After three years, negotiations for DreamWorks’ move to Playa Vista are all but dead.
At the heart of the dispute are the two sides’ divergent visions of the structure of the proposed Entertainment, Media and Technology campus, to be built on what was once the Hughes Aircraft plant, near Marina del Rey.
DreamWorks had always intended to run its own studio, with its own soundstages, but developer Playa Capital, which took over the site last October, wants a hand in controling at least some of the facilities.
“This is about competing concepts of what the campus will be like,” said an insider who asked not to be identified. “Will it be a monopolistic closed shop for DreamWorks or an open, collaborative, creative community, as Steven Spielberg himself envisioned in December 1995?”
Last week, DreamWorks co-founder Jeffrey Katzenberg, hearing that Playa Capital intended to deliver to him a set of proposals “significantly different” from what the studio had outlined in an Aug. 12 ultimatum (Daily Variety, Aug. 27), wrote a one-page letter to principal investors Morgan Stanley Dean Witter & Co. and Goldman, Sachs & Co. telling them not to bother.
“I am writing you in advance to save you the time and effort of putting forth an unworkable solution,” Katzenberg wrote. He still held out the hope, however, that “we may secure a home at Playa Vista.”
Peter Denniston, president of developer Playa Capital Co., has given DreamWorks until Wednesday to agree to the proposals that Katzenberg rejected.
Representatives of Playa Vista and DreamWorks could not be reached for comment, but Daily Variety obtained copies of both Denniston’s and Katzenberg’s latest letters. The impasse was brought to a head by the Aug. 12 letter from Katzenberg to the chief investors, in which he said the Playa Capital negotiators were “disingenuous and lacking in good faith.”
Denniston wrote back that he did not “feel it in our collective interest to debate your somewhat selective interpretation of our negotiations on a point-by-point basis.” He said it was always the developers’ intention to have DreamWorks “become the cornerstone of the campus at Playa Vista.”
But from the investors’ perspective, Denniston wrote, it would befit “the spirit of Playa Vista” to divide the campus in order to build “an independent soundstage campus for use by all industry members,” whereas DreamWorks is seeking to control the facilities itself.
In his second letter, dated Aug. 25, Katzenberg rejected as “unrealistic and impractical” the notion of “allowing Playa Capital to develop and operate a studio facility on its portion and allowing DreamWorks to develop its own soundstage facilities on its portion.”
A source with knowledge of the thinking at DreamWorks said the studio is “done negotiating.”
For his part, Denniston rejects Katzenberg’s position that DreamWorks must have control over all studio facilities or the deal is off. Denniston reminded Katzenberg that, on Aug. 4, the developers had provided DreamWorks “with the sole right to control and operate their own studio facilities.”
Under the proposal, DreamWorks would control a total of 27.6 acres, with room for a 50,000-square-foot “superstage,” five 18,000-square-foot film/TV stages and about 48,000 square feet of production support space. Nearby, Playa Capital would develop its own soundstages and facilities.
“And yet, for reasons we do not fully understand, this proposal is ignored in your letter,” Denniston wrote. “One must wonder whether your failure to acknowledge our Aug. 4 proposal in your letter reflects a decision that you are uninterested in Playa Vista and thus are trying to withdraw from the negotiations by pointing a finger at Playa Capital.”
Value to area
DreamWorks feels it brings roughly $100 million in value to the Playa Vista development, a figure arrived at by computing the various tax breaks and incentives offered by local and state governments as well as the aura of the studio’s name, which Katzenberg and his partners feel would attract other high-rent tenants. In addition, the studio plans to spend about $200 million to bring its headquarters to the project and to set up a state-of-the-art studio.
The developers said in the letter they recognize the value of DreamWorks’ name, but are said to be tired of feeling “cowed” by the studio bosses.
“We have always indicated we are very interested in successfully completing a transaction with DreamWorks,” Denniston wrote in his Aug. 26 letter. “And while on an ongoing basis we are responding to unsolicited expressions of interest on the property, we prefer to move forward with DreamWorks.”
Then he gave the studio until Wednesday to agree to the division of the studio lot, as well as other proposals, “so that we might move forward with development of DreamWorks’ future home at Playa Vista.”
A source close to DreamWorks said the studio had no intention of replying by Wednesday, if at all.