Economy
Soros buys Paramount film library, Spielberg not for sale
The deal values the library, which contains movies such as "Gladiator," "Saving Private Ryan" and "American Beauty," at USD 900 million. The decision comes after Paramount's buyout last year of DreamWorks' live-action operations for USD 1.6 billion.
After the conversion of certain commercial agreements from debt to advances, Viacom expects DreamWorks to fetch as much as net USD 600 million. The deal is expected to close in April.
The sale was considered a must for Paramount to spread the risk of acquiring DreamWorks. According to the current situation, the key asset Paramount retains in the deal is DreamWorks' production talent - mainly three-time Academy Award winner Steven Spielberg, one of the latter studio's principals.
"That's significant," said Philip Remek, analyst for Guzman & Co. "It's basically betting that Spielberg will come up with another blockbuster. The odds are pretty good."
Spielberg himself isn't always on the mark, analysts point out. His latest effort, "Munich," a controversial movie about the aftermath of the killing of Israeli athletes in the 1972 Olympic Games, cost USD 75 million to make but has returned only USD 47 million domestically and generated USD 112 million worldwide. Note that a movie usually needs to double its production budget to break even.
Still, there is no questioning the credentials of Spielberg, who has directed seven of the world's top 50 box-office draws, and had a hand in the production of numerous others. Further, he retains a formidable production staff, including former Universal Pictures Chairwoman Stacey Snider.
Paramount gets an avenue for reviving its filmmaking operations, which had been reduced to mostly a series of remakes or revivals of old television shows - often met with mixed reviews.
"It seemed like Paramount needed something to jump-start the whole process," said James Goss, analyst for Barrington Research. "DreamWorks gets them pretty much on target right away."
Under terms of the deal announced Friday, Soros Strategic Partners and Dune will acquire all 59 DreamWorks live-action films released through 15 September, 2005. Soros will enter into an exclusive 5-year agreement with Paramount to distribute the library.
Viacom will keep ownership of music publishing and some other ancillary and derivative rights associated with the library, including sequel and merchandising rights. It also will retain a minority interest in the entity holding the library assets.
Viacom said that it retained certain rights to reacquire the library. Soros and Dune can sell the library to Viacom, beginning at the end of the fifth year, at fair-market value.
The arrangement also gives the parties certain rights to acquire the other's interest in the library at fair-market value at any time upon the triggering of certain events.
In the event that Soros continues to own the library after the fifth year, the distribution agreement with Paramount will automatically renew.
"It's sort of a temporary lease on the properties," said Barrington's Goss.
Analysts were puzzled as to why Soros would acquire the rights to DreamWorks' library. The highly successful financial speculator has little or no history in the film business.
The Hungarian-born Soros, however, is a philanthropist and has an interest in philosophy. He's also a liberal political activist who funded efforts to defeat President Bush's re-election efforts in 2004.
After the conversion of certain commercial agreements from debt to advances, Viacom expects DreamWorks to fetch as much as net USD 600 million. The deal is expected to close in April.
The sale was considered a must for Paramount to spread the risk of acquiring DreamWorks. According to the current situation, the key asset Paramount retains in the deal is DreamWorks' production talent - mainly three-time Academy Award winner Steven Spielberg, one of the latter studio's principals.
"That's significant," said Philip Remek, analyst for Guzman & Co. "It's basically betting that Spielberg will come up with another blockbuster. The odds are pretty good."
Spielberg himself isn't always on the mark, analysts point out. His latest effort, "Munich," a controversial movie about the aftermath of the killing of Israeli athletes in the 1972 Olympic Games, cost USD 75 million to make but has returned only USD 47 million domestically and generated USD 112 million worldwide. Note that a movie usually needs to double its production budget to break even.
Still, there is no questioning the credentials of Spielberg, who has directed seven of the world's top 50 box-office draws, and had a hand in the production of numerous others. Further, he retains a formidable production staff, including former Universal Pictures Chairwoman Stacey Snider.
Paramount gets an avenue for reviving its filmmaking operations, which had been reduced to mostly a series of remakes or revivals of old television shows - often met with mixed reviews.
"It seemed like Paramount needed something to jump-start the whole process," said James Goss, analyst for Barrington Research. "DreamWorks gets them pretty much on target right away."
Under terms of the deal announced Friday, Soros Strategic Partners and Dune will acquire all 59 DreamWorks live-action films released through 15 September, 2005. Soros will enter into an exclusive 5-year agreement with Paramount to distribute the library.
Viacom will keep ownership of music publishing and some other ancillary and derivative rights associated with the library, including sequel and merchandising rights. It also will retain a minority interest in the entity holding the library assets.
Viacom said that it retained certain rights to reacquire the library. Soros and Dune can sell the library to Viacom, beginning at the end of the fifth year, at fair-market value.
The arrangement also gives the parties certain rights to acquire the other's interest in the library at fair-market value at any time upon the triggering of certain events.
In the event that Soros continues to own the library after the fifth year, the distribution agreement with Paramount will automatically renew.
"It's sort of a temporary lease on the properties," said Barrington's Goss.
Analysts were puzzled as to why Soros would acquire the rights to DreamWorks' library. The highly successful financial speculator has little or no history in the film business.
The Hungarian-born Soros, however, is a philanthropist and has an interest in philosophy. He's also a liberal political activist who funded efforts to defeat President Bush's re-election efforts in 2004.
