The Dream Is for Sale

Nov 7, 2005  •  Post A Comment

Two days before Christmas, DreamWorks SKG and Universal Pictures will release Steven Spielberg’s feature “Munich.” The big-budget movie is about a secret squad from Israel’s Mossad intelligence agency that was sent to kill 11 Palestinians suspected of having a role in the murder of 11 Israeli athletes at the 1972 Munich Olympics.

There is little doubt Mr. Spielberg, the Oscar-winning director of “Schindler’s List” and the most successful filmmaker of his generation, will create another powerful drama. But that doesn’t guarantee success at the box office. This thriller is set in the real world. It will not be as easy to sell as past successes that were flights of fantasy, such as his “E.T.: The Extraterrestrial.”

In this case, whether “Munich” is a well-received holiday gift or a lump of coal carries extra significance. The movie’s fate could influence the final terms, even the viability, of NBC Universal’s pending bid for DreamWorks. The Universal City, Calif.-based division of General Electric has reportedly offered to acquire DreamWorks’ live-action movie and television operations, 60-film library, TV program library and other assets for a price said to be above $1.3 billion, including the assumption of about $500 million in debt. Only DreamWorks Animation, which is a separate, public company, would be excluded, though distribution rights to its animated and CGI movies would be part of the deal.

If “Munich” is a blockbuster, unlike some other recent DreamWorks movies, such as “The Island,” principal owners Mr. Spielberg, Jeffrey Katzenberg and David Geffen will have leverage not only to get their rich asking price but also to insist on employment contracts for some loyal DreamWorks employees-a demand that is a potential sticking point in closing the deal, according to sources.

The negotiations have been on and then off. When talks faltered in late September, primarily over price, Mr. Geffen said publicly that he doubted any deal could ever be done with NBC Universal. Universal Studios President and Chief Operating Officer Ron Meyer presented a revised offer in mid-October.

Mr. Geffen, and others at DreamWorks and NBC Universal, declined to comment. However, according to sources, the deal is very much back on. There is now a good chance a sale will be completed, though it may not play out until early next year-after “Munich” premieres. Apparently that is all right with the sellers, who are said to prefer doing the transaction next year for tax purposes. Sources say NBC Universal would just like to get the deal done. Even with an agreement in principle, NBC Universal executives still must get final approval from General Electric.

The sale will include DreamWorks’ television operations and participation in series currently in production-“Las Vegas,” in season three on NBC, and “Rescue Me,” entering season three on FX.

DreamWorks Television is also a partner with producer Mark Burnett in the reality series “The Contender.” The show about boxers is moving from NBC, where it was a ratings loser last season, to ESPN, where it should find a warmer reception among sports fans. DreamWorks TV, which earlier this year produced the miniseries “Into the West” for TNT, also has several movies and series in development, including a potential 10-hour miniseries for NBC, “Tomorrow/Today,” set in a Los Angeles TV station in the future.

The DreamWorks TV library also includes the hit miniseries “Steven Spielberg Presents ‘Taken'” and short orders of failed series including “The Job,” “Boomtown,” “Oliver Beene” and the animated financial disaster “Father of the Pride.” Most distribution rights to DreamWorks’ biggest TV hit, “Spin City,” have been sold to Paramount.

Despite the superb track record of the founders, DreamWorks has never lived up to the hype that accompanied its launch in 1994. At that time DreamWorks intended to compete head-to-head with other major studios. It wanted to produce, distribute and own movies, TV shows, music, video games and more. It was once going to have its own high-tech studio in West L.A.

In the early years DreamWorks TV deficit-financed series and made expensive talent deals with Gary David Goldberg, Maury Povich, Michael J. Fox, Ted Danson and others. At one point it had a major co-production agreement with ABC, then run by Robert Iger, but it fell apart after Disney acquired ABC.

Aside from “Spin City,” which ran from 1996 until 2002, the kind of hits that would generate big syndication revenue never happened. Instead, there was a flood of red ink. Today DreamWorks’ idea of owning the TV programming it makes is moot; NBCU is already a partner, distributor and in most cases underlying owner of DreamWorks-produced TV series and movies.

DreamWorks TV is now essentially a producer for hire based at NBC Universal, where it has a “pod” deal that covers some overhead and development costs. The TV division is run by the highly regarded duo of Daryl Frank and Justin Falvey, who are likely to continue very much as they have been even after a sale.

The economics have turned sour on the DreamWorks founders’ goal of becoming independent movie and TV moguls, so some kind of transaction seems inevitable. DreamWorks is already in business with NBC Universal in so many areas it would be difficult for another buyer to enter the picture. And without the strategic imperative (mainly keeping Mr. Spielberg’s talents, even on a nonexclusive basis), the price being demanded probably would not make sense.

An informed source confirmed that NBC Universal is really the only buyer at this point, though the DreamWorks partners could seek other bidders or not sell at all-but that now seems unlikely.

As of late last week DreamWorks had not officially responded to the NBC Universal offer, according to sources. With big bucks and even bigger egos involved, a deal could always unravel. At best, an announcement remains weeks or even several months off.

However, in the end, it is likely the DreamWorks founding partners will get their big payoff, even if their dream of becoming the next Irving Thalberg, Jack Warner or Darryl Zanuck is dead.