Studio signs seven-year distribution pact

DreamWorks has nailed down its seven-year distribution pact with Universal — as expected — but there are several aspects of the deal that stand out.

In the end, there was no bidding war for DreamWorks pics. Universal will commit $150 million to the new venture and will collect an 8% distribution fee. Par will still be distributing many films before and after the new U deal takes effect.

Disney supposedly had engaged in casual talks with DreamWorks principals Steven Spielberg and Stacey Snider, but the Universal deal had been expected given U’s longstanding ties with the pair.

The 8% distrib fee for releasing DreamWorks’ slate of films is similar to what Paramount Pictures collects for releasing DreamWorks Animation pics, which remain at Par through 2012.

Snider and Spielberg recently exited Paramount to partner with Reliance Big Entertainment, which will distribute the new DreamWorks projects in India. It’s assumed the duo will retain the DreamWorks moniker, though the 12-member DreamWorks Animation board will have to approve that.

Reliance invested $550 million in the company, with DreamWorks hoping to add an additional $700 million to its coffers via JPMorgan by the end of the year.

In announcing the arrangement, DreamWorks and Universal said the deal will take effect in 2009 and will include six or so films per year.

However, the first DreamWorks-produced, U-released project will not likely hit the bigscreen until 2010 given that Paramount is aboard to distribute a number of DreamWorks pics through the end of 2009. In addition, as part of Paramount and DreamWorks’ divorce settlement, Par has an option to co-finance and co-distribute 15-20 DreamWorks-led films that had been developed during DreamWorks’ three-year stint with Par.

Paramount also retains sequel and remake rights to all films it has distributed or will distribute for DreamWorks.

“Steven and I have both enjoyed successful, longtime relationships with Ron Meyer and everyone at Universal,” said Snider, a former U chair. “Having spent a decade in the Universal family, I’m very familiar with their talented distribution and marketing teams, under the dynamic leadership of Marc Shmuger and David Linde. Steven and I are looking forward to this new association with our old friends.”

Universal co-chairman Linde said the studio, which currently releases an average of 28 films per year, will not scale back the number of films produced by the U, Focus and Rogue labels. Instead, studio will increase the number of films it distributes annually at a time when most studios are reducing their slates.

“We pursued this deal because we felt comfortable with Stacey and Steven and are confident in their ability to make commercial movies,” Linde said. Spielberg and Snider “did their homework. They certainly didn’t make this decision lightly. They will get the kind of distribution and marketing that they want.”

As part of the deal, Universal will advance DreamWorks the marketing costs of the films.

Though U will be saddled with distributing an extra six movies a year, move is considered savvy for the studio. Paramount execs concede that DreamWorks titles such as “Transformers” and “Dreamgirls” greatly benefited the studio’s bottom line.

DreamWorks founder David Geffen, who will not be following Spielberg and Snider to the new company, negotiated the deal on behalf of DreamWorks. Linde said it was a “team effort” in bringing the new DreamWorks incarnation into the Universal fold.

Spielberg began his career making movies for U and kept his DreamWorks offices on the lot.

“Universal has always been my home base, so this agreement starts a new chapter in what has been a long and successful association,” said Spielberg. “While it feels great to come home again, it feels like I never left.”

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