Are The Wheels Coming Off Dreamworks?

Are The Wheels Coming Off Dreamworks?

Wednesday, Breitbart News reported that DreamWorks, the film company co-founded in 1994 by Steven Spielberg, David Geffen, and Jeffrey Katzenberg, had received a $200 million bailout from India’s Reliance Entertainment, a company with a questionable history and ties to the Obama administration:

Spielberg and Geffen are both close with the Obama administration. The Reliance Group has dealt with the Obama administration in questionable ways. In June 2010, the Export-Import Bank of the United States rejected a loan guarantee to Reliance to buy $600 million worth of equipment due to environmental concerns. When Democrats complained that 1,000 jobs would die if the deal didn’t happen, the Obama administration stepped in – and suddenly, the Bank gave the loan, with the condition that Reliance promised to build an enormous renewable project in India.

Today Deadline is reporting that Steve Molen, head of DreamWorks’ physical production, has resigned and that in 2012, the company is expected to release only two films:

Problem is, there isn’t much for someone with Molen’s skill set to do at DreamWorks 2.0 right now. The company is releasing only two movies this year: the small People Like Us and the Steven Spielberg-directed Lincoln. Both pics are expected to be modest box office at best — even though weekend grosses have heated up for 2012.

In the coming weeks and months, more resignations and layoffs are expected as what Deadline describes as a “draconian plan to downsize production” is enacted. Update: reports the studio is cutting 10 percent of its staff.

From my perspective, one of the main problems DreamWorks is running into is that unlike the majors — Paramount, Sony, Universal, etc. — a small shingle can no longer survive in an environment where you actually have to survive off of revenue from film. The bigger studios are so diversified across so many different kinds of businesses that they can afford to absorb the huge losses in their film divisions that have been caused mainly by the collapsing home video market.

The new reality in the film business is that in the last quarter of last year, disc revenues (DVD and Blu-ray) collapsed 21.3% over the previous year. This report says studio cash-flow from film has cratered 40%.

The box office might be booming this year, but in the overall trend this will likely be remembered as a blip and DreamWorks will likely be remembered as a casualty of a new reality where studios can’t survive on film alone.

The chickens have come home to roost. Divisive, nasty spokespeople (actors), diminished quality of product, and an overall disconnect with the hundreds of millions of customers who don’t live on the coasts is finally catching up to Hollywood and close to taking out the weakling in the herd.

Like Hollywood is doing now, a few years ago, Spielberg attempted to sell his soul to the communist Chinese. But the Academy Award-winner was ahead of his time. Apparently, it is now okay with left-wing human rights activists to do so (and to censor your films to please Chinese censors), so he might want to give it another go.

Or he could just go back to making movies people want to see.