DreamWorks Animation Will Pay Fox Same Theatrical Distribution Fee as Paramount

Fox will receive a lower fee on digital rights and DreamWorks will independently handle domestic television deals

DreamWorks Animation will pay 20th Century Fox the same 8 percent distribution fee to release its films theatrically that it was paying Paramount, studio chief Jeffrey Katzenberg said Monday.

Getty ImagesIt will also get the same payday for its work distributing the animation house's films on home video and on international television.

But Fox will receive a lower fee on digital business than Paramount did. Katzenberg told media on a conference call that Fox will earn a 6 percent fee on digital rental, on demand and electronic sell-through of DreamWorks Animation's titles.

Also read: DreamWorks Animation Signs Distribution Deal with Fox

Paramount received an 8 percent fee across all release channels.

As part of the five year pact, DreamWorks Animation will handle domestic television distribution independently. Katzenberg said that the economics on the deal were better than the one with Paramount thanks to lower digital distribution costs.

”This deal is an absolute win-win,” Katzenberg said.

"The one real difference here with Paramount is that 7 years later there are certain capabilities built within DreamWorks that we can do ourselves," he added.

Katzenberg said that he was confidant that joining forces with Fox, which has its own animation hit maker in Connecticut-based Blue Sky Studios, will help the studio become the number one distributor in the world.

"In every area, Fox is a world class distributor," Katzenberg said, noting the studio's strength in the home entertainment sector.

The DreamWorks Animation chief labeled the company's year-long search for a new partner, "a good process," and acknowledged that the studio had contemplated distributing its own films in-house and had talked to Sony Pictures.

The animation house behind "Kung Fu Panda" and "Shrek" has been looking for a new home since announcing in August 2011 that it was ending its distribution deal with Paramount.

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The studio’s board of directors rejected a proposal from Paramount to extend its distribution pact for another year, once its deal expired this year. Its upcoming feature "Rise of the Guardians" will be the final film it releases through Paramount. Its first film under the new pact with Fox will be "The Croods," an animated film set in the prehistoric era that opens domestically on March 22, 2013.

On the call, Katzenberg publicly thanked Paramount for its work rolling out his studio's films and in a statement Paramount chief Brad Grey wished DreamWorks Animation well.

“DreamWorks Animation has been a terrific partner for Paramount over the last 7 years and we congratulate their entire team on their new distribution deal with Fox," Grey said. "Jeffrey is one of the most successful executives in our business, both in terms of his creative talent and the value he has built at his company.  The marketing and distribution work we did with DWA helped pave the way for the creation of Paramount’s new animation division. We are grateful to Jeffrey and his entire team for their contributions to our studio and wish them the best at their new home.”

Paramount's relationship with DreamWorks isn't entirely over yet. Paramount retains certain home entertainment and other rights to the films it released theatrically for 16 years after their debut, according to an individual with knowledge. That doesn't prevent DreamWorks Animation from rolling out more sequels and reboots to movies like "Kung Fu Panda" and "Shrek" that Paramount distributed, however. The ability to make fresh installments in those franchises goes with the studio.

Fox Studios  Co-Chairmen Jim Gianopulos and Tom Rothman said that there were no bruised egos at Blue Sky, despite the fact that the studio will now be juggling one of its major competitors. The Fox chiefs said that the Blue Sky team, which recently scored with the $796.5 million grossing "Ice Age: Continental Drift," knew they were "loved."

Katzenberg also disputed that there will be an clashes of egos now that he is working alongside a large personality like Rothman. He said there will be more than enough oxygen in the room to go around.

"I’m now very old and I actually don’t suck air any more," Katzenberg said.