DreamWorks Animation and News Corp: Drama Behind the Scenes of the Fox Deal

This story first appeared in the Oct. 5 issue of The Hollywood Reporter magazine.

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On Aug. 20, DreamWorks Animation announced its new long-term distribution deal with the Fox film studio. But sources say there was more behind-the-scenes drama in the making of the pact than either side has chosen to reveal. Those with knowledge of the situation say Fox parent News Corp. discussed a potential purchase of DWA at a price that would have included a premium on the company's market valuation of a little less than $1.5 billion.

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That would have been based in part on having DWA CEO Jeffrey Katzenberg as part of the package. News Corp., which declined comment, was said to have gone so far as to examine the profit margins on DWA movies, which are far more expensive to make than the Ice Age films and others from Fox's Blue Sky Studios.

The company also couldn't envision where Katzenberg would fit into its already top-heavy executive suite, which includes president and COO Chase Carey as well as newly promoted Fox Broadcasting chairman Peter Rice (though he'll be tied up with television responsibilities for the foreseeable future).

Then there's James Murdoch, who according to Reuters is eyeing a post-hacking-and-bribery-scandal portfolio in the U.S. Sources with close ties to DWA insist the company wasn't interested in selling to News Corp. and is not for sale, and they deny that Katzenberg would ever take a role there.

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One source says the company has plans that will justify a great price in the future. DWA recently paid $155 million for Classics Media, with more than 450 family entertainment titles including Casper the Friendly Ghost and Lassie, and it has announced a series of deals in China.

Now it remains to be seen how the Fox movie studio -- which is anticipating the departure of co-chairman Tom Rothman -- will cope with its famously hands-on new partner. A former associate says distribution fees from the DWA movies should make it all worthwhile. "They get aggressive, but so what?" says this observer. "Nobody worth a crap is easy to deal with." DWA declined comment.