DreamWorks-SoftBank talks may augur Hollywood dealmaking wave

Mon Sep 29, 2014 11:27pm EDT
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By Lisa Richwine

LOS ANGELES (Reuters) - DreamWorks Animation SKG Inc's talks about taking on a Japanese owner highlight the challenges facing Hollywood's smaller studios in remaining independent and could prompt a string of other deals.

Over the weekend, a source said DreamWorks, the studio best known for movie franchises including "Shrek" and "Madagascar," had held talks about a possible sale to SoftBank Corp, the cash-rich Japanese communications and media company.

While a SoftBank source and banking sources in Japan said interest in a deal now appeared cool, the development could make other independent studios the targets of larger players, or prompt them to seek outside buyers or investors.

Many smaller, independent studios produce only a handful of movies each year, making them especially vulnerable to box office disappointments, such as those that DreamWorks has produced lately with "Rise of the Guardians," "Mr. Peabody & Sherman" and "Turbo." And they don't have the other businesses like cable channels or theme parks to help ride out film flops.

Movie studios have also faced a decline in DVD sales and increased competition from digital entertainment options like Netflix Inc.

The industrywide challenges make it harder for smaller studios without partnerships to tap the cash and distribution networks of larger companies, said Hal Vogel, the chief executive officer of Vogel Capital Management and an entertainment industry analyst. 

    "The movie business is capital intensive," he said. "You need a lot of cash just to stay in business."

Independent studios that are currently riding hot streaks could become targets for purchase or investment from larger media companies - some of them China-based - that want to acquire proven content.   Continued...

A man holding an umbrella walks past the logo of Softbank Corp at its branch in Tokyo April 22, 2014.  REUTERS/Yuya Shino