Magazine article Newsweek

Hollywood: DreamWorks Sale-Why the Dream Didn't Work

Magazine article Newsweek

Hollywood: DreamWorks Sale-Why the Dream Didn't Work

Article excerpt

Byline: Sean Smith

The dream is over. Eleven years after founding their studio, Steven Spielberg, David Geffen and Jeffrey Katzenberg agreed to sell DreamWorks SKG to Viacom for a reported $1.6 billion. Viacom's studio division, Paramount Pictures, gets DreamWorks' library of about 60 films--such as "Saving Private Ryan" and Oscar winners "American Beauty" and "Gladiator"--along with a slate of films DreamWorks planned to release next year, including Clint Eastwood's "Flags of Our Fathers." Spielberg will likely give Paramount first dibs on his movies, and Paramount will get half the profits of any movie he makes at another studio. The biggest prize, though, is that Paramount, led by Brad Grey, who initiated the deal, will now distribute films from DreamWorks Animation. A separate, publicly traded company run by Katzenberg, DreamWorks Animation created the "Shrek" movies, which have grossed $1.4 billion worldwide.

Despite DreamWorks' successes, the company never quite lived up to its potential. Plans for a studio campus in L.A.'s Playa Vista section were scrapped, the record label and videogame unit were sold off, and while other major studios release more than 20 movies per year, DreamWorks has released an average of only six per year since 2002.

Just about everybody in Hollywood has an opinion about what went wrong. One theory, voiced by a rival studio head (who refused to be identified while commenting on industry matters), was that DreamWorks could not survive because the costs of running a studio now are so high that it's impossible to make a profit without other large revenue streams, including a sizable DVD library. …

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