DreamWorks Studios stays alive with new $200-million infusion

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Steven Spielberg’s struggling DreamWorks Studios has gotten a new lease on life thanks to a $200-million investment from its primary financier, India’s Reliance Entertainment, said a person with knowledge of the matter unauthorized to speak publicly.

A shortage of cash since late last year has left many in Hollywood nervous about DreamWorks’ future. The company, led by Chief Executive Stacey Snider, severely cut back on its spending on development and production.

The independent studio has only two movies set to come out this year -- the low-budget drama ‘People Like Us’ and the Spielberg-directed biopic ‘Lincoln’ -- compared with six in 2011, the first year that it released films in its current incarnation.

After raising $325 million from Reliance and another $325 million in debt in 2009, DreamWorks immediately ran into trouble when its first movies, the young adult science-fiction film ‘I Am Number Four’ and the big-budget comic book adaptation ‘Cowboys & Aliens,’ flopped. Academy Award nominee ‘The Help’ was a hit, but the remake of ‘Fright Night’ was also a disappointment while robot boxing family story ‘Real Steel’ and Spielberg’s own ‘War Horse’ turned in so-so box-office performances. (Spielberg’s ‘The Adventures of Tin-Tin’ was not a DreamWorks movie.)

Altogether, the year left DreamWorks in a dire financial state. As a result, since late last year it has been negotiating with Reliance for more money.

Under the new arrangement, DreamWorks will scale back its ambitions from the six pictures per year that it announced in 2009 to a proposed three to five starting next year. The films will continue to be released by Walt Disney Studios.

In addition, DreamWorks now intends to seek co-financiers for all of its movies with large budgets. Already, 20th Century Fox is on board to co-finance ‘Lincoln’ and ‘Robopocalypse,’ an adaptation of the bestselling book that is the studio’s only movie already scheduled to come out in 2013.

DreamWorks, which has about 80 employees, recently lost its well-regarded head of marketing Christine Birch, who moved to the smaller studio FilmDistrict. The company does not intend to replace her, the knowledgeable person said, and will instead rely more on the small team at Disney that handles marketing for DreamWorks releases.

The studio’s lowered ambitions under its new financing marks another bump in its long and difficult path. Founded in 1994 by Spielberg, former Disney President Jeffrey Katzenberg and media mogul David Geffen, DreamWorks SKG was originally intended to be a multimedia giant that could stand alongside Hollywood’s established studios.

After failing to realize those dreams, the trio sold DreamWorks SKG to Paramount Pictures in 2005. But after Spielberg and Snider clashed with Paramount executives, they spun out the company in its current, third incarnation. (DreamWorks Animation is a stand-alone, publicly-held company not connected to DreamWorks Studios.)

After initially seeking to raise $1.25 billion, Spielberg and Snider ended up closing their deal for far less after nearly a year of difficult negotiations.

DreamWorks’ troubles reflect a larger trend in Hollywood, in which independent movie studios that don’t have reliable cash flow from a library of movies or some other business are struggling to survive when they don’t release a string of hits. Relativity Media also came close to folding in the last year before finding a financial savior in supermarket magnate Ron Burkle.

The new funding and the amount were first reported by the New York Times and Reuters.

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-- Ben Fritz