Tough deal to come for Spielberg

With Reliance deal done, brass turns to Paramount

Steven Spielberg finally has his rupees, but now comes the tricky bit.

Having wrapped up negotiations with India's Reliance Big Entertainment, Spielberg and other DreamWorks brass begin potentially complicated discussions with Paramount over exit terms.

Reliance will provide $550 million in equity funding and JPMorgan Securities will lead a $500 million-$700 million bank syndication to reconstitute DreamWorks as a private company separate from Paramount. Team Spielberg hopes to get a first wholly DreamWorks-produced project into production by September 2009, but DreamWorks executives also are expected to negotiate for the right to take one or more development projects with them.

Other pending issues include the matter of who will distribute films produced by the new DreamWorks. Paramount could maintain a distributor relationship with the new company, but it is far more likely that Spielberg and DreamWorks CEO Stacey Snider will ink a deal with Universal, where they have maintained offices even while Paramount employees.

Fox and Disney also are possible distribution partners. DreamWorks execs have been happy enough with the marketing and distribution of their films at Paramount, but relations with corporate execs at Paramount and parent Viacom have been difficult.

Complicating exit talks with Paramount, the Melrose studio intends to make Spielberg pay for the right to take with him any of the film projects developed by DreamWorks execs at the studio. He could participate as a producer on such films in any event, but they would be released as Paramount films barring a mutually acceptable monetary settlement, a top Paramount exec said.

Meantime, Paramount has offered to fund Spielberg's Paramount-based passion project "Tintin" entirely, following the collapse of talks with Universal to co-finance the motion-capture production. The offer is contingent on the $130 million project being produced under unspecified financial terms, which Spielberg might or might not accept.

In a statement issued Friday, Paramount lauded the DreamWorks trio.

"We congratulate Steven, David and Stacey, and wish them well as they start their newest venture," the studio said. "Steven is one of the world's great storytellers and a legend in the motion picture business. It has been an honor working closely with him and the DreamWorks team over the last three years, and we expect to continue our successful collaboration with Steven in the future."

Indeed, a high-profile DreamWorks/Paramount project -- "Transformers: Revenge of the Fallen" -- is being lensed.

Several DreamWorks execs have been expected to follow the corporate brass in exiting the studio, but Paramount is allowing the label's entire work force of 150 or so to depart. The DreamWorks trio had exit clauses in their respective contracts allowing them to leave by year's end, but others needed Paramount permission.

"To facilitate a timely and smooth transition, Paramount has waived certain provisions from the original deal to clear the way for the DreamWorks principals and their employees to join their new company without delay," the studio said.

DreamWorks and Reliance reps shook hands on final deal terms Thursday night, then advised Paramount of the developments while paperwork was distributed and signed by deal participants Friday.

It's expected that Spielberg and Snider will take most of the DreamWorks work force with them. It's unclear if anyone not landing a DreamWorks job will be given a position at Paramount.

Geffen is expected to leave DreamWorks, while Snider will assume an even greater lead position and company equity.

Spielberg, Snider and Geffen had been obligated to continue working for Paramount until at least Oct. 31. But Paramount has waived the provision and cleared the way for their immediate departure.

Technically, rights to the DreamWorks name reside with the separate, publicly traded DreamWorks Animation. But Spielberg will have no problem securing use of the name for his new company from DWA topper Jeffrey Katzenberg, onetime principal in the original DreamWorks SKG.

Paramount retains the right to distribute the 59-title library acquired in its DreamWorks acquisition. But it sold a controlling interest in those library assets to Soros Group and Dune Capital for $900 million in May 2006.

The film and TV arm of Mumbai-based business magnate Anil Ambani's Reliance ADA, Reliance Big Entertainment began negotiating with Spielberg reps in June and a deal essentially was struck weeks ago. Spielberg and Snider flew to New York just after Labor Day to meet with Ambani for an effective deal clincher, but lawyers continued to put finishing touches on the agreement while the DreamWorks team mulled how to time its formal Paramount exit.

Reliance Big Entertainment has struck a string of production partnerships in Hollywood during the past year, but the Spielberg venture is by far the flashiest -- and priciest -- to date, netting the Asian comer a 50% DreamWorks stake. Reliance was advised in its negotiations by a film-consulting division of JPMorgan, with Los Angeles attorney Schuyler Moore leading the Indian team in negotiations.

Los Angeles attorney Skip Brittenham crafted DreamWorks' new business plan.

DreamWorks aims to produce at least six films a year. There's speculation that its executive staff will be trimmed, and the scope of operations will depend in part on the size of the bank syndication JPMorgan pulls together.

The firm is expected to deliver a loan package of at least $500 million without too much difficulty, despite the tight credit market. But reaching the $700 million goal DreamWorks is seeking could require RBE's convincing nontraditional entertainment lenders from the Asian banking community to participate.

The bank financing will take up to 90 days to complete, but Spielberg and Snider are expected to move quickly to form a production team. Current top execs include production president Adam Goodman and executive vp Holly Bario.

DreamWorks is likely to continue relationships with outside producers including Montecito Picture Co., Red Hour Films and Parkes/MacDonald Prods. Tom Pollack and Ivan Reitman's Montecito has produced DreamWorks/Paramount films including "Disturbia" and the upcoming "Hotel for Dogs" and "I Love You, Man"; Ben Stiller's Red Hour-delivered "Blades of Glory."

Former DreamWorks production toppers Walter Parkes and Laurie MacDonald have continued as de facto studio execs, handling prestige productions like "Sweeney Todd." Their projects include "The Trial of the Chicago 7," with Paul Greengrass attached to direct.

Paramount, which closed on its $1.6 billion acquisition of DreamWorks in February 2006, said the loss of the DreamWorks creative talent won't crimp its production pipeline.

"The acquisition of DreamWorks has been beneficial both creatively and financially for Paramount and accelerated our strategy of focusing on our world-class franchises and brands," the studio said. "It gave us a solid slate of films to fill out our lineup, a valuable catalog we were able to monetize and a development pipeline that will bear fruit for us for years to come. The acquisition jump-started our rebuilding plans, which are now well under way."

Paramount has two summer tentpoles -- "Star Trek" and "G.I. Joe" -- in the can, plus the Eddie Murphy starrer "Nowhereland" and Martin Scorsese's "Shutter Island."

Further down the road, a Marvel-produced "Iron Man" sequel is in the works, as well as animated features "Avatar: The Last Airbender" from M. Night Shyamalan and "Rango" from Gore Verbinski and Johnny Depp.

The loss of DreamWorks should help several projects get increased traction. David Fincher has projects including "Torso," "The Killer" and "Black Hole," while J.J. Abrams has "Morning Glory" and "Little Darlings."

Elsewhere, Misher Films is readying "Swingles," and "Sopranos" capo David Chase has a deal to write, direct and produce a Paramount drama.

Among franchise projects, a stalled reboot of Tom Clancy's Jack Ryan franchise might get new juice and a "Dune" remake is planned with Peter Berg directing. "Beverly Hills Cop IV," with Brett Ratner at the helm, is tagged for a summer 2010 release.