Disney, DreamWorks in distribution deal

(Agencies)
Updated: 2009-02-10 09:52

LOS ANGELES – Walt Disney Co said it secured a deal to distribute films by Steven Spielberg's DreamWorks Studios in a pact short on details but one that provides much-needed cash for the Oscar-winning director's outfit and reaps long-term revenues for Disney.

Disney Studios Chairman Dick Cook said on Monday his unit will market and distribute about six films each year for DreamWorks, the fledgling studio helmed by Spielberg, but refrained from disclosing details of the deal.

The Wall Street Journal has reported that Disney will earn at least an 8 percent fee off the box office gross of DreamWorks films, and would lend the studio $150 million. But Cook would only say those numbers were off the mark.

"The ideas are right, the numbers may be wrong," Cook told Reuters in a telephone interview. "It hasn't been entirely accurate..., the stuff that has been reported today."

"That was from some old proposals or old deals along the way," he said.

DreamWorks Studios is Spielberg's newly created production unit, and is separate from listed DreamWorks Animation SKG Incor the DreamWorks SKG Inc private firm that Spielberg founded with media moguls David Geffen and Jeffrey Katzenberg.

In exchange for mounting promotional campaigns and sending movies to theaters, Disney earns a share of DreamWorks' films' box office grosses. In the case of a huge hit like DreamWorks SKG Inc's "Transformers", which made $708 million, the fees would easily be in the tens of millions of dollars.

Disney stepped in after a previously announced -- but never consummated -- deal between DreamWorks and General Electric Co's Universal Studios fell apart, because of what a source close to the matter described as disagreements over financing.

Larry Haverty, manager of Gabelli Global Multimedia Trust, which owns Disney shares, saw the deal as positive for both parties.

"It's revenues without a lot of costs (for Disney). It's a very good situation for them and for DreamWorks, it solves the funding situation for (DreamWorks)," he said.

Spielberg and DreamWorks chief executive Stacey Snider were seeking distribution, and some financing, for films they planned to make with India's Reliance BIG Entertainment.

Reliance agreed last year to match up to $500 million in financing for the new studio but DreamWorks had trouble securing its share of funding in the worsening global economic conditions, the source said.

DreamWorks turned to Disney late last year when Universal balked at its demand for more upfront money and fees from Universal's TV distribution pact with HBO, the source said.

The first Disney-distributed DreamWorks film is set to hit theaters in 2010.

'LONG TERM VIEW'

DreamWorks Studios now owns the rights to a variety of film projects, expected to include a remake of the 1998 French comedy "The Dinner Game" and fantasy adventure series "The 39 Clues".

Future DreamWorks films will carry Disney's Touchstone Pictures banner, an adult-oriented niche that Disney had pared to two to three films a year during a 2006 restructuring that cut the studio's total output and a quarter of its workforce.

Disney enjoyed years of strong growth from its big-budget "Pirates of the Caribbean", "National Treasure" and "Chronicles of Narnia" franchises, as well as its Pixar-Disney films.

But the risks inherent in big budgets and hit-driven filmmaking caught up with the studio in 2008 when it posted two steep sequential quarterly drops in profit and revenue.

The deal returns Disney's slate to close to its pre-2006 number of 17 or 18 films a year and will add workers to the studio's staff, Cook said.

But it spares Disney the expense of making less pricey films that can fill revenue gaps left by a failed "event" film, such as last year's underperformer, "Prince Caspian."

Cook said the tie-up of two iconic names "didn't have anything to do with a quarter, or a movie... we are taking a very long term view of this."

The DreamWorks films under its Reliance partnership will complement Disney's family-friendly fare, Cook said.

"I think (DreamWorks) are going to make all different kinds of movies in all different price points and genres," he said.

Cook described as "erroneous" and "ridiculous" rumors that Disney wanted to sell its Miramax film production unit, which focuses on art-house fare such as "Shakespeare in Love."

Shares of Disney closed down 1 cent, or 0.05 percent, at $19.44 on Monday on the New York Stock Exchange.