DreamWorks SKG ended exclusive discussions with NBC Universal, which had made an offer to acquire DreamWorks for about $1 billion, Geffen confirmed Sept. 27.


(The Hollywood Reporter) -- DreamWorks SKG ended exclusive discussions with NBC Universal, which had made an offer to acquire DreamWorks for about $1 billion, Geffen confirmed Sept. 27.

NBC Uni chairman Bob Wright and Universal Studios president Ron Meyer pursued DreamWorks for several months and earned the right of exclusive negotiations three months ago.

DreamWorks and Universal confirmed that NBC Universal made an initial offer of about $1 billion, but by Sept. 23, NBC Uni sought to revise that price downward.

In the end, it was Spielberg, filming "Munich" in Europe, who balked, said Geffen, who took the role as lead negotiator for DreamWorks.

"He had been conflicted about it from the beginning," Geffen said. "When they changed the price, he decided not to do it."

People familiar with the negotiations said NBC Uni's new offer was roughly $100 million lower than the previously agreed-upon price. NBC Uni was trying "creative ways to make it work," said one source close to the talks.

But among several sources, who would speak about the discussions only without being identified, there was disagreement about the cause of the breakdown in the talks, first reported in the Sept. 27 issue of the Wall Street Journal.

The primary issue appears to have been the price of the deal. "The bottom line was only about money and GE's return on that money," said one source familiar with the discussions. While Universal might have been willing to meet DreamWorks' demands, the fiscally conservative GE was not.

As far as Spielberg was concerned, though, the bottom line also involved the issue of creative control.

According to sources familiar with DreamWorks' position, Spielberg was reluctant to give up green-light control over DreamWorks' film slate. But another source insisted that "Steven's freedom had nothing to do with it."

"Steven Spielberg is one of the most creative and successful directors and producers in the history of filmmaking," Wright said Sept. 27. "I have the highest respect both for him and for DreamWorks, and I look forward to many more years of continued collaboration."

While DreamWorks is now free to open merger discussions with other entities, Geffen said he and his founding partners are happy to remain a private, independent company.

NBC Uni, which had been aggressively courting DreamWorks, is still free to do so, albeit no longer exclusively, insiders said. But some observers also viewed Geffen's decision to speak about the talks' breakdown with the media as a calculated risk, which could alienate the powers-that-be at GE. By announcing the end of the exclusive talks and potentially putting DreamWorks on the market for other buyers' consideration, Geffen "went to DEFCON 5," one observer said.

Purchasing DreamWorks would have given NBC Uni rights to the 11-year-old company's library of 60 titles along with future production from its the live-action arm. DreamWorks Animation SKG, which became a separate, publicly traded company run by CEO Katzenberg last year, was not part of the talks.

However, because DreamWorks distributes DreamWorks Animation's movies theatrically, Universal also would be acquiring the rights to distribute those animated films in the domestic market if a deal is struck.

Universal Home Video already has the rights to distribute DreamWorks' DVDs -- live action and animated -- domestically and internationally. Year-to-date in 2005, DreamWorks DVDs account for 30% of Universal Home Video's revenue, according to figures supplied by DreamWorks. Those deals run through 2010, though DreamWorks does have various outs and buyouts, according to one source close to the talks.

But the potential DreamWorks deal had an added appeal for Universal, which is withdrawing from its long-term partnership with Paramount Pictures in United Pictures International, through which it distributes its films abroad. With Universal setting up its own foreign distribution arm, it needs more product to put through its system and would like to keep DreamWorks' slate flowing through its pipeline.

In fact, DreamWorks points out that the $339.6 million in international theatrical rentals it earned last year compared favorably with Universal's $355.7 million.

With Universal and Paramount in the midst of dissolving UIP, DreamWorks is free to seek a fresh international deal with Universal, Paramount or any other company.

While observers don't discount the possibility that NBC Uni and DreamWorks could resume talks, DreamWorks might now entertain offers from other potential buyers. Viacom's Paramount Pictures would be one likely party because with the UIP breakup it, too, needs a product infusion in its international pipeline.