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UPDATE: DreamWorks Renews Universal Deal

19 Apr, 2001 By: Thomas K. Arnold

In a surprise to many observers, DreamWorks SKG has renewed its distribution deal with Vivendi Universal for another five years.

The agreement, originally signed in 1995, gives the Universal Studios unit worldwide home video distribution rights as well as international theatrical distribution rights to live-action and animated films.

The announcement of the renewal, jointly issued in a press release April 16, came less than two weeks after it appeared the relationshipwas on the rocks.

On April 3, AOL Time Warner c.e.o. Gerald Levin had confirmed months of rumors that the Warner Bros. film studio was in talks with DreamWorks about snagging distribution rights away from Universal.

Universal Studios Home Video president Craig Kornblau, for one, is breathing a sigh of relief.

"I’ve been dealing with these people for years, and if we would have lost them I don’t know what I would have done all day," Kornblau says with a laugh.

"Seriously, I think that this deal is dead-on ideal for both parties, and I’m just thrilled."

"I think we’ve had a fabulous working relationship with the Universal organization," adds Kelley Avery, DreamWorks’ worldwide head of video. "And when we look back at what we’ve accomplished over the past several years and at what happened this last fourth quarter, with our releases from Chicken Run to Eldorado to Gladiator in their hands, I couldn’t be more thrilled."

Last year, 25% of Universal Studios Home Video’s record revenues of $1.4 billion came from DreamWorks product. Among the top sellers wereGladiator, which has now shipped more than 5 million units on DVD alone;American Beauty; and Chicken Run. The first two films also won bestpicture Oscars in 2001 and 2000.

"I think Warner thought they were going to do it," Kornblau says. "But I always assumed that at the end of the day, Steven [Spielberg] would not leave our studio."

Indeed, Spielberg launched his career at Universal. Fresh out of USC film school, he was hired by then-Universal chiefs Lew Wasserman and Sidney Sheinberg to work on the lot.He subsequently made some of his biggest films for Universal, beginning with Jaws and continuing with E.T.: The Extra-Terrestrial, Jurassic Parkand Schindler’s List.

DreamWorks’ Avery describes the video portion of the distribution deal as a "fulfillment service agreement." Universal sales reps take orders for DreamWorks product, and the Universal distribution team "is actually responsible for getting our product to market," Avery says.

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