Staffers fear downsizing amid industry woes

As a constricting entertainment industry copes with the aftermath of one strike, the threat of another and a rocky economy, all eyes are on Warners and DreamWorks.

Soon, Steven Spielberg and David Geffen will make up their minds about the future of DreamWorks, and Warners execs Alan Horn and Jeff Robinov will decide the shape and size of their specialty divisions. The fate of hundreds of employees rides on the decisions of these players.

As Spielberg puts the finishing touches on “Indiana Jones and the Kingdom of the Crystal Skull” before its Cannes launch, he and Geffen face some tough choices regarding the company they founded in 1994. If Geffen opts to leave DreamWorks before the end of the year, Spielberg can also leave before the termination of his contract in 2010. If he goes, so can co-chairman Stacey Snider.

While unofficial meetings and talks have been taking place between the DreamWorks principals and Universal Pictures, where Spielberg has long kept his offices, no real negotiations have yet begun. They will be triggered the moment attorney Skip Brittenham telephones Universal chief Ron Meyer or other studio heads on DreamWorks’ behalf.

While most eyes are on the obvious suspects for a shakeup, with DreamWorks’ Geffen, Spielberg and Snider potentially in play again this year, other studio divisions are also in flux as they face looming consolidation and cutbacks.

In particular, Warners is weighing the fates of two banners, specialty arms Warner Independent Pictures (WIP) and Picturehouse, and hundreds of staffers. Warners recently axed 450 staffers at New Line Cinema and still has to decide the fates of WIP, housed on the Warners lot, and New York-based Picturehouse.

The two banners are expected to merge, and their respective heads, Polly Cohen and Robert Berney, are likely to accept a bicoastal co-head arrangement. But neither knows the size, scope and mandate of the company they could be running — or the number of layoffs that would likely follow.

Similar questions of scope are in the cards at DreamWorks. If it’s more trouble than it’s worth to mount DreamWorks: The Sequel at another studio (minus a library, and in an unforgiving economic climate for raising cash), Geffen and Spielberg may opt to remain at Paramount and stay close to their 100 or so projects going forward, from “Transformers 2″ and “Lincoln” to “Tintin.” Insiders point to one potentially indicative tea leaf: After a long quiet period, DreamWorks has begun buying material again.

(Jeffrey Katzenberg’s DreamWorks Animation, which was not part of the 2005 sale to Viacom, has a distrib deal with Paramount through the end of 2012.)

But many industry insiders aren’t betting the farm on DreamWorks staying at Paramount. The relationship between DreamWorks execs and Viacom mogul Sumner Redstone and his chief exec Philippe Dauman remains a chilly one.

There’s also the ongoing issue of Snider, who once ran Universal for Meyer, not wanting to report to Paramount chairman Brad Grey. That thorn could be removed by making Snider a DreamWorks partner, and/or moving the operation to another studio like Universal or even Fox. (Geffen’s recent vacation with fellow mogul Rupert Murdoch has raised questions about his taking DreamWorks to the News Corp. studio.)

And while Spielberg, who is 61, has long nursed the dream of owning and running a studio, he may not be ready to come to terms with that dream’s demise. His primary goal has always been keeping his creative freedom, and while he doesn’t need DreamWorks to maintain that, he may want to hang onto his fiefdom anyway.

If Geffen is willing to walk away from Paramount, he could make a deal for Spielberg and Snider to leave with the DreamWorks name and start their own Amblin-style DreamWorks-monikered production shingle at Universal. A smaller entity of that sort wouldn’t require hideously complex financing, and even with Spielberg getting his top dollar, would be affordable for its new parent studio.

Spielberg and Snider would still perch at the top of the Hollywood food chain. They could negotiate with Paramount to cherrypick their favorite DreamWorks projects. Even if Spielberg has the right to take whatever he wants with him, both Grey and Spielberg should recognize that an ongoing cordial relationship is in their mutual best interest. (At one recent meeting, Snider told her staff to expect uncertainty in the next months, and that she didn’t know how things would turn out.)

If Geffen, Spielberg and Snider actually do abandon DreamWorks, Paramount would have to decide what to do with it. They could let it continue under production prexy Adam Goodman. Or they could do as Warners did with New Line, and fold the label’s development and production slate into their own, downsize and trim overhead.

Warners may not be finished with its own cost-cutting. The last studio to jump on the specialty label bandwagon, there’s little evidence that Warners understands the vagaries of that universe, which is mired in a competitive, glutted cycle.

During his short tenure, ex-WIP prexy Mark Gill generated some hits, including 2005’s “March of the Penguins.” But he chafed under the supervision of Robinov, who was unwilling to grant him the autonomy he sought.

Gill’s successor Cohen, a former production exec at the studio, has faced a more unforgiving market. While her acquisitions “Introducing the Dwights” and “Snow Angels” have foundered, she has bet on producing more films, the same strategy that Berney has espoused at Picturehouse. (New Line bought out onetime Picturehouse partner HBO.)

Berney invested early in two foreign-language films — “La Vie en rose” and “Pan’s Labyrinth” — which nabbed five Oscar awards between them. WIP nabbed an actor nom for Tommy Lee Jones in “In the Valley of Elah.”

But producing more films requires resources for production, as well as competitive marketing and distribution. It would be hard, these days, for a small, fiscally contained Paramount Classics-style division to fly.

One troubling sign: Unless they’re given some kind of greenlight heading into Cannes, neither Cohen nor Berney or their acquisitions teams will be able to buy at the fest. It will be a window-shoppingexpedition.

Read more of Anne Thompson’s blog here

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