DreamWorks, Universal end distribution deal

Fri Feb 6, 2009 8:20pm EST
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By Bob Tourtellotte and Gina Keating

LOS ANGELES (Reuters) - DreamWorks SKG, the movie company controlled by Steven Spielberg, and Universal Pictures on Friday severed their film distribution pact, sending DreamWorks into advanced talks with Disney where it expects to get more funds to spur production.

DreamWorks has produced movies such as classic "Saving Private Ryan" and action hit "Transformers," but has been looking for cash since splitting off from Paramount Pictures last year and taking itself private with the backing of Indian media conglomerate Reliance ADA.

Universal, a unit of the NBC Universal media division of General Electric Co, said it broke off "several weeks" of talks on a distribution deal after the smaller DreamWorks "demanded material changes to previously agreed upon terms."

In October, the studios reached a deal for Universal to take an 8 percent fee for releasing a slate of about six films a year over seven years beginning in 2009.

But sources familiar with the matter said the slumping economy caused DreamWorks to ask for better terms, including more money up front and access to Universal's TV distribution pact with HBO, from which DreamWorks would derive fees.

Universal balked and DreamWorks turned to the Walt Disney Co studio restarting talks that began late last year.

A Universal spokeswoman declined to comment beyond their statement. DreamWorks also declined to talk, and a Disney representative could not be reached to discuss reports that a Disney/DreamWorks tie-up could come as soon as Friday.

LUCRATIVE DEALS   Continued...