Time Warner’s Home Box Office has inked a 10-year exclusive movie-output deal with DreamWorks SKG that could land the new studio a humongous $1 billion over the life of the contract.
According to sources familiar with the deal, HBO will pay a sliding-scale license fee that’s directly tied to the box-office performance of the titles. But instead of averaging out to about $5.5 million a title, as in the usual major-studio theatrical-output deal, sources say HBO will pony up about $10 million a title, on average, plus an additional premium of 22.5% for a movie directed by Steven Spielberg, one of the principals of Dreamworks SKG.
And for a big hit from DreamWorks, HBO would have to pay up to $16 million instead of the $12 million cap applied to hits produced by a major studio in the typical studio-output deal, these sources say.
There are three key reasons for the high price tag: the track record of DreamWorks principals Spielberg, Jeffrey Katzenberg and David Geffen; intense bidding by rival pay services, and a manageable number of titles.