A battle of wills behind scenes at Paramount

Tensions continue to simmer a year after Viacom's purchase of DreamWorks SKG's live-action operation, insiders say.

By Claudia Eller
Times Staff Writer

7:44 PM PST, January 28, 2007

Viacom Inc.'s year-old acquisition of DreamWorks SKG's live-action studio has been, at times, more of a nightmare than a dream.

A year after David Geffen, Steven Spielberg and Jeffrey Katzenberg sold the studio for $1.6 billion to Viacom's Paramount Pictures, simmering tensions, backbiting and internal power plays between the co-founders and the new owner suggest a case of sellers' remorse.

The self-described "Dream team" seems to be having trouble adjusting to its new home. And that comes as little surprise to Hollywood.

From Day 1 of the acquisition, industry insiders presumed the powerful trio would be hard-pressed to relinquish its dream of ruling over a vast Hollywood empire such as the one it set out to build in 1994 with DreamWorks. As a result, the DreamWorks live-action studio has been seen by many as a Trojan horse inside Paramount's gates that might eventually topple management and grab control.

So far that hasn't happened. Viacom Chairman Sumner M. Redstone, who built his entertainment empire from a series of brutal takeover battles and billion-dollar acquisitions, is accustomed to coddling big egos. The 83-year-old patriarch acknowledges the difficulty that founders have in letting go.

"I understand how people like them, entrepreneurs who built companies and are creative geniuses, want a hell of a lot of autonomy," Redstone said in a recent interview, after returning from lunch with Spielberg at the Bel-Air Hotel, where one topic was the director's latest installment of "Indiana Jones" for Paramount. "They're entitled to a lot of autonomy and [we] are committed to giving them that."

Spielberg has answered to no one for most of his adult life and is considered the most successful director in Hollywood, with such classics to his credit as "Jaws," "ET: The Extraterrestrial," "Jurassic Park" and "Schindler's List."

Geffen also has had few masters, amassing wealth of more than $4 billion, mostly from the sale of music labels he started.

Both Geffen and Spielberg signed four-year employment contracts with Paramount, although Redstone said they are shown great deference.

"We do not treat them as employees, we treat them as co-workers," he said.

Katzenberg, the former chairman of Walt Disney Studios, maintained his autonomy as head of the separate, publicly traded DreamWorks Animation, based in Glendale. But his company's fortunes are tied to Paramount because of a seven-year contract with the studio to distribute DreamWorks Animation's movies, including the upcoming "Shrek 3."

None of the DreamWorks founders would comment for this article.

People close to Spielberg say he is happy at Paramount, despite his continued effort to "carry the torch that DreamWorks should feel like its own studio," said a person with knowledge of his thinking, who asked for anonymity for fear of upsetting the director.

It was Spielberg who insisted, as part of the sale, that Paramount's logo appear on DreamWorks' movies after the credits to give DreamWorks' own banner top billing.

The latest source of tension is a tug-of-war over who deserves the credit for Geffen's pet movie project "Dreamgirls." Although the film was produced by DreamWorks, Paramount co-financed the movie after Warner Bros. bowed out in the 11th hour. After the DreamWorks acquisition, Paramount became sole owner of the movie, which received eight Oscar nominations last week and the Golden Globe for best comedy or musical.

The sparring over credit for "Dreamgirls" began even before the movie opened.

On Nov. 28, a DreamWorks executive sent an e-mail to top Paramount managers, including Chief Executive Brad Grey, with an explicit request: "The filmmakers of 'Dreamgirls' have specifically asked that there be no speeches before the movie at either the New York or Los Angeles premiere."

Yet Grey got up without hesitation at both the premieres in early December to salute the filmmakers and pay tribute to Geffen's 25-year odyssey getting the project made.

DreamWorks insiders were affronted by the actions, according to several people at the studio, who requested anonymity for fear of reprisal from their boss.

Paramount executives, however, felt Grey was well within his rights as chairman of the studio that owns "Dreamgirls."

By then, however, the ill will between Paramount and DreamWorks had been building for months. Power plays by Geffen had created bad blood within both Viacom's and Paramount's executive suites.

Last fall, on the day that Redstone fired Grey's boss, Viacom Chief Executive Tom Freston, Geffen called the media maverick to suggest that he appoint Katzenberg as Freston's replacement and buy DreamWorks Animation.

Geffen has made no secret of his interest in cashing out of the movie business entirely and reinventing himself as a newspaper mogul. He had offered Tribune Co. $2 billion in cash to buy the Los Angeles Times.

But Redstone had no intention of capitulating to Geffen. He had just appointed his trusted lieutenant and executor of his estate, Philippe Dauman, as the CEO of Viacom. He told reporters at the time that he had no desire to buy DreamWorks Animation, and he reiterated that sentiment last week.

"We were pushed all along on that, and I said we didn't feel we needed it and didn't want to spend the money," he said.

It wasn't the first time that Geffen had attempted to increase DreamWorks' power base inside Viacom. Shortly after the DreamWorks live-action studio was sold, Geffen lured hot-shot movie chief Stacey Snider to run the label inside Paramount. Snider had worked closely with the DreamWorks founders, particularly Spielberg, as head of Universal Pictures.

Though Grey signed off on her hiring, the move was widely viewed as an effort by Geffen to position Snider for Grey's job.

Snider had far more experience as a studio boss than Grey. At Universal, Snider was well-respected, having shepherded such hits as "A Beautiful Mind," "The Fast and the Furious," "The 40 Year Old Virgin" and "The Mummy."

Grey was a relative newcomer to the corporate ranks. Before heading to Paramount nearly two years ago, he had a lucrative career as a talent manager and producer of such hit TV shows as "The Sopranos" and such box-office darlings as "Charlie and the Chocolate Factory" and "The Departed."

But Grey says he feels no threat from Snider or her partners at DreamWorks. "I believe in Steven, David, Jeffrey and DreamWorks, and the company was only enhanced by Stacey joining us."

But Snider has chafed under Grey's management, culminating in a heated exchange between the executives this month. The day Grey announced that Paramount President Gail Berman was leaving the studio, he issued a press release outlining a restructuring of the operations that tightened his grip over the company's four production units, including DreamWorks.

"I have all the heads of these divisions reporting to me creatively. I'm really comfortable with that," Grey was quoted as saying after announcing he was eliminating Berman's position and assuming some of her duties.

Snider told associates she was furious that Grey had not given her a heads-up about the news release and had lumped her in with three production chiefs who lacked her seniority and status. Although she contractually reported to Grey, Snider saw herself as his equal and considered her true boss to be Spielberg, according to people close to her.

After all, she was the only one at the studio other than Grey who could "greenlight" movies. Along with Spielberg and Geffen, Snider can approve, without Grey's blessing, any film costing up to $85 million, and those up to $100 million if Spielberg is director. DreamWorks is expected to make six to eight movies a year — about as many as Paramount, before counting its two smaller labels.

Snider called Grey that evening to express her anger, said a person with knowledge of the conversation. The discussion became acrimonious and Grey hung up on Snider, the person said. Snider immediately contacted Geffen, who phoned Grey on her behalf.

Grey refused to discuss the matter, but sources close to him say the three have made up.

"I feel zero tension with my partners at DreamWorks," Grey said. "We are one company and their success is our success."

Grey's challenge is convincing his new colleagues. "They have to put some of their ego stuff aside and realize they have something bigger and greater than the sum of the parts," suggested Lilli Friedland, a Century City psychologist who works closely with media executives.