DW-Reliance first, distrib deal second

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Steven Spielberg still hopes to strike an agreement by Labor Day on a $550 million deal with Reliance Big Entertainment to help fund a reinvented DreamWorks, but discussions with studios over a new distribution arrangement could stretch into September.

In fact, much needs to be done on various fronts as the iconic hyphenate seeks to take back ownership control of his movie projects.

A $750 million loan component of DreamWorks' new business plan would take another 30 days to complete, once a lead bank is selected. And besides picking a distribution partner, there's the question of whether that studio also would take a small stake in the new DreamWorks.

Even basic corporate governance needs to be sorted out. At this point, at least one party to the talks envisions a six-seat board split evenly between DreamWorks management and RBE, with Spielberg as chairman and current DreamWorks CEO Stacey Snider getting a lead role and equity position in the enterprise.

Current DreamWorks chairman David Geffen is expected to bow out of the picture, once he helps Spielberg set up the venture.

RBE — the entertainment subsidiary of diversified Indian conglomerate Reliance ADA — has signaled its interest in getting a deal done but continues to sort through details. DreamWorks' own review of a business plan worked up by entertainment attorney Skip Brittenham has been thorough but positive, according to sources close to the negotiations.

With things looking good from both parties' perspectives, an agreement in principle could be announced within three weeks at the earliest, sources close to the talks said.

DreamWorks spokesman Chip Sullivan declined comment on the situation, and Reliance execs weren't immediately available.

Paramount struck a deal to acquire DreamWorks in December 2005, but the combo has proved awkward. Spielberg has a contract provision allowing him to leave at year's end, with the ability to take Snider and the DreamWorks name with him.

Paramount could still strike a new deal with Team Spielberg, but a more likely scenario would see Universal, Fox or Disney partnering with the new DreamWorks on distribution. Paramount execs seem resigned to losing control of DreamWorks yet hope a distribution-only arrangement can be worked out.

"Every indication is that they want to be autonomous," a Paramount insider said. "So the first announcement will probably be, 'We have the money.' But there are other things to be considered."

A participant in preliminary discussions about the DreamWorks business plan confirmed Paramount remains in the mix of studios being considered for a distribution partner for the new company.

"There have been remarks made about staying with Paramount, about how it would be so easy, with all the people already there and that kind of thing," the source said. "But there's so much bad blood between them that I can't imagine that happening."

DreamWorks Animation legally controls rights to the DreamWorks moniker, should Spielberg bolt Paramount, but it's assumed Spielberg would be granted the right to use the name at his new company.

DWA also distributes its movies and DVDs through Paramount via a deal stretching to 2012. The agreement has exit clauses sufficiently complicated as to suggest it's unlikely DWA would leave the arrangement early.

The publicly held animation company can exit its distribution agreement after Jan. 1, 2011, but only if there is a 35% or greater turnover in DWA stock. DWA also would have to pay Paramount $150 million to end the distribution arrangement, or a lesser amount if it exits closer to the 2012 expiration date. (partialdiff)
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