DreamWorks Animation could be headed to Sony

DreamWorks Animation has decided not to distribute its own films after its longtime deal with Paramount Pictures expires this fall, and it may strike a new pact with Sony Pictures, according to people close to the negotiations not authorized to speak publicly.

The Glendale-based studio behind the “Shrek” and “Kung Fu Panda” movies must find a new distribution partner quickly. Its last film under the Paramount deal, “Rise of the Guardians,” hits theaters on Nov. 12.

The publicly held DreamWorks does not yet have a distributor for “The Croods,” set to come out in March, and for “Turbo,” scheduled for next July. It typically takes many months to coordinate the release of an animated film, because the genre attracts a variety of promotional and merchandise partners.

DreamWorks’ Chief Executive Jeffrey Katzenberg has told media analysts that he wants to secure a distribution agreement by this fall.

Sony may not be the only potential distributor that DreamWorks is presently talking to, though several studios including Warner Bros., Universal and Disney are not in the mix, said people with knowledge of the matter.

DreamWorks had been in discussions with 20th Century Fox, so that studio remains a possibility, said a person apprised of the former talks. One scenario being floated is that DreamWorks could cut a deal with Fox to handle the international release of its movies, while Sony would distribute them domestically.

But others said that DreamWorks might prefer to have its movies go through one worldwide distributor.

DreamWorks officials declined to comment for this article and Paramount and Sony representatives did not immediately reply to requests for comment.

In October, DreamWorks hired former Disney distribution chief Chuck Viane to advise the studio on its options. Katzenberg at the time said the company’s alternatives included self-distribution.

But in recent weeks the studio has accelerated negotiations with Sony, according to people close to the situation. The parties, however, have yet to settle on terms of the deal, said one person familiar with the talks who requested anonymity because of the confidentiality of the discussions.

Unlike Universal, Disney and Fox, which each have successful in-house animation units (Illumination Entertainment, Pixar and Disney Animation, and Blue Sky Studios, respectively), Sony’s lack of consistency at the box office with its own division would suggest it could use a boast from DreamWorks’ movies.

Sony has had mixed results with its own animated productions. Last summer’s “The Smurfs”was a surprise hit, grossing more than $563 million globally. But Sony struggled with its two last releases, the costly” Arthur Christmas”($147.4 million worldwide) and “The Pirates! Band of Misfits” ($115 million globally). The studio’s next animated release is “Hotel Transylvania” on Sept. 21.

A possible Sony-DreamWorks deal could, however, create scheduling conflicts for the Culver City studio. On the same date “The Croods” is set to debut in March, Sony plans to release the Tom Hanks movie “Captain Phillips,” a drama about Somali pirates. Next July, a week before DreamWorks’ “Turbo” is scheduled to premiere, Sony has dated Adam Sandler’s comedy sequel “Grown Ups 2.”

Another person close to the situation said Paramount, which launched its own animation division and made the Oscar-winning but commercially soft “Rango,” is still open to renewing its its DreamWorks agreement. The Viacom Inc.-owned Hollywood studio recently released DreamWorks’ “Madagascar 3: Europe’s Most Wanted,” which has grossed a strong $457 million globally, with some foreign markets yet to launch.

Forged in 2006, the partnership between DreamWorks and Paramount has been largely fruitful, with both studios benefiting from hits such as the “Madagascar,” “Shrek” and “Kung Fu Panda” series.

But the two studios clashed over the terms of a contract renewal. Under the current deal, Paramount collects 8% of revenues generated by DreamWorks releases, below the industry average. But Katzenberg has nonetheless been seeking to trim that fee.

People familiar with the thinking of Paramount executives have said the studio would only renew the pact on the same or more favorable terms than it currently receives from DreamWorks.

The stock price of DreamWorks, which is a separate entity from Steven Spielberg’s live-action production company based at Disney that made “The Help” and “Cowboys & Aliens,” has suffered over the last two years.

Share prices have fallen more than 30% over that period, while the broader market is up more than 20%. DreamWorks Animation announced earlier this week that it was collaborating on an indoor New Jersey theme park featuring its characters.

At this week’s Comic-Con International convention in San Diego, DreamWorks Animation’s chief creative officer Bill Damaschke said the studio has 10 movies in production and eight or nine pictures in “pre-production or advanced form of script development.” In his remarks Thursday, Damaschke announced that the studio is making a third “Kung Fu Panda” film.

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