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Legendary, Warner Bros. Near Distribution Deal (EXCLUSIVE)

Legendary Entertainment will likely leave its distribution and co-financing pact with Universal Studios early, according to multiple insiders. The company behind “Godzilla” and “Kong: Skull Island” is decamping for Warner Bros., its former home. A deal has yet to be signed, but the two entertainment players are in exclusive negotiations and are expected to come to an agreement shortly.

However, the deal will be much different than previous pacts that Legendary has signed, signaling a larger strategic shift that’s taken place at the company following a series of box office flops and the departure of its founder Thomas Tull in 2017. Namely, the Warner Bros. alliance will be a straight output deal, meaning that the studio will release Legendary’s films for a fee. It will not be a slate financing partnership, which was the kind of alliance that Legendary had at Warner Bros. during an eight-year relationship that ended in 2013. Warner Bros. could invest in certain Legendary films and vice versa, but neither company is be obligated to take equity stakes in each other’s films.

Legendary was previously motivated to leave Warner Bros. in part because of bad blood between Tull and former studio chief Jeff Robinov. But both companies have new leadership — Toby Emmerich has taken the reins at Warners and Josh Grode, a former entertainment lawyer, has been in charge at Legendary since early this year. The two men have been hammering out a new deal in recent weeks. The company’s decision to move “Detective Pikachu,” its Pokemon adaptation, to Warner Bros. from Universal was widely reported to be a signal it was eyeing the exit door. Legendary no longer has any movies set up at Universal. It had originally been linked to the Dwayne Johnson and Gal Gadot action-thriller “Red Notice,” but it will no longer back that picture. The company’s deal with Legendary was originally slated to end in December. Legendary does not have rights to future installments in ongoing franchises such as “Jurassic World” that it previously invested in when its deal was in place at Universal.

When Legendary migrated to Universal, it did so with grand ambitions. The companies announced that as part of the deal Legendary’s franchises and intellectual property could be turned into rides at Universal’s theme parks. In return, Universal said it viewed the deal as a chance to collaborate with Legendary on projects in China. Legendary is owned by Chinese conglomerate Dalian Wanda and has long had a presence in the Middle Kingdom through Legendary East, a joint venture film production company based in Hong Kong. The alliance didn’t pay off. Universal came to believe that it would have been better off if it had financed films such as “Jurassic World” without Legendary, because the studio was forced to share the profits on movies that were wildly successful and arrived without a lot of risk attached to them. In turn, many of the films that Legendary produced, such as this summer’s “Skyscraper” and “Crimson Peak,” turned out to be box office misses. “Kong: Skull Island,” a hit for Legendary, was released by Warner Bros.

Warner Bros. and Legendary reunited at this year’s Comic-Con to show footage from “Godzilla: King of the Monsters,” the latest entry in the soon-to-be partners’ monster franchise. In June, Legendary announced it has closed a $1 billion senior secured revolving credit facility led by J.P. Morgan.

Spokespeople for Warner Bros., Universal, and Legendary declined to comment.

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