July 28, 2005
NBC Universal Said to Be in Talks for DreamWorks Unit
By LAURA M. HOLSON
NY Times
http://www.nytimes.com/2005/07/28/business/media/28movie.html?pagewanted=print
LOS ANGELES, July 27 - DreamWorks SKG, the live-action entertainment
company co-founded by the director Steven Spielberg, is in talks to be
acquired by its longtime partner, NBC Universal, according to two people
with knowledge of the negotiations.
The news is the latest in a series of twists for DreamWorks, a company
co-founded in 1994 by Mr. Spielberg, the music mogul David Geffen and the
film executive Jeffrey Katzenberg. More than a decade after opening its
doors, DreamWorks has not turned out to be the media giant the founders had
hoped it would be.
Dreamworks SKG, which produced the movies "Gladiator," "Saving Private
Ryan" and "American Beauty," among others, is all that's left of the company.
It sold its music business in 2003. Its Internet ambitions popped with the
rest of the dot-com bubble. Its television business has had more misses
than hits. And last year it spun off DreamWorks Animation, which has been
plagued by shortfalls in its DVD business and credibility concerns
regarding management, leading to a decline in its stock price.
Putting the live-action business up for sale reinforces what many in the
entertainment business have already learned: few independent movie studios,
no matter how talented the principals, can thrive without a larger
corporate parent with strong financial resources.
"If you don't have the capital and financing to build it up, it's hard to
progress," said Hal Vogel, a long-time entertainment industry investor who
runs his own firm. "DreamWorks doesn't seem to have a lot of choices in
this matter. It's a logical combination." But, Mr. Vogel added, "it's all a
matter of the price."
If a deal is struck, NBC Universal will acquire DreamWorks' library of 60
feature films, as well as its television shows, according to two people
with knowledge of the negotiations, who spoke on condition of anonymity
because the discussions were still in progress. NBC Universal would also
acquire the distribution agreements for both DreamWorks' live-action and
animated movies, as well as the live-action films in development.
The acquisition would also secure the relationship Universal has had with
Mr. Spielberg for decades.
Price will be a crucial issue in any further talks. Metro-Goldwyn-Mayer,
with its 4,000 titles, sold for about $5 billion, much more than expected.
It is not yet known how much the DreamWorks deal is worth, but one of the
people with knowledge of the talks said it could be more than $750 million.
A DreamWorks spokesman, Brian Edwards, declined to comment on a possible
sale, which was first reported Wednesday in The New York Post. Executives
at NBC Universal also declined to comment.
But for the moment there appear to be few other serious buyers. Warner
Brothers Pictures, for one, has been in talks with the co-founders of
Miramax Films, Harvey and Bob Weinstein, about distributing their movies,
according to a person apprised of the Miramax negotiations. (A Miramax
spokesperson did not return phone calls.)
Other studios, like Sony Pictures Entertainment, have not been approached
or are not interested, Hollywood executives said. Some have speculated that
Paramount Pictures would be interested; Mr. Geffen is close to Brad Grey,
who recently became chairman of Paramount Motion Picture Group.
But a Hollywood executive who has talked to top executives there said there
had been no discussions with DreamWorks.
The live-action unit has had its share of trials recently, including the
release of "The Island," a film by the director Michael Bay that earned
only $12 million at the domestic box office its opening weekend, a tenth of
what it cost to make. In recent years, DreamWorks also has had a revolving
door of production executives.
Mr. Geffen has been overseeing DreamWorks' live-action operations at the
request of its investors. But Mr. Geffen, a billionaire who made his money
in the music business, has long disliked the economics of the movie
business. He has been talking with top executives at NBC Universal,
including Ron Meyer, president of Universal Studios, for more than a year,
according to the two people with knowledge of the talks.
Mr. Meyer is said to be a close associate of Mr. Geffen, and the talks
gained momentum in recent weeks. Mr. Geffen and Mr. Meyer talked by
telephone as Mr. Geffen was sailing in the Mediterranean, said one person.
But there are still lots of details to work out which could take time.
"No one is in a war room," said one person with knowledge of the situation,
who said it was only recently that Bob Wright, the chairman and chief
executive of NBC Universal, became involved in the discussions.
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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