Viacom Inc.'s Paramount Pictures has released DreamWorks SKG co-founder Steven Spielberg and his team of executives from their contracts, paving the way for the famous filmmaker to form a new studio backed by India's Reliance ADA Group.
The move spells an end to a short-lived and acrimonious corporate marriage that at the same time provided Paramount with some of its biggest hits in recent years.
But Spielberg and his DreamWorks colleague David Geffen chafed under Paramount management and last year began setting the stage to find investors who could pry them loose from the studio.
DreamWorks is now poised to restart as an independent studio backed by one of India's largest conglomerates, which is also keen to establish itself as a global media player.
DreamWorks has informed Paramount that it has finalized its equity partnership deal with Reliance to launch the new studio. The deal is expected to be announced Monday.
Reliance will invest $550 million in equity for a 50% stake in DreamWorks and has been working with JPMorgan Chase & Co. to borrow an additional $700 million. The new studio is seeking total capitalization of $1.25 billion to satisfy a business plan to make as many as six pictures a year.
Next step: DreamWorks needs to find a distributor for those films. The likely partner is Universal Pictures, where Spielberg has roots as a young filmmaker and has always maintained offices. Former Universal Pictures Chairwoman Stacey Snider, who has been running DreamWorks and has a long history with Spielberg, will become a partner in the new company.
Geffen, who has been active behind the scenes in helping the Reliance deal come together, will not be part of DreamWorks going forward.
Since last January, Geffen has had the option to exit his contract with Paramount, but he didn't act on it until now. Once Geffen exercised his right to leave, Spielberg and Snider were free to leave within 60 days, but no sooner than Oct. 31 of this year.
However, on Friday, after a DreamWorks lawyer told Paramount that DreamWorks had signed its equity partnership agreement with Reliance, the studio immediately released the DreamWorks principals from their contracts.
Paramount also gave permission to Spielberg to take "without delay" all of DreamWorks' approximately 150 employees. But it is not clear how many of them Spielberg and Snider actually want, nor is it clear whether Paramount intends to keep any of the DreamWorks staff.
