Hit Movies Provide Rich Source for New Nickelodeon Programming

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LOS ANGELES ( -- There's never been a television version of DreamWorks Animation's mega-hits "Shrek," its sequel "Shrek 2" or this summer's "Madagascar," but that could change quickly under a new agreement between the studio and Viacom's Paramount Pictures.
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Jeffrey Katzenberg, CEO of DreamWorks Animation, with his favorite ogre.
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Nickelodeon series
Jeffrey Katzenberg, CEO of DreamWorks Animation, said during a conference call with investors yesterday that Viacom's Nickelodeon had committed to produce a minimum of one TV series every two years based on DreamWorks properties.

It has yet to be decided if the TV shows will come from existing hit DreamWorks characters or if they'll be based on future projects such as next summer's feature release, "Over the Hedge."

The newly announced deal "does not preclude exploiting to TV our past work," Mr. Katzenberg said. "Those are details we're still working through."

There's no timetable yet of when a project could begin, though Mr. Katzenberg said the intent is "to move forward quickly, prudently and, most important, creatively."

High-profile exposure
A collaborative relationship with Nickelodeon is just one benefit of the deal that will give DreamWorks films high-profile exposure across Viacom channels like MTV, Comedy Central, TV Land and BET. That kind of broad marketing is especially important to the kinds of movies that DreamWorks produces -- those that can cross over from children's fare to draw adults.

The new marriage between DreamWorks Animation and Paramount Pictures happened alongside a larger deal in which Paramount executives said they will buy the live-action studio DreamWorks SKG for $1.6 billion. To offset some of the investment, Paramount intends to sell the 59-film DreamWorks live-action library and talks are ongoing with potential buyers. The library contains prestigious Oscar-winning films such as "American Beauty" and "Gladiator," though the studio has had a string of disappointments in recent years, including one of the summer's biggest and most expensive bombs, "The Island."

Most lucrative part of deal
Paramount has secured distribution rights for the next seven years for DreamWorks' animated movies through theatrical, home video and TV channels. The relationship it will forge with Nickelodeon, a powerhouse in children's properties, is potentially the most lucrative part of the deal, analysts said.

DreamWorks properties "are in the hands of experts with a phenomenal track record," Mr. Katzenberg said, noting that Nickelodeon President Herb Scannel and his team have created lasting franchises that span TV, film, video games, merchandise and online content.

Nickelodeon will finance the TV versions of DreamWorks' properties, but some back-end details like ownership and revenue division are still in the works.

Retains merchandising rights
DreamWorks Animation, which was spun off as a public company in 2004, retains the merchandising and other ancillary rights for its properties. With the pending sale of sibling DreamWorks SKG to Paramount Pictures, DreamWorks Animation could have shopped around for a distribution agreement with another studio. Executives said they decided to work with Paramount because the studio will "improve our balance sheet and broaden our distribution capabilities," Mr. Katzenberg said. "It's a great deal for the company."

DreamWorks Animation will pay an 8% distribution fee to Paramount, similar to what it paid DreamWorks SKG, and will receive a $75 million bonus when the deal closes.

With the imminent sale of DreamWorks SKG to Paramount, Hollywood has only one independent studio, Lions Gate, left. DreamWorks had been in protracted talks with NBC Universal about a sale, but the deal stalled as Universal's parent company, General Electric, crunched numbers. Though discussions were still taking place as late as last week between DreamWorks and Universal, DreamWorks and Paramount executives got together and concluded their own deal.

Founded in 1994
DreamWorks SKG was founded with much fanfare in 1994 by music mogul David Geffen, prolific filmmaker Steven Spielberg and animation guru and former Walt Disney executive Mr. Katzenberg. At one time, it included film, TV, home video, online, music and video games. It's been pared down over the years, with little but the film operations remaining.

It's a relatively lean company, especially by Hollywood studio standards, and few of its 500 employees are expected to lose their jobs when it folds under Paramount. In areas that overlap, like marketing and distribution, it's unknown if both studios' executives will stay put. Rick Sands, who joined DreamWorks early this year as president and chief operating officer, is leaving the company. The Miramax veteran specifically wanted to work at an independent company. Terry Press, who worked with Mr. Katzenberg at Disney, has been the top marketing executive at DreamWorks since its beginning. Paramount Pictures' head of marketing, Gerry Rich, is a longtime Hollywood veteran who has been at Paramount for a year and a half.

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