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MCA Makes Huge Deal With DreamWorks Studio

June 13, 1995

UNIVERSAL CITY, Calif. (AP) _ The Seagram Co. Ltd. successfully signed Hollywood’s most-touted creative alliance Tuesday to a 10-year deal with its newly acquired entertainment company MCA Inc.

The deal with DreamWorks _ the first major pact by MCA under its new owner _comes only a week after MCA failed to lure talent agent Michael Ovitz as its leader. But it is a dramatic statement of DreamWorks’ faith in MCA.

The powerful DreamWorks studio was formed last October by director Steven Spielberg, record mogul David Geffen and former Disney studio chief Jeffrey Katzenberg.

``People with this much talent could have made this deal anywhere,″ said Tom Pollock, chairman of MCA’s Motion Picture Group. ``They made it with us for a number of reasons. One is that we’re very good distributors. This is also Steven’s home _ it has been for 26 years.″

Under the deal, MCA will buy 2 percent of DreamWorks for about $50 million. The deal could yield MCA $1 billion in revenues, mostly in distribution fees, over the course of the deal, the parties estimated.

Under the deal, MCA and its subsidiaries will distribute DreamWorks’ movies internationally and its records and home video releases worldwide.

But as expected, DreamWorks will retain domestic motion picture distribution rights. The agreement gives MCA rights to characters and concepts created by DreamWorks at MCA’s theme parks.

``This is extraordinarily important for MCA,″ Seagram President Edgar Bronfman Jr. said in an interview. ``There is no better creative talent in Hollywood than the three DreamWorks principals.″

Seagram, the Canadian liquor maker, bought 80 percent of MCA for $5.7 billion last week.

Spielberg directed the two highest-grossing films of all time, ``Jurassic Park″ and ``E.T. the Extra-Terrestrial.″ Katzenberg’s Disney reign included the smashes ``The Lion King,″ ``Aladdin″ and ``Pretty Woman.″ Geffen’s record label handles Guns N’ Roses, Aerosmith and Nirvana, and many top alternative rock acts.

DreamWorks was lured by every major studio but negotiated only with MCA, Geffen and Bronfman said.

But the deal was delayed by uncertainty over MCA’s management. Bronfman offered Ovitz $250 million to leave his Creative Artists Agency to run the entertainment giant but he declined the offer June 5.

MCA President Sid Sheinberg, who was to be replaced by Ovitz, will remain in charge of MCA ``as long as practical,″ Bronfman said. No other person has surfaced yet as a likely successor.

``We made the deal in a matter of hours,″ Geffen said in an interview. ``It just took us a long time to sit down.″

DreamWorks may also build its studio on the lot of MCA’s Universal Pictures, although no final decision has been made. ``Edgar has invited us to be here if we want to,″ Geffen said.

DreamWorks expects to release up to 10 animated and live-action movies a year by 1997 or 1998. Its first live-action movie should be in theaters in 1996, and DreamWorks animators have begun work on a story based on the Ten Commandments that is scheduled for 1998.

Universal Pictures will produce any Universal sequels Spielberg is obligated to direct or produce, including follow-ups to ``Jurassic Park″ and ``Casper.″ Universal and DreamWorks will co-produce and co-finance some 30 movie projects now in development at Spielberg’s Amblin production company. Any new films will be financed by DreamWorks alone.

DreamWorks’ new record label has not announced any new acts but is said to be negotiating with disgruntled Sony artist George Michael.

Geffen declined comment except to say DreamWorks’ first record could be out late this year.

The international market is a critical component of the agreement. Overseas revenues dwarf domestic receipts for movies, and MCA’s music division has recently built a powerful international distribution network.

MCA’s music unit has been more profitable than its movie division. Bronfman, who is a songwriter, said: ``Music is one of the best businesses in the entertainment business. For MCA, this is an outstanding opportunity.″

Wall Street reacted favorably to the announcement. Seagram stock, which has been slumping, surged $1.50 to $30.825.

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