Image: Movie still
Laurence Fishburne stars in DreamWorks' "Biker Boyz," released earlier this year. The film was one of a number of box-office disappointments for the studio in 2003.
By
CNBC
updated 12/8/2003 3:55:35 PM ET 2003-12-08T20:55:35

It’s been a sleepy year at DreamWorks, the studio headed by Hollywood heavyweights Steven Spielberg, Jeffrey Katzenberg and David Geffen. Amid lackluster returns at the box office, there’s talk the dream team is looking for a financial partner.

Every studio has ups and downs in the cyclical business of Hollywood and no one in town is suggesting that DreamWorks is going through anything more than a normal, typical cold streak at the box office.

But DreamWorks is not a typical studio. Since it doesn’t have a big film library or other revenue-generating assets like the other Hollywood majors, DreamWorks relies largely on money from its current film releases to fund its operations.

They’ve only put out six titles this year, about half of what they’ve typically done. The best of these was “Old School” which made about 75 million dollars at the domestic box office and has done well in home video.

But disappointments like the animated “Sinbad, Legend of the Seven Seas,” “Biker Boyz” and Woody Allen’s latest release, “Anything Else” mean DreamWorks will have less money to fund and develop future releases.

The studio started with a big bankroll from equity partners, which include Microsoft co-founder Paul Allen, but that may not be enough to keep them going with marketing and production costs going through the roof. (MSNBC is a Microsoft-NBC joint venture.)

“The economics of the business have deteriorated to the point where it’s much more difficult, and had they been at this stage say 10 or 15 years ago, I don’t think there’d even be a question about them remaining independent,” said Harold Vogel of Vogel Capital Management, a New York-based venture capital firm and hedge fund operator. “Today there is more of a question about that.”

Vogel, a long time industry watcher, said he has no specific knowledge of DreamWork’s finances, which the privately held company keeps pretty close to the vest.

But the question about DreamWorks future is a popular parlor game in Hollywood, and even though DreamWorks spokesman Andy Spahn insists the studio has not been looking for a merger or equity partner, several sources have said otherwise.

“I can tell you, absolutely, that DreamWorks has talked to Universal, those talks go back a few years,” said Carl Diorio, business editor at Daily Variety. “They’ve talked to MGM and in both these instances it was approached with the idea that it would be a merger of equals.”

Analysts said the idea of pairing DreamWorks with MGM, a company with a big film library would make a lot of sense. And given DreamWorks’ long history with Universal, a link up there is not inconceivable.

Still, the company says nothing is in the works. And DreamWorks does have a fairly large and promising slate of films for 2004, including a highly anticipated sequel to its computer animated hit “Shrek,” so they could go from cold to hot very quickly. But as far as the long term, there are few people in Hollywood who think the company will remain independent forever.

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