September
24
DreamWorks Animation's Paramount Future in Flux?
[Posted by Ben Fritz]
With DreamWorks Studios bidding sayonara to Paramount, there's lots of buzz about how long the other Dreamworks -- Animation, that is -- will be sticking around. Its distribution deal with Paramount, as has been reported, ends in 2012. But what about this talk of an early exit option?
It exists, but it ain't easy. DreamWorks Animation's deal with Paramount signed in 2006 only gives it the option of existing as of Jan. 1, 2011, if at least 35% of the company's stock changes hands. Given that Jeffrey Katzenberg and David Geffen combined own more than 70%, that would mean they'd actually have to start relinquishing their controlling stake.
Even if that happens, though, leaving doesn't come cheap. DreamWorks Animation would have to pay Paramount $150 million, pro-rated if it leaves at any point after 1/1/2011 and before 12/31/2012.
Given that Paramount has unarguably been doing a good job marketing and distributing DreamWorks Animation's movies, particularly overseas (just check "Kung Fu Panda's" grosses, for instance), it would be very hard for Jeffrey Katzeberg and his management team to argue to the shareholders that leaving two years early is worth that kind of money. Even if it is an awkward arrangement between the two DreamWorks's.
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I wonder if DreamWorks Animation's interests will actually be effectively served by following DW Studio's lead and leaving Paramount in 2012.
Posted by: Phoebe | September 25, 2008 at 07:48 AM