Rude awakening for Spielberg as DreamWorks runs short of cash
Even the world's most successful director is struggling to raise money for movies as credit crunch bites
Friday 19 December 2008
He is impossibly rich, uniquely powerful and boasts a copper-bottomed CV that includes dozens of the most influential blockbusters of modern times. But even Steven Spielberg's career is stalling in the apocalyptic face of the global credit crunch.
The legendary movie mogul, who recently "divorced" Paramount Pictures to turn his production firm, DreamWorks, into an independent company, finds himself in the unfamiliar position of struggling to raise enough money to get the ambitious new project off the ground.
Ironically, given his unrivalled reputation for producing some of the most lucrative films ever made, such as Jaws, ET, and the Indiana Jones series, Spielberg seems unable to raise $750m of the $1.2bn needed to underwrite DreamWorks' slate of forthcoming movies. Without the cash, the firm will be unable to begin work on its proposed selection of films, which include a selection of the most eagerly awaited projects in Hollywood.
They include Peter Morgan's Hereafter, which Clint Eastwood is rumoured to be directing, a terrorist thriller called Motorcade, and the Jewish comedy Dinner for Schmucks, which was originally to star Sacha Baron Cohen but now features Steve Carrell.
Spielberg's problems date back to October, when an Indian company, Reliance Big Entertainment, agreed to put up $500m to take his company independent, provided he could raise an additional $750m in loans to finance a total of 17 proposed films over the next seven years.
However, the collapse of AIG, which was due to provide a portion of the cash, and the tightening of credit markets left Spielberg unable to secure the cash and his bankers, JP Morgan, have delayed efforts to raise more money until the new year.
The Hollywood newspaper Variety carried a front-page report that the company's cashflow problems had left an important distribution deal with Universal Pictures "in jeopardy".
Its report noted that Spielberg's firm is being forced to "limp along" on $75m in bridge financing and must find another $20m by mid-January to compensate Paramount Pictures for its departure, announced in August and formalised two months later.
The article asked: "If they had to do it all over again, would DreamWorks co-founder Steven Spielberg and his partner Stacey Snider have left their lucrative deal at Paramount Pictures, where their slate of films had thrived?"
Although it seems unlikely that DreamWorks will collapse, Spielberg is expected to dramatically scale back his plans for the studio. Only one major project is currently under way, a $130m 3D version of Tintin. Unless the market improves, pundits say he will be forced to produce fewer, smaller movies. The problems come after a turbulent year for Spielberg, whose long-standing business partner David Geffen parted company from DreamWorks at the end of October. Mr Geffen, one of the film industry's best deal-makers, had engineered the company's separation from Paramount Pictures.
Mr Spielberg's Wunderkinder charitable foundation also lost an undisclosed sum after investing a "significant portion" of its assets in the collapsed $50bn fund run by the disgraced Wall Street financier Bernard Madoff.
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