December 12, 2005 | posted by Michael Baxter in Uncategorized |

There was a time when Paramount was a giant amongst Hollywood’s giants, with the Godfather and Indiana Jones series amongst its hits. But these days it can only manage a pale reflection of the former glories it beamed out onto the global big screen.

In 2004, Paramount could only manage seventh place at the US Box Office ratings. Abroad, Universal distributes its movies, and the company has had a $100mn limit for the cost of any one film it finances.

Then last year, its owners Viacom realised something had to be done, and appointed Brad Grey to try and turn things around.

Now Mr Grey would appear to be anything but grey. Before joining Paramount, he represented stars such as Brad Pitt and Jennifer Aniston. His mantra seems to be that the key to success lies in hiring top talent, or as he puts it: “the best talent both in front of and behind the camera.”

Enter Dreamworks. If there’s one thing that this company is not short of, it’s talent. Peter Jackson might be breathing down his neck, but Stephen Spielberg remains the top director in Hollywood. With his partners in the Dreamworks venture, leading record producer David Geffen and ex Disney man Jeffrey Katzenberg, the film studio has oodles of talent.

But ability, it would appear, isn’t enough. Despite releasing films including Saving Private Ryan, Gladiator, and American Beauty, the company has struggled under its huge debts. Not even the backing of Bill Gates’ former business partner and co founder of Microsoft, Paul Allen, was enough. The problem, it would appear, is that to be successful in this business you need scale. Not even the dream line of Spielberg, Geffen, Katzenberg and Allen’s money was enough to break through the chicken and egg situation, of needing scale to be successful, and success to generate scale.

So perhaps it’s a marriage made in heaven. Paramount’s owner, Viacom, is forking out $1.6bn. It will then sell the film library, raking in almost $1bn, leaving it with $600 to $700mn down on the deal.

But not all the talent will be coming Paramount’s way. DreamWorks animation - the studio behind Shrek and Madagascar, will remain an independent company, headed by Katzenberg. Paramount will have the distribution rights to DreamWorks back catalogue, and the TV rights to spin off series based on future animations.

David Geffen will become chairman of Paramount Dreamworks, but Stephen Spielberg will be free to hawk his talents elsewhere. Geffen said of the man behind Jaws and ET, “Since we began DreamWorks, other than the sequel to ‘Jurassic Park,’ he has never made a movie for anyone other than DreamWorks and I think that is his intention in the future.”

As to why do the deal, Mr Geffen also said, “Sadly, we were never able to (produce) enough films to make that economically sound…Together, we will be able to distribute our films at a much lower cost per film, so it’s a ‘win-win’ for both of us.”