Spielberg company lures $500m investor

DREAMWORKS SKG, the film studio dream of three of the international entertainment industry's most powerful operators, has at two strokes become a powerful force in the global multimedia market through deals with the Microsoft computer group and one of its founders.

The founders of DreamWorks - Steven Spielberg, the world's most commercially successful film-maker, David Geffen, the billionaire music potentate based in Los Angeles, and Jeffrey Katzenberg, a former studio executive responsible for the revival of the Walt Disney Company's tradition of making classic full-length cartoon films such as The Lion King - announced the start of the company last August with a huge fanfare but little else.

But last week Paul Allen, the multi-billionaire co-founder of Microsoft, said he was investing $500m (£310m) in DreamWorks in return for just under 20 per cent of the company.

And Microsoft itself is willing to go halves with DreamWorks in a $30m LA-based company, tentatively called DreamWorks Interactive, which will initially involve producing adventure games and interactive stories for personal computers and game machines.

In the last few months, the DreamWorks trio have reportedly been wooed by hundreds of suitors queuing up to invest in their plans to create an interlocking multimedia enterprise to make live action and animated films, TV shows, tapes and compact discs, toys, videos and interactive computer software.

DreamWorks is arranging a $1bn line of credit from Chemical Bank and is well on its way to selling off a third of the company, some $900m worth, giving it close to $2bn to fund its activities. The three founders have chipped in $100m of their own, small change for Messrs Spielberg and Geffen, although not for the less fabulously rich Mr Katzenberg.

So far, the biggest individual investor is Mr Allen, whose involvement has created a particular ripple of interest, not least because it is seen as a big vote of confidence. Mr Allen co-founded Microsoft with Bill Gates, America's richest man, whom he befriended at school in Seattle, where they began experimenting with computers. He left the software company in 1983, after being diagnosed with Hodgkin's disease, which is now in remission, but he kept a large amount of stock, which has rocketed in value. Forbes magazine estimates that, at 42, he is worth $3.9bn.

Unlike his new business partners, he is not yet a celebrity in Hollywood (although he is beginning to look star-struck; take note, he is going to this week's Oscars). But he is known in the sporting world as the owner of the Portland Trailblazers basketball team, in entertainment circles for his 80 per cent stake in Ticketmaster, and in the computer world for his software and multi-media company Asymetrix and Interval Research, a research firm.

The DreamWorks trio were clearly delighted with his decision to invest in their activities, but some industry analysts were less enthusiastic, expressing surprise at his willingness to spend so much for less than a fifth of what is an unproved entertainment firm. What, they ask, is he getting for his half billion dollars?

According to Time magazine, the company's film division, headed by Spielberg, is planning to invest $800m in 24 feature films by the end of the decade.

It also has a deal with ABC television for live action programming and is working on an animated release, The Prince of Egypt, due out at Christmas 1998.