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ENTERTAINMENT

DreamWorks breakup could get ugly

The studio may clash with Viacom over movies, stars and other properties as it charts an exit strategy.

June 19, 2008|Claudia Eller | Times Staff Writer

Those movies played a pivotal role in a turnaround for Paramount, which had few projects in the pipeline when Grey took over in early 2005, and came at a time when some of Paramount's own films, including "Stardust" and "Zodiac," were costly flops. Not all of DreamWorks' movies worked, either. Three films lost significant money: "Things We Lost in the Fire," "The Heartbreak Kid" and Clint Eastwood's war drama "Flags of Our Fathers," which left Paramount and financing partner Warner Bros. about $40 million in the red.

Once Geffen began telegraphing his unhappiness with Paramount, the handwriting was on the wall. Geffen, Spielberg and Katzenberg, who runs the separate and publicly traded DreamWorks Animation, were livid last fall when Viacom Chief Executive Phillippe Dauman told investors that the financial effect of losing DreamWorks would be "completely immaterial."

On Wednesday, media analyst Harold Vogel echoed those remarks. "For Viacom, it will not look good officially because Spielberg is such an important filmmaker, but it may not make all that much difference in the long run," Vogel said. "Viacom's investors will be focused on what happens with the current Paramount management and their ability to generate their own projects and create their own legacy."

Paramount has relied heavily on a steady supply of movies from DreamWorks and has profited from their hits, including last year's $700-million global juggernaut "Transformers," which Paramount co-owned before buying the studio. The companies are currently in production on a "Transformer" sequel, which will be released next summer.

Post DreamWorks, Paramount will have to step up its own development and production output and prove it can sustain profitability with its own movies. It is unclear how many of DreamWorks' employees will remain at Paramount. The future is also uncertain for DreamWorks producers, such as the husband-and-wife team Walter Parkes and Laurie MacDonald, and former Disney executive Nina Jacobson.

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claudia.eller@latimes.com

Times staff writer Thomas S. Mulligan contributed to this report.

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