October 21, 2014

Dreamworks Caught in a Real-Life Drama

But Hollywood is pondering something else: What becomes of DreamWorks Studios, the boutique studio behind those films?

The 10 nominations between the two movies, including best picture for each, have made DreamWorks a strong contender for honors on Oscar night, Feb. 26. The two dramas already lead the best picture pack at the box office, with “War Horse” passing “Moneyball” over the weekend, according to estimates, to become the second most popular nominee, behind “The Help,” which had domestic ticket sales of about $170 million.

Behind the scenes, however, executives at DreamWorks and its partners are quietly opening discussions that in the next few months will determine its future and answer a broader question about the state of Hollywood: Can a faltering film industry sustain a company that insists on making ambitious, Oscar-caliber, studio-size films — but without the deep pockets of a Viacom, which owns Paramount Pictures, or a News Corporation, the parent of 20th Century Fox?

Created four years ago by Steven Spielberg and Stacey Snider in partnership with Reliance Entertainment, an Indian financier, DreamWorks was a successor to DreamWorks SKG. The earlier DreamWorks was an independent studio that was created amid much fanfare by three Hollywood heavyweights — Mr. Spielberg, Jeffrey Katzenberg and David Geffen. Eventually they sold it to Paramount and briefly worked with the studio in what became a failed marriage.

(The new DreamWorks is unrelated to the publicly held DreamWorks Animation.)

Over the years, small, independently financed companies — some with their own distribution mechanisms, others, like DreamWorks, without — have generated hits, only to disappear or be merged into larger corporations. Miramax Films was acquired by Disney after releasing “The Crying Game,” a box-office success and best picture nominee; Disney has since sold the unit. Summit Entertainment was recently sold to Lions Gate; Summit investors saw the end of their blockbuster “Twilight” series as a prime moment to cash out.

For smaller film companies, the hunger for capital is a perennial problem. Making a studio-level film can require an immediate investment of $100 million or more. But even the hits pay back their investors slowly, over a cycle that may last as long as 10 years, as movies are sold successively in theaters, on DVDs, to Internet streaming and cable television services and so on.

DreamWorks is now in the ticklish position of having nearly exhausted its first round of financing, which included $325 million in equity from Reliance, and a matching $325 million in lending from banks led by J. P. Morgan Securities. An original plan called for more from each, but the struggles of the national economy brought the investment up short. Now, DreamWorks is left to line up new financing at a time when movies are struggling.

Attendance at North American movie theaters hit a 16-year low last year. DVD sales continue to drop. Although some emerging overseas markets are picking up steam, Europe and other important sales territories are uneven. And there are no indications of an immediate reversal of the trends.

So the question becomes whether, or to what extent, Reliance and allied lenders are prepared to back another round. Executives from Reliance and DreamWorks declined to discuss their plans. Over the weekend, however, they said in a joint e-mail that they remained pleased with their partnership.

“Our relationship has always been structured to allow us to adapt to changing market conditions and to create the best chance for success for all parties involved,” they said in a statement.

Speaking on condition of anonymity to avoid conflict with executives of the companies, people familiar with the situation said talks about further financing will probably open in the next few weeks. The outcome will determine whether DreamWorks, which distributes its films under a long-term deal with Walt Disney Studios but has also worked with other partners, will be able to maintain its ambitious course.

Article source: http://feeds.nytimes.com/click.phdo?i=13df14cc2eb484fd614a68c9dd42933f

Speak Your Mind