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Reliance Deal is Done at Last

Reliance Deal is Done at Last

The Wall Street Journal, as usual, got the early call on the culmination, finally, of the long-in-the-works DreamWorks/Reliance deal:

The principals of DreamWorks SKG have completed a long-anticipated deal with one of India’s largest entertainment conglomerates to set up a new $1.2 billion film company, according to people familiar with the matter.

The deal gives DreamWorks co-founder Steven Spielberg and DreamWorks Chief Executive Stacey Snider the financial support they need to leave Viacom Inc.’s Paramount Pictures and start their new venture. Under the signed agreement, Mumbai-based Reliance ADA Group will invest $500 million equity and provide another $700 million in debt through J.P. Morgan Chase & Co. toward the new venture, which will produce a slate of about six films a year.

Variety reveals that DreamWorks will be able to take its staff with them. This could help the studio unload some of the DreamWorks overhead of some $50 million a year:

Though the deal has been anticipated for some time, what had been unclear was the fate of DreamWorks’ executives, who would have been contractually obligated to remain employed by Paramount. In a surprise move, Paramount waived its right to keep DreamWorks’ execs in its fold.

“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,” Paramount said in a statement.

It’s not unusual for a deal this complex to take so long.

It is unusual that having not clinched a deal with Universal, and moving to Viacom/Paramount, which acquired DreamWorks for $1.6 biillion 2 1/2 years ago, Spielberg/Geffen and co. should be so hellbent on getting out of there.

It became clear that Spielberg, Geffen and Stacey Snider thought they were a satellite company working alongside Paramount–even serviced by the studio, on some level. But Paramount chairman Brad Grey considered DreamWorks to be not a sibling company but one of several labels answering to him, like MTV or Paramount Vantage.

Add the ornery and volatile Sumner Redstone to the mix, and you had a recipe for disaster.

Even if Spielberg and company had to go offshore, to India, they were going to raise the necessary funding to make another go at a standalone company answering to no one. Now Spielberg and Snider (as Geffen departs the team) will go their merry way–presumably to a Universal distribution deal, although the studio balked at putting up $130 million for the 3-D animated Spielberg/Peter Jackson adaptation of the comic-strip classic Tintin.

As Claudia Eller points out in the LAT, this is a sign of the times, as studios resist the lure of getting into bed with even filmmakers of the stature of Spielberg and Jackson if the numbers don’t add up. The two filmmakers (who could grab as much as 30% of the gross on their pics) were switching off producing and directing duties on the first two installments of a planned trilogy filmed back-to-back. Production was scheduled to begin next month, as Paramount was hoping to find a partner to shoulder the cost. Negotiating this deal with Paramount comes at the very moment that Spielberg is extricating himself from the studio and hopes to walk away with as much as he can get.

Universal will likely wind up as DreamWorks’ distributor. But the Tintin situation highlights the fact that even as a standalone, DreamWorks will need willing financial partners if it wants to mount big-budget behemoths. The other question is how willing Spielberg and Snider will be to pare back their size, scope and staff to remain lean and mean. They risk following the path taken by would-be indies like Joe Roth’s Revolution and The Weinsteins, two companies who raised substantial funding but followed a free-spending, old-fashioned studio-scale paradigm.

[Originally appeared on]

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