Paramount to Sell Off DreamWorks Library, Retain Distribution Rights12 Dec, 2005 By: Jessica Wolf
Paramount to Sell Off DreamWorks Library, Retain Distribution RightsJESSICA WOLFjwolf@questex.comViacom executives laid out details of Paramount Pictures' purchase of DreamWorks SKG this morning.
Under terms of the $1.6 billion deal, which will close by the end of January, according to Viacom execs, Paramount will acquire and immediately sell off the 59-title strong DreamWorks library, which includes Academy Award-winning titles such as American Beauty.
Tom Freston, co-COO and head of the “new” Viacom said Paramount could garner $850 million to $1 billion in the sale of DreamWorks library titles to financial investors — an attractive option because it will quickly reduce Paramount's net investment in the acquisition. Paramount expects that sale to be final shortly after the acquisition deal is finalized in January.
Paramount would retain worldwide distribution rights to the DreamWorks library at “a very healthy market-rate distribution fee,” Freston said.
As for company infrastructure changes, it's a “work in progress,” Paramount CFO Mike Dolan said today. There is a figure set aside for severance and the two companies are looking at parts of the companies where there is overlap. Production teams under Steven Spielberg and David Geffen — who remain with the new company — are “sacrosanct,” executives said.
“While DreamWorks, the studio, will close, the DreamWorks label will continue to survive and thrive under Paramount,” Freston said.
Paramount president Brad Grey said DreamWorks will continue to produce four to six films each year. These will be included in Paramount's overall target of 14-16 releases annually.
“We see this as a transforming event for the studio,” he said. “I've always said my plan for transforming Paramount is to make good movies.”
“The best talent is now at Paramount,” he continued. “You can be sure that great movies will follow.”
At a press conference over the weekend, DreamWorks head David Geffen, who will remain at the helm of the DreamWorks label, said he doesn't foresee many layoffs for DreamWorks employees.
“We have approximately 500 employees including accounting, legal and business affairs and we are contemplating that most of those, if not all, with very few exceptions, will be coming to Paramount or staying at DreamWorks at the offices that are now on the Universal lot,” Geffen said.
Previously, NBC Universal parent company General Electric was in talks to acquire the independent studio. The Paramount deal would terminate Dreamworks' distribution contracts with NBC Universal.
“We tried very very hard to conclude a deal with GE, which we were never able to do,” Geffen said.
Having gone through that “misstep,” he said, DreamWorks executives told Paramount they would not respond unless Paramount came to the table with completed contracts, which that studio delivered inside of a week.
“We were in discussions with GE for nine months and were never able to get completed agreements,” Geffen said.
Paramount also acquires the following, under the deal:
The combined company, the included distribution deal for all new and catalog DreamWorks Animation titles, and the sheer creative force of DreamWorks producers such as Spielberg and Geffen will make the supplier much stronger in the retail market, Freston said.
DreamWorks' TV sales team was a highly coveted part of the purchase, Freston said.
“It is a critical resource, considering we would have had to hire from scratch considering that team went with CBS in the [Viacom] split.” he said.
Viacom's company split will be final early in 2006. The new Viacom includes Paramount Pictures, Paramount Home Entertainment, MTV Networks (including MTV, VH1, Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music Television, Spike TV, TV Land and others), BET and Famous Music.
Les Moonves, now head of CBS and co-president of Viacom, will head up the other half of the split in a new company to be called CBS Corp. This will include the CBS and UPN broadcast networks; Viacom Television Stations Group; Infinity Broadcasting; Viacom Outdoor; the CBS, Paramount and King World television production operations; as well as Showtime, Simon & Schuster and Paramount Parks.