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September 27, 2005

Hold It Right There!

There are few dealmakers smarter than David Geffen. Even as a man with great taste acting as an impresario over the years, it has been his skill at the negotiating table (and away from it) that has made him a billionaire.

And here, in the Universal deal, we see his skill as a Texas Hold ‘Em player. He’s going all in. His stack of chips and his cranky primary partner are too depleted to make any other play.

So when G.E. turned out to be more unwilling to treat Hollywood like its personal Monopoly board than buddy (not-to-be-fucked-with-buddy, but buddy nonetheless) Ron Meyer, what moves were left to Geffen to try to get advantage in this one bold, painful, all-in hand?

Withdraw from negotiations two days before the “exclusive term” ends and use Spielberg’s alleged distant grumbling as a threat. And in two moves that are purely speculation by this writer, leverage the UIP break-up… which I am assuming was an opportunity for DreamWorks distribution execs not to lose their jobs as they would help with the expansion of Universal’s new standalone international distribution arm, which may have become an assumption at Universal. And second, float the idea that Spielberg might miss the year-end window with Munich… which has no basis of fact in terms of the production, but which could unsettle the Universal Oscar push, which is a minor issue, but a potentially public issue. (It’s not speculation that this has been floated. It is speculation that this might be why it’s been floated.)

What is true in all of these reports is that Spielberg’s absence for the months of shooting Munich, which ends first unit production this week, hangs over things like a father due home after a child has broken a window. However, Spielberg is as much a key asset for the DreamWorks side as he is a problem at the table, in that he has had his business on the Universal lot forever – DreamWorks production lives there now and has for much of the life of the company – and there is a strong feeling that he is not leaving. Period.

The whole situation is not unlike the Weinstein exit from Disney, though without any of the personal acrimony. How much will G.E. pay for the DreamWorks assets and how much will they give the new Universal/DreamWorks division to operate each year?

There is no studio, including DreamWorks, that has ever completely disallowed filmmakers from working elsewhere if the studio passes on the film in question. Imagine makes movies for other studios sometimes, as Bruckheimer does, Rudin did, etc. I think it is fair to say that no one is saying “we’re locking you up and throwing away the key” to Mr. Spielberg. So you can put that notion under ‘red herrings.”

As I wrote months ago when Geffen floated his $1 billion figure for DreamWorks… the assets appear to be worth about $700 million. That figure would barely allow the studio to pay out Paul Allen. Besides… Geffen said a billion.

But even if G.E. NBC/Universal division was seen to be paying out a couple of hundred million too much for this asset, the amount could probably be worked into a face-saving public proclamation as partially being future funding of the “DreamWorks” efforts inside of Universal. But how much funding for how many years would Universal be willing to offer and how guaranteed would the funding be?

What Spielberg surely does not want is a $150 million “dependent division” style funding commitment with the company having to run the Universal gauntlet for any production dollars more than, say, $50 million, even for a Spielberg movie.

Getting back to Miramax, in the recent extension negotiations, Disney once offered The Weinsteins a $350 million a year budget for a new contract – half of what they had built it up to – and The Weinsteins turned them down. It was taken off the table and never came back. And still, as The Weinstein Company launches in earnest with movies in the weeks to come… they still have no substantive outside funding. $350 million must sure look good now.

Going farther back… there is no future for DreamWorks as an independent. They need to sell their assets to continue to exist as more than a company endlessly at the precipice. Unlike The Weinsteins, they could raise capital… but not enough that it wouldn’t be perceived as embarrassing. And because of the decades long relationship, Spielberg leaving Universal’s lot would be a stone cold shocker.

Expect the tussle to go private and then public and then private again before it’s over. There isn’t a studio in town that is really in the market for just buying DreamWorks’ $500 million library on its own without scoring the asset that is Spielberg. You’ll probably hear rumblings about WB being interested soon. And then, expect the Universal/DreamWorks deal to be done before November 15. No other option makes sense for either side.

Posted by poland at September 27, 2005 10:37 PM

Comments

Posted by: Mark Ziegler at September 27, 2005 11:44 PM

Posted by: PandaBear at September 28, 2005 12:01 AM

Posted by: joefitz84 at September 28, 2005 12:36 AM

Posted by: Sanchez at September 28, 2005 04:29 AM

Posted by: bicycle bob at September 28, 2005 06:17 PM

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