Universal-DreamWorks deal: Collapse!

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For months, it seemed like a done deal: DreamWorks was hitching up its wagons and heading back to Universal, Steven Spielberg’s ancestral home, where Universal and DreamWorks would once again be one happy family, as they were back in the days of ‘ET.’ Now the New York Times has a scoop saying that the Universal deal has fallen apart, amid reports that DreamWorks is negotiating a distribution deal with Disney, which could be announced in a matter of days -- or even hours.

The news is fascinating on two fronts. First off, it’s a quasi-admission by Disney that it needs more quality movies in its pipeline, which in the past couple of years had been restricted largely to very targeted family entertainment from its Disney, Pixar and Jerry Bruckheimer brands. DreamWorks, with Stacey Snider at the helm, would presumably deliver more adult-oriented films -- in other words, films very similar to the classy Touchstone pictures that Disney has largely phased out after unceremoniously pushing production chief Nina Jacobson out of her job several years ago.

But what really caught insiders’ eyes was the tone of Universal’s statement announcing the collapse of its DreamWorks negotiations. Normally, a corporate announcement would blandly paper over any differences, accentuating the positive, especially an announcement involving a Hollywood titan like Spielberg. Instead, Universal said that ‘over the past several weeks DreamWorks has demanded material changes to previously agreed upon terms. It is clear that DreamWorks’ needs and Universal’s business interests are no longer in alignment.’

In corporate speak, that translates as: ‘They tried to screw us.’ It’s an accurate reflection of Universal’s anger at what they are describing as duplicity on the part of DreamWorks. I’m sure DreamWorks has its side of the story, but Universal insiders were furious when they discovered that DreamWorks was secretly trying to leverage its deal by getting better terms from Disney. The ‘material changes’ alluded to in the announcement include DreamWorks’ effort to get Universal to put DreamWorks films through its pay-TV deal, instead of DreamWorks coming in with its own pay-TV deal, as had originally been proposed. The original negotiations had also been for a straight distribution deal, but that too changed when DreamWorks’ funding began to evaporate during the global economic collapse. Universal says DreamWorks kept coming back, asking for more and more production funding from Universal, which created new tensions that slowed the deal.

Today at Universal bad feelings abound. Perhaps cooler heads will prevail, but for now, there is a chill in the air around Spielberg’s cozy Amblin villa right in the heart of the Universal backlot.