What to expect from DreamWorks 2.0

Studio will be starting from scratch

As teams of lawyers hammer out details of a DreamWorks-Paramount divorce agreement, Hollywood is speculating about DreamWorks 2.0.

A few things are clear.

Under co-toppers Steven Spielberg and Stacey Snider, DreamWorks will be starting from scratch. There were 200 projects the company had developed over the years, including approximately 80 in active development, from “Tintin” to the Sacha Baron Cohen comedy “Dinner With Schmucks.”

The company will retain the DreamWorks name. (They only needed the blessing of Jeffrey Katzenberg, which was no problem.)

But there are some key questions to be resolved:

  • There are 150 DW workers, many with contracts. The question is how many will make the transfer with DreamWorks.

  • DreamWorks had several producer deals, including Montecito Pictures, Walter Parkes/Laurie MacDonald, Sam Mendes, Alex Kurtzman & Roberto Orci, Nina Jacobson, and Ben Stiller’s Red Hour. It’s possible some of those deals could revert to Paramount, although Parkes/MacDonald is expected to stay at DW. That may be true of some others.

  • DreamWorks plans six films a year, but as it develops new works, the question is whether it will co-finance some of those mutual projects with Paramount.

While joint ventures might appear unlikely, there are some advantages for Par chairman Brad Grey, who could use more equity partners.

There are also advantages for DreamWorks, which would get half rights to these. Spielberg can choose to be involved as a producer or director on any DreamWorks project. If Par makes any of those movies without Spielberg and Snider’s participation as financing partners, Par will have to pay Spielberg a contractual 7½% gross cut against 50 % of the profits.

DreamWorks is basically a producer with equity financing seeking studio partners. There is still the issue of J.P. Morgan Chase’s ability to raise $700 million in debt off Reliance’s $500 million in equity, which is not a sure thing. The senior debt of the DW deal has not been worked out yet.

DreamWorks’ position is strengthened by its proposed equity-to-debt ratio, but now is not an ideal time to play the credit markets.

The money will be more expensive and its restrictions, covenants and oversight will be more severe.

But DreamWorks has something few other companies do: the ability to stick with its film vision. At a time when most film companies are going under, or trying to cope with new-media or with conglom micro-managers, DreamWorks now has the opportunity to greenlight six pics a year, with no corporate overlords or board of directors.

As formidable players at the top of their game, Spielberg and Snider will have their pick of Hollywood projects, without the distraction of studio in-fighting.

What it does need, though, is a distributor.

Although Twentieth Century Fox and Disney made courtesy calls to DreamWorks when the Reliance deal closed, Universal seems to be the studio most compatible with Spielberg and Snider. After all, DreamWorks has enjoyed past distribution deals with U, which used to be run by Snider. And through all of DreamWorks’ moves in 14 years, Spielberg has remained burrowed in at his adobe Santa Fe-style homebase on the U lot, which still maintains the same ’70s vibe.

Despite the close ties, Spielberg and Snider were clearly stung by U’s refusal to co-finance the $130 million “Tintin.” Spielberg and Peter Jackson were asking for their usual deal (which adds up to some 30% of the back-end gross).

Interestingly, Grey is having ongoing talks with reps from Spielberg and Jackson over fully financing the pic. If Universal winds up as DreamWorks’ distributor, the studio could wind up partnering on the movie anyway.

The folks at DreamWorks can’t get specific on the record about a process that is constantly evolving.

For example, it will take months to settle the contracts of the executives. There is speculation in town that Snider lieutenants Holly Bario and Marc Sourian are likely to go to DreamWorks while production prexy Adam Goodman may remain at Par, at least temporarily. He has 18 months left on his contract and might stay in a supervisory role over the projects he knows most about.

Certainly Grey is unlikely to change his recently appointed motion picture chief John Lesher or production head Brad Weston.

Insiders say Snider is looking forward to being an owner after her long career as a studio exec. She has never shared in the gross of DreamWorks’ movies, and took a cut from her Universal chairman’s salary of $6 million a year when she joined forces with Spielberg.

Finally, the New DreamWorks is a far cry from the conglomerate envisioned by Spielberg, Katzenberg and David Geffen 14 years ago, with multiple divisions for movies, animation, Internet, television, games, music and theater.

As a centerpiece of that plan was a studio they were going to build in Playa Vista, which was never realized. DW Animation has maintained its campus in Glendale, Calif.

Now, DreamWorks has cleared the deck of other distractions. It’s ready for its new role, as a producer of six films a year. And that’s it.