Disney’s excellent adventure

Studio welcomes unlikely new tenant

It makes sense for Hollywood’s biggest kid to move to the Happiest Place on Earth.

Steven Spielberg makes the kinds of movies Disney loves to fill its slate with: high-profile tentpoles that can generate considerable coin companywide for years to come.

But last week, Disney didn’t just make a deal with Spielberg. It brought on board his company DreamWorks — which could create one of Hollywood’s more awkward partnerships over the next five years.

The Mouse House is a different animal from studios.

Anyone following Disney recently has been hammered with one message: That’s it’s focused on the Disney brand.

That means keeping its studio pipeline filled with family fare that will not only generate millions in ticket sales but also move a lot of DVDs, videogames, merchandise, increase traffic to its websites, and boost attendance at its theme parks with a new attraction or two. At least that’s been the hope since 2006, when the Mouse House underwent its big corporate reinvention.

At a lavish all-day showcase last year, studio chairman Dick Cook rolled out the company’s 2009 slate, saying “We are going to concentrate on doing what we do best. And that is: Being Disney!”

Meanwhile, Disney CEO Robert Iger insists “demand for the Disney experience” remains strong and recently told Fortune, “I don’t care if a Touchstone movie does $100 million on $30 million of cost, its success doesn’t breed any other success in the company.”

So imagine the surprise when Disney agreed to distribute 30 of DreamWorks’ films through its Touchstone banner over the next five years. The first six start unspooling in 2010.

With a rigid corporate culture, Disney is notorious for opposing partnerships. It won’t co-finance pics with other studios and recently parted ways with Walden Media and the “Chronicles of Narnia” franchise. The disappointing B.O. of the second installment and the expensive pricetag of the third were cited as reasons, but one of the main deal killers was that Disney couldn’t fully own the pics and exploit them companywide — especially at its theme parks — without having to pony up a hefty check to Walden. Similarly, Disney only began fully integrating Pixar’s properties into its parks after the studio bought the toon shop in 2006.

So why the sudden change of heart?

While Disney has been able to rebuild its family brand — through the “Pirates of the Caribbean” and “National Treasure” franchises, as well as talent from its Disney Channel and, of course, the purchase of Pixar — it’s struggled with its more adult fare.

Disney has long used Touchstone to distrib pics for older audiences, but recent releases like Spike Lee’s WWII drama “Miracle at St. Anna” and Kevin Costner’s political comedy “Swing Vote,” both co-financed through other sources, have struggled at the B.O.

It needs DreamWorks’ more commercial pics to rebuild that banner and has provided the studio with a loan of around $100 million to help keep its doors open, as well as P&A support.

In development are six pics DreamWorks bought from Paramount after the distribution deal with that studio dissolved last year.

They include the drama “The Trial of the Chicago 7,” Secret Service actioner “Motorcade,” the Steve Carell comedy “Dinner With Schmucks,” comicbook adaptation “Atlantis Rising” and “The 39 Clues,” based on a series of fantasy adventure books — mostly pics that don’t boast characters that can fill store shelves with toys. A flippant in-joke in town last week was the potential for “Chicago 7” to become the next great theme park ride.

But that’s not the point.

Disney’s global distribution machine is considered one of the best in the biz, but fewer films on its sked meant that it couldn’t make as much money and realize as much profit as it could have.

Fewer pics also meant that its homevid arm had less to release. That division has been hit hard, especially with consumers buying less DVDs lately.

More output from DreamWorks will mean more coin in Disney’s coffers, as long as it can rein in distribution and marketing costs. The Mouse House will collect 10% of the gross of each pic, under terms of its distribution fee.

While the financial aspects of the DreamWorks deal will certainly benefit Disney, there are still aspects of the relationship that could create rifts over time.

  • Disney now must keep a lot of egos happy: DreamWorks’ execs can be demanding, but the Mouse House also needs to make sure that producers on the lot like Jerry Bruckheimer, Scott Rudin and Adam Shankman, as well as toon topper John Lasseter, are satisfied with the best release dates for their pics.

  • The Mouse House will be able to tout that it’s in the Spielberg business without having to necessarily pony up the hefty backend he demands from the pics he directs and produces. He’s never helmed a pic for Disney; even the Peter Pan-themed “Hook” was set up at Sony’s TriStar.

  • Given the distribution aspects of the deal, Disney doesn’t have creative control over what DreamWorks decides to make, with Walt Disney Studios prexy Oren Aviv remaining hands-off creatively. It’s only a matter of time before DreamWorks produces a pic Disney isn’t keen on distributing.

  • Spielberg still continues his exclusive partnership with Universal Studios when it comes to the theme park biz. The deal pays him 2% of all park receipts, estimated to be worth around $50 million a year. That means that while DreamWorks pics can be licensed to other parks, the director can’t provide creative input to Disney for any new attractions.

  • Where does DreamWorks Animation fit into all this? Well, it doesn’t. And that’s just the way Jeffrey Katzenberg wants it, considering Pixar is Katzenberg’s biggest rival. The exec no longer sits on the board of DreamWorks’ live action studio and its toons continue to be distribbed by Paramount. That’s where things might get testy: Katzenberg and Spielberg, each with their own distrib, could wind up clashing over the most prized release dates.

Either way, Disney has finally landed Spielberg. It may not be the way it wanted him after all these years, but the partnership will prove whether the Mouse House is going to continue to dominate the family film biz or become one very dysfunctional family.

“Today, I am going to give you a good sense of what’s to come!” exclaimed Cook, almost presciently at the Disney Showcase. “We have the best talent and the best technology, the best executives and the best effects! Only the best is good enough for Disney!”

With Spielberg now on board, it’s certainly managed to prove that point.

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