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DreamWorks Animation and Viacom get cozy

As Paramount Pictures hammers out the last details of adding DreamWorks SKG to the Viacom corporate family, the question of how DreamWorks Animation (spun off as a public company in 2004) will fit into the mix is still somewhat up in the air. The animation arm was not included in the acquisition, though Paramount Pictures has taken over as distributor for DWA films.
January 1, 2006

As Paramount Pictures hammers out the last details of adding DreamWorks SKG to the Viacom corporate family, the question of how DreamWorks Animation (spun off as a public company in 2004) will fit into the mix is still somewhat up in the air. The animation arm was not included in the acquisition, though Paramount Pictures has taken over as distributor for DWA films.

The deal holds great potential for both companies to capitalize on each other’s resources, particularly on the broadcast side. Paramount’s sister company Nickelodeon has already agreed to promote DWA films on the network. Additionally, Viacom and Paramount will help DWA cross over into TV animation by financing new series based on the animation house’s film slate. ‘The commitment is to produce a minimum of one TV series every two years out of one of our properties,’ says DreamWorks Animation CEO Jeffrey Katzenberg, adding that specifics for both content and finances on the TV side have yet to be nailed down.

And while new DWA films such as the upcoming May release Over the Hedge are part of the deal until 2012, it is unclear at this stage whether it precludes the exploitation of past films such as Shrek or Madagascar, which Katzenberg says would offer ‘great possibilities.’ Other agreements will stay much the same: the DreamWorks brand, for instance, is owned by DWA and is licensed by DreamWorks SKG. That arrangement is expected to shift over to Paramount. The deal made no mention of DWA’s consumer products arm, which will remain with the animation studio.

The December move followed months of industry speculation about the fate of the independent studio/distributor, given that its film productions can’t carry the costs of self-distributing. From Paramount’s perspective, the addition of DreamWorks SKG – founded in 1994 by Hollywood heavyweights Steven Spielberg, Jeffrey Katzenberg and David Geffen – has the potential to boost its flagging fortunes.

Under the new contract, Paramount takes over the studio’s right to distribute and market DWA films in theatrical, home entertainment, and television markets around the world – though the deal does not yet encompass rights for emerging media and digital platforms. Paramount will earn the same 8% distribution fee, with the contract lasting until 2012, two years longer than the original agreement with DreamWorks SKG. As a signing bonus, Paramount is paying DWA US$75 million, which it will use to pay down debt owed to NBC Universal and save the company US$5.5 million in interest payments.

‘Overall, the intent of the new agreement is to allow DreamWorks Animation to operate under the same operating and financial conditions as we did during our relationship with DreamWorks studios,’ Katzenberg says.

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