U ready to deal in wake of shakeup

GE boosts coin as studio looks beyond D'Works

By GABRIEL SNYDER

It was a rough week for Universal. First, DreamWorks, which U had been negotiating for months to buy, was snatched away by Paramount. Then, its biggest financial bet of the year, Peter Jackson's $207 million "King Kong," failed to deliver "Lord of the Rings"-like numbers.

Still, despite recent setbacks, the mood among U execs is generally optimistic these days (a torrent of 22 Golden Globes noms was certainly a balm) because after years of parsimonious owners, the first two years of GE ownership has calmed execs who've grown used to boardroom strife.

Its dealmakers may not have been as bullish as a U-DreamWorks combo as Viacom execs were, but U chair Stacey Snider says GE wants to increase its investment in film production.

"Even amid all the predictions that they would come in and cut us back, they gave us $100 million to $150 million to make more movies and hold onto more rights," Snider says.

Some of that money is going to U's Focus division, which produced Ang Lee's "Brokeback Mountain" with River Road, and its genre label Rogue.

It's a big change from the days when Barry Diller was on the lot wielding a cost-cutting hatchet for Vivendi.

Since Steven Spielberg, Jeffrey Katzenberg and David Geffen started the studio 11 years ago, DreamWorks has always been closely aligned with U, with all its films being distribbed internationally and on homevid through U's channels. And for all that time, the DreamWorks live-action production has been headquartered on U's Lankershim lot.

DreamWorks also figured prominently in U's plans for the future, especially in foreign distribution, where U and Par are shutting down their joint-venture UIP, with the first major phaseout starting in 2007.

"Psychologically," Snider says, "they were like a sister company. It was definitely disappointing because we had planned for months to be together."

The fees U collected from the DreamWorks distrib activity weren't all that sizable -- a U source says they account for 2% of the studio's total annual income. But DreamWorks has helped bulk up the share of the market U controls.

With DreamWorks Animation reliably producing tentpole toons, having big family titles in the pipeline would, on the foreign sales side, give U's standalone operation clout with exhibs, and in homevid, help win space on Wal-Mart shelves.

U and DreamWorks have accounted for the vast majority of grosses for UIP. Since 2000, U's foreign grosses have been $4.6 billion, while DreamWorks product has taken in $3.2 billion. Par lags way behind with just $2 billion.

And in homevid, since 2000 DreamWorks titles have represented about a third of U's homevid operation's total rental and sales revenues.

At the start of 2007, U will operate independently in Austria, Belgium, Germany, Italy, Netherlands, Russia, Spain and Switzerland, while Par will take over Australia, Brazil, France, Ireland, Mexico, New Zealand and the U.K.

Each studio has several more months to decide whether to exercise the option of using each other's operations in those markets until the end of 2008.

"Part of the strategy in the unwind with UIP included conversations on how to ramp up product," says Snider. "DreamWorks was a part of that, but it wasn't the sole strategic solution."

U vice chair Marc Shmuger, who has been leading the planning for a post-UIP future, says, "We're now looking at our product portfolio and then saying, where can we make up that difference?"

For any studio looking to increase the amount of product in its pipeline, there are only two ways to make up the difference: either make it (and pay for it) yourself or find someone producing films who needs a distribution outlet.

Over the past few years, U has been inking distrib pacts with outside financiers and pickups are now a big component of its slate. This year, six of the 18 pics on the U slate were pickups: Gold Circle's "White Noise" and "The Wedding Date," "Land of the Dead" financed by Atmosphere and Wild Bunch, Stratus' "Prime" and the Mountain Dew Films' snowboarding doc "First Descent."

"Adding to our own releases with rent-a-system deals was part of the strategy we put in place a few years ago," Snider says.

U's slate in 2003 was dominated by co-financed pics, including its highest-grossing movie that year, "Bruce Almighty," which it shared with Spyglass, as well as "Seabiscuit" (Spyglass and DreamWorks), "The Rundown" (Columbia), "The Cat in the Hat" (DreamWorks) and "Peter Pan" (Sony and Revolution).

GE's investment in film production would have increased even more under if the deal with DreamWorks had gone through. DreamWorks would have received its own production funds that would have been independent from the U and Focus budgets.

(At Par, DreamWorks has its own budget and is expected to produce four to six pics annually. But that money is being carved out of Par's own budget, leaving Viacom's overall annual film investment basically the same.)

Even before U lost the DreamWorks deal, U's production has been in quiet flux.

Former production chiefs Mary Parent and Scott Stuber have moved over to an exclusive producing pact, and Donna Langley and Jon Gordon have taken over.

Its most prominent supplier, Brian Grazer and Ron Howard's Imagine, is shooting its biggest project, "The Da Vinci Code," for another studio (Sony). And U-owned Working Title has been going through something of a Stateside rut.

Though there has been a nearly wholesale turnover among production execs, U has a fair amount of films set up.

Next year's slate includes:

• "The Break Up" starring Vince Vaughn and Jennifer Aniston;

• "You, Me and Dupree" starring Owen Wilson, which Stuber and Parent are producing;

• "Fast and the Furious: Tokyo Drift," third title in the franchise, helmed by Justin Lin;

• "Miami Vice," Michael Mann's adaptation of his tube skein, starring Colin Farrell and Jamie Foxx;

• "Curious George," the kidbook toon adaptation, from Imagine;

• "The Inside Man," Spike Lee's detective story starring Denzel Washington, also from Imagine;

• "American Dreamz," a political satire from the Weitz brothers;

• "The Children of Men," a sci-fi pic starring Clive Owen and Julianne Moore;

• "The Good Shepherd," a spy thriller starring Matt Damon and helmed by Robert De Niro, which Morgan Creek is financing.

Also on deck are Working Title's "Nanny McPhee," which is already a hit in the U.K., the Paul Greengrass-helmed "Flight 93," the HBO musical "Idlewild," starring Outkast's Andre 3000 and Big Boi, college application laffer "Accepted," and Gold Circle's horror pic "Slither."

Snider says assembling that slate amid so much change is a feat in itself.

"When you look back at what we accomplished -- this very precise and important management shift, the unwinding of UIP and keeping a slate of movies going, I think we did pretty good."

Looking beyond '06, Langley and Gordon have both been pushing pics to the starting gate.

Langley acquired the "Blink" pitch by Stephen Gaghan and Malcolm Gladwell, as well as inked the "Syriana" helmer to a first-look producing pact. She's also running point on the studio's adaptation of Microsoft vidgame "Halo," which Parent and Stuber are producing with Peter Schlessel.

Meanwhile, Gordon, who only started in October, is overseeing the development of third installments in U's "Bourne" and "Mummy" franchises, as well as overseeing Mann's Mideast thriller "The Kingdom" and the currently untitled David O. Russell project.

So, while U is smarting over its DreamWorks loss, studio brass makes it clear that it didn't need to find a new pipeline of product as badly as Par's new regime did.

"GE bought Universal. GE buys companies all the time," Snider says. "In this case, I just feel they didn't want (DreamWorks) as bad as Viacom wanted it."