International Herald Tribune
Spielberg looks to Bollywood for cash
By Michael Cieply and Brooks Barnes
Wednesday, June 18, 2008
LOS ANGELES: Steven Spielberg and other top executives at DreamWorks SKG may get a boost from an ambitious Bollywood player, but their planned alliance could be less grandiose than dreams past.
After a drawn-out tussle with the boutique film studio's owner, Paramount Pictures, one filled with perceived slights over respect and credit, Spielberg and his partner, David Geffen, are now in discussions with Reliance Big Entertainment of India about a cash infusion of $500 million to $600 million, say several executives briefed on the negotiations.
That investment, and access to a revolving credit line of about $400 million, would allow them to split from Paramount, a unit of Viacom, and make about six major movies a year. Yet for all the turmoil, they could conceivably remain in business with Paramount, by having it distribute their movies.
Any deal is still at an early stage, these people cautioned, and it may be several weeks before an agreement is signed, if at all. The talks were first reported by The Wall Street Journal.
While $500 million is not a lot of money in Hollywood, executives briefed on the negotiations said the commitment was favorable to the DreamWorks team. Reliance, without gaining much control over the enterprise, would be paying for a grand introduction to the United States movie business.
"Why the Indians? It is all about terms," said one of the executives who had been briefed. "These people are willing to pay a lot of money for little more than the right to go sit at a premiere with Steven Spielberg."
The Reliance deal being discussed would create an operation on a par with DreamWorks's activity since Viacom bought the company for $1.6 billion in 2005, while stopping short of the company's peak activity during its 11 years as an independent. But part of Geffen's strategy, said the executives, is to use a possible Reliance deal to draw additional investor interest, which in turn could pressure Reliance to put more money on the table.
A heftier investment would give the DreamWorks principals more insulation against the hazards of an industry accomplished at separating investors from their dollars.
DreamWorks itself is expected to remain part of Viacom. But the unit's top executives — including Geffen, 65, Spielberg, 61, and the chief executive, Stacey Snider, 47 — would be free to leave under their contractual arrangements.
DreamWorks began in 1994, backed by more than $700 million from Paul Allen, a founder of Microsoft, who remained an investor for over a decade. The studio, complete with an animation division, was heralded as the first true challenger to the major studios in decades. But it was slow to release its first movie — "The Peacemaker," which did not arrive until 1997 — and its slate was uneven. "Saving Private Ryan" and "Gladiator" were both critical and box-office successes, but other movies, like "The Mexican" and "The Island," fizzled on both fronts.
For Spielberg and friends, starting anew brings perils of its own. Their company would begin life with great cachet, but little income. Without a steady income from a film library, and perhaps without unfettered access to the dozens of scripts, books and other development properties they sold to Paramount, their new company would not start generating meaningful income for a couple of years.
Their money would be quickly depleted if their films in the next year or two did not match the strong performance of last year's crop, which included "Transformers" and "Norbit." Moreover, the new company could well end up looking like a smaller version of its predecessor, especially if its executives, who have worked in Spielberg's adobe-style quarters on the Universal lot, were to continue distributing through Paramount.
The DreamWorks' principals have been searching at least a year for a cash infusion that might allow them to adjust or end their relationship with Paramount. One person briefed on the team's plans said the new company was expected eventually to distribute its wholly financed films through a studio for a fee, though no talks on such a deal are under way. A DreamWorks spokesman declined to comment on the financing. Paramount also declined to comment.
DreamWorks has provided Paramount with some of its most successful recent movies. The separately owned DreamWorks Animation studio, under its chief executive Jeffrey Katzenberg, distributes animated films like "Kung Fu Panda" through Paramount under a deal that was distinct from the purchase of the live film operation.
Yet Geffen and his colleagues have chafed from the beginning at their relations with Brad Grey, the Paramount chairman, whom they tended to regard more as their partner than boss. There was a big tiff over how much authority Snider should have. And Geffen was miffed at what he saw as Grey's move to take credit for DreamWorks's "Dreamgirls" at industry screenings in New York and Los Angeles.
As much as it could hurt Paramount to lose the principals behind a string of hits, any blow would be softened by its status as the top studio this year, mainly because of Marvel Entertainment's "Iron Man," and of course, Spielberg's "Indiana Jones and the Kingdom of the Crystal Skull." Paramount also controls the rights to the coming "Transformers" sequel.
A deal between Reliance Entertainment and the DreamWorks principals would represent the first significant capital flow from fast-growing emerging markets into Hollywood. The president of Reliance Big Entertainment, Rajesh Sawhney, would not comment on the negotiations, but in a telephone interview Wednesday, he did discuss the company's plans to streamline the moviemaking process in Hollywood.
Reliance Big Entertainment hopes to help bring a "new sensibility" to Hollywood and other established markets, he said. In mature media markets "the bureaucracy of the system takes over," he said, and talent, in the form of directors and producers, often "gets lost." Reliance Big Entertainment will "try to engage directly with the talent, to create the biggest value," he said.
Reliance Big Entertainment, part of the Reliance ADA Group, said in May that it would finance films by production companies run by eight of Hollywood's biggest stars, including George Clooney and Tom Hanks. These deals, brokered by Creative Artists Agency, would give the producers full creative freedom, Reliance said at the time. Thirty projects are being discussed, with 8 to 10 expected to begin in the next two years.
Reliance expects overall revenue from the films to be about $1 billion.
"At the core of all this is making the movies that the talent wants to make," Sawhney said about the company's Hollywood plans.
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