Less than two years after Steven Spielberg and his partners sold DreamWorks SKG to Viacom Inc.'s Paramount Pictures for $1.6 billion, a divorce appears to be inevitable.
Spielberg and partner David Geffen have felt slighted that they haven't received more credit within Viacom, given the success of their movies. Recent hits such as "Transformers" and "Blades of Glory" have lifted Paramount out of the doldrums and heightened resentment that has been mounting between the DreamWorks founders and the company's owners since the deal went down 19 months ago.
Big egos often collide in Hollywood. In this case, Geffen has butted heads with Viacom's 84-year-old chairman, Sumner Redstone. Internal power struggles, backbiting, perceived snubs and accusations of credit grabbing have also marred the marriage.
Smarting from seller's remorse, the DreamWorks principals are expected to bolt late next year. Geffen has been telling people in Hollywood that he and Spielberg would look for a new backer and studio home as soon as they are free to do so.
Geffen plans to exercise an out in his contract that frees him to leave next year. If he exits, Spielberg has the right to follow him out the door. Stacey Snider, who runs DreamWorks, can walk if Spielberg departs.
Any breakup is sure to be messy for both sides. Spielberg is knee-deep in movie productions at the Melrose Avenue studio. He and his DreamWorks partners would be forced to leave behind hundreds of projects, including a planned movie version of Alice Sebold's bestseller, "The Lovely Bones," to be directed by Peter Jackson of "The Lord of the Rings" fame. Spielberg pursued that property for many years. They would also abandon key executives at DreamWorks as well as those they installed in senior positions at Paramount.
Essentially, Spielberg & Co. would be starting from scratch, returning to the days in 1994 when DreamWorks was formed. A departure would lead to an even more bitter rivalry with Paramount as the two camps competed head to head for movie projects, talent and consumer dollars.
The questions for Paramount would be: Did the studio get its money's worth when it paid up for the 11-year-old live-action studio from Spielberg, Geffen and Jeffrey Katzenberg? And what value do the remains of DreamWorks have without the talents of the self-described Dream Team?
At the time of the acquisition, Paramount was criticized for overpaying. But its top executives say the purchase easily will pay for itself.
"The deal for us has been highly profitable and is ahead of schedule," Paramount Pictures Chairman Brad Grey said in an interview Thursday. "It would always be better to have Steven and DreamWorks with us, but of course we'll be OK" if they leave.
Grey acknowledged that the DreamWorks deal "really accelerated our turnaround."
DreamWorks' hits, which also included "Norbit," "Disturbia" and "Dreamgirls," have played a major role in the recovery of Paramount, which had few projects in the pipeline when Grey took the helm in early 2005. At a time when Paramount's own movies, including the expensive flop "Stardust," have been underperforming, DreamWorks' output has catapulted its owner from last to first place in industry market share.
Still, Viacom's top brass got tired of the speculation about Geffen's chronic unhappiness and desire to leave Paramount.
At an investor conference in New York on Tuesday, Viacom Chief Executive Philippe Dauman said of the likely divorce, "We're planning for that." He went on to assure investors that the financial effect on Paramount and Viacom would be "completely immaterial."
That comment ratcheted up the ill will. Jumping to the defense of his partner, Katzenberg shot back Wednesday: "To suggest that not having Steven Spielberg is completely immaterial just seems ill-advised," he said to the same group of investors in New York. "I think calmer heads need to prevail here."
Katzenberg runs publicly held DreamWorks Animation SKG Inc., which is not owned by Paramount but has a multiyear distribution deal with the studio.
In a business as unpredictable as Hollywood, DreamWorks and Paramount could wind up having a rapprochement and drawing up new employment contracts.
Grey said he remains hopeful. "The temperature has to go down a little bit," he said. "If there's an economically prudent deal that makes sense for us, of course I want Steven and DreamWorks to be part of Viacom. No one respects Steven and David more than I do."
But most industry observers believe that's a long shot.
The DreamWorks partners declined to comment.
In December 2005, when Paramount agreed to acquire DreamWorks, players on both sides heralded the union as a win-win. Geffen was thrilled when Paramount's Grey persuaded the Viacom board to buy the company after extensive negotiations with NBC Universal fell apart in the eleventh hour.