Disney signs deal with DreamWorks

Company will handle distribution for films

Disney has officially added DreamWorks to its Magic Kingdom.

The Mouse House inked an exclusive long-term distribution pact with DreamWorks over the weekend. Accord will add six more pics to Disney’s release schedule beginning in 2010 and pairs Steven Spielberg with the family-friendly studio. Overall, Disney will distribute 30 DreamWorks pics through the Touchstone banner over the next five years.

Studio’s annual output will now grow to 20 pics per year — a dramatic departure from its cost-cutting strategy, instituted in 2006 to reduce its overall annual slate to some 12-15 films.

Under terms of the new deal, Disney will handle distribution and marketing for DreamWorks’ titles through its Touchstone banner, collecting 10% of the gross of each pic.

It will also retain homevid and TV rights for the films, outside of India, and cover overhead costs for DreamWorks, which will remain based on the Universal lot.

According to those close to the talks, the deal is nearly the same as the one David Geffen brokered quietly between DreamWorks and Disney last summer but was never inked when Spielberg opted to return to his roots and move the studio back to the U lot.

DreamWorks Animation is not part of the pact with the Mouse House and continues its own distribution deal with Paramount Pictures. Move could create an awkward situation for original DreamWorks co-founder and DreamWorks Animation topper Jeffrey Katzenberg, who views Disney partner Pixar as his biggest rival in the animated sphere.

However, Katzenberg is completely divested from the new DreamWorks and is not a member of its board.

Under the deal, Disney will provide a much-needed bridge financing loan to DreamWorks, which has had trouble raising money to match a commitment from Mumbai-based Reliance amid the worsening global credit crunch.

DreamWorks said it is halfway to raising the $325 million it needs to take advantage of an additional $325 million from Reliance — both figures have already been downsized from original goals of $700 million in loans and $500 million from Reliance.

The Disney loan (the amount was undisclosed) will help DreamWorks reach that goal and enable it to continue operating as a major production shingle at a time when belt tightening is eliminating thousands of jobs in Hollywood.

For Disney, outside of the influx of creative talent, more pics on its sked means a greater opportunity to utilize the impressive distribution and marketing machine it set up worldwide but hasn’t been able to exploit given its smaller slate.

“The DreamWorks deal gives Disney the opportunity to leverage its global infrastructure without incurring further financial risk,” said Walt Disney Co. topper Bob Iger, who has had a long relationship with DreamWorks execs after pairing with them to launch DreamWorks TV in 1994 while at ABC.

The Touchstone banner has typically been used to unspool pics that aren’t strictly family fare or movies that Disney can exploit across its various divisions, especially its theme parks.

Those include recent releases like the “Step Up” dance pics, laffers “Wild Hogs” and “Swing Vote,” WWII drama “Miracle at St. Anna” and horror entry “Primeval.”

DreamWorks has yet to decide which movie it will move forward with first.

DreamWorks principals Spielberg and Stacey Snider partnered with Reliance in the fall to form a new company and immediately hammered out, though never finalized, a distribution deal with Universal. The U deal fell apart Friday after Universal toppers found out that DreamWorks was in negotiations with Disney.

After the success of the “Pirates of the Caribbean” and “National Treasure” franchises, the Mouse House has been actively looking for tentpoles to generate coin from across its various divisions, especially its theme parks, online and merchandising arms.

It’s hoping that working with Spielberg will help launch family-friendly properties it can exploit.

“We’re both thrilled and honored to be marketing and distributing all of DreamWorks’ signature upcoming live-action motion pictures and to begin a new relationship with such respected colleagues as Steven, Stacey and their creative team at DreamWorks,” Disney chairman Dick Cook said. “Steven has made some of the biggest and most loved films of all time and continues to be one of the great icons of our industry.”

That may be true, but Disney will have to be careful with regard to just how much attention it lavishes on Spielberg.

Studio also has other prolific producers on the lot to keep happy, including Jerry Bruckheimer, Scott Rudin, Adam Shankman and Jon Turteltaub. For now, the tenor is welcoming.

“The DreamWorks team of Steven Spielberg and Stacey Snider is obviously one of the most talented and experienced in American film, and their new association with (Disney) can’t help but be beneficial for all involved,” Bruckheimer said. “I wish DreamWorks the best in what should be a great new chapter in the company’s history.”

Added Cook: DreamWorks’ “motion pictures will be the perfect complement to the already robust slate of Disney and Touchstone films being made by Oren Aviv and his team.”

But industry watchers wonder how DreamWorks’ fare, which skews more adult and sometimes carries an R-rated, will fit in at the squeaky clean Mouse House. It’s hard to imagine Disney taking such past DreamWorks films as “Tropic Thunder” or “Revolutionary Road” into the marketplace. Nevertheless, Snider sees no potential problem with that.

“It’s an advantage that our films are so different from theirs,” she said. “Of course we will continue to make R-rated movies. … I have every confidence they will do a great job handling them.”