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DreamWorks-Disney Distribution Deal Finalized

The Walt Disney Company will distribute six DreamWorks films per year, the studio announced.

DreamWorks has finalized a new distribution deal with The Walt Disney Company and an announcement is expected on Monday, Disney announced on Monday morning.  

In a press release, the company wrote: 

"The Walt Disney Studios has agreed to enter into an exclusive long-term distribution arrangement with filmmaker and DreamWorks Studios co-founder Steven Spielberg, and partner Stacey Snider, chief executive officer of DreamWorks, to distribute all upcoming live-action motion pictures produced by DreamWorks under their partnership with Reliance BIG Entertainment, part of The Reliance Anil Dhirubhai Ambani Group."

The announcement says Disney will release six DreamWorks movies per year under its Touchstone banner, with the first film expected in 2010. The agreement also includes plans for Reliance to release DreamWorks movies in India.

The deal emerged unexpectedly on Friday after, unbeknownst to DreamWorks’ previously announced distribution partner, Universal, the independent studio entered into advanced talks with Disney to cut a different deal. 

When Universal learned of negotiations with a rival studio, it abruptly cut off ties to DreamWorks with a curt statement.

The Disney negotiations were led by Allen Levine, a financier with J.P. Morgan representing lead investor banker Reliance Big Entertainment. As the representative of Reliance, Levine is currently the major decision-maker over the distribution deal. He and DreamWorks and Disney executives met on Friday and through the weekend to get the deal done. 

DreamWorks’ difficulties in securing capital to fund its movies was the wedge that drove Universal and DreamWorks apart. While the studio found a backer in the Indian media conglomerate Reliance last year, it has so far has been unable to raise the $700 million necessary to match the Indian company’s $500 million investment. 

DreamWorks had sought a $250 million equity investment by Universal, but Universal was unwilling to commit that much capital. 

One DreamWorks executive said that JP Morgan is expected to close to $325 million in funding by the end of March, which would be matched by an equal investment from Reliance. But until that time, no movies are being green-lighted, and production is at a standstill.  

Disney executives say its distribution deal involves no equity investment. But it does include numerous slots in its pay TV deal with Starz that would give DreamWorks movies an outlet on pay television. 

The deal with DreamWorks gives Disney more product to fill its distribution pipeline, after the major studio has cut back on production during a time of economic slowdown. 

Universal was reluctant to give up spots for its movies on HBO; DreamWorks’ pending deal with HBO fell through, leaving the company without distribution on pay TV. 

Over the weekend, Universal executives expressed anger over having been blindsided by DreamWorks. DreamWorks was “inept,” said one angry senior Universal executive this weekend. “They are the blind leading the blind.” 

A DreamWorks executive, however, insisted that Universal was aware of the negotiations with Disney. 

Another unknown fact that emerged in the rancorous back-and-forth between DreamWorks and Universal was that Steven Spielberg received two percent of all ticket sales from Universal theme parks, because of a long-time deal that would come due at the end of this year. 

The annual value of that is  $30 million, according to a knowledgeable studio executive.