is therefore having difficulty meeting his obligations to Indian company Reliance, with which he has a film partnership. During negotiations, Spielberg attempted to increase Universal’s existing financing commitment from US$100 million to US$200 million. The new economic conditions prompted Universal to end its talks with DreamWorks abruptly. According to a Universal spokesperson, negotiations were terminated because DreamWorks was demanding fundamental changes to previously agreed terms. It was also clear that DreamWorks’ and Universal’s business interests were no longer aligned.
Industry observers see a deal with Disney as the most likely alternative. DreamWorks had already held talks with the film-production company last autumn, but Spielberg then chose a distribution partnership with Universal. Some believe cooperation with Disney would have been more advantageous for DreamWorks anyway. Disney produces fewer films per year than Universal and its films are also aimed at family audiences, meaning they do not compete directly with DreamWorks productions. Disney’s investment in DreamWorks would therefore not threaten the success of its own films.
