Katzenberg Mulls Bold Expansion

"Puss in Boots"

DreamWorks Animation opened "Puss in Boots" to $34.1 million.

DreamWorks Animation's CEO tells THR he might distribute other people's movies, which could bring in new money and quiet Wall Street critics.

Is Jeffrey Katzenberg about to grow his empire? If DreamWorks Animation goes it alone when its alliance with Paramount ends in 2012, Katzenberg is considering forming a co-op to distribute third-party films in addition to DWA's lucrative animated titles.

Such a dramatic move would open up new business opportunities for DWA but require additional overhead, such as new marketing and distribution execs. The strategy could be a boost to the public company, whose tiny slate of films is scrutinized by Wall Street. When Puss in Boots opened Oct. 28 to $34.1 million, hammered by a freakishly early nor'easter, Janney Montgomery Scott analyst Tony Wible complained it was "even worse than our bearish [predictions]," and the stock dropped 8 percent to close at $18.56 on Oct. 31.

To help explore three key options -- including self-distributing only DWA titles or negotiating a new deal with Paramount or another studio -- Katzenberg has recruited Chuck Viane, who stepped down as Disney's longtime president of distribution this year.

"One of the things we've thought about is creating a co-op in which we would distribute films from other independent producers, and there are even some mini-majors that might want to have that kind of scale to service them and to reduce their costs," Katzenberg tells THR. "These are big ideas and big opportunities that are about much more than just marketing and distributing two or three DreamWorks titles a year."

Reteaming with Viane -- whom Katzenberg and former Disney studio chief Dick Cook brought to Disney 27 years ago -- strengthens Katzenberg's bargaining position, since Viane has deep ties with the theater-owner community.

"As I told Jeffrey, part of my problem has been answering the phone from all these people who want to have these conversations," Viane says.

Katzenberg underscores that he doesn't favor any one option at this point. He intends to start talks with Paramount and any other studio by springtime before deciding his course by summer 2012. Paramount's Brad Grey wants a higher distribution fee than the 8 percent DWA now pays; Katzenberg isn't likely to go along. 

"Clearly, being with a major studio, you have the benefit of their infrastructure. And most of these companies have affiliated businesses that can help you," he says, adding that Paramount has done a phenomenal job with his movies, which have generated $10 billion. "But controlling your own enterprise has a lot of advantages. You're not relying on someone else, you're not ever taking a back seat to anybody else's agenda, you're never in conflict with somebody else's needs or problems or scheduling."

DWA wouldn't have to start from scratch, either, since it already handles its own consumer products. Still, in addition to creating a theatrical operation, it would have to set up a home video division (which Paramount now handles, along with television sales), but Katzenberg says that's hardly "rocket science," noting that DWA COO Ann Daly has experience in that arena. She headed worldwide home entertainment at DreamWorks SKG -- the studio that Katzenberg created with David Geffen and Steven Spielberg in 1994 and from which DWA was spun off in 2004.

If Katzenberg does get into distribution, he wouldn't be remaking DWA into a new version of the original DreamWorks. But the move would raise an intriguing scenario: There would be nothing to prevent current DreamWorks partners Spielberg and Stacey Snider from working with DWA when their multiyear deal with Disney ends in 2015.