‘Dream Team,’ ABC Plan Joint Venture

In their first major business deal since forming their much-ballyhooed Hollywood studio last month, Jeffrey Katzenberg, Steven Spielberg and David Geffen on Monday announced an alliance with Capital Cities/ABC to create prime time and syndicated television shows.

Robert Iger, president and CEO of Capital Cities/ABC, said the broadcast company is putting “in excess of $100 million” into the joint venture. Geffen said that he and his two partners combined also are investing more than $100 million in the production company.

The agreement puts Capital Cities/ABC in business with three of Hollywood’s most successful executives at a time when Warner Bros., Paramount Pictures and other studios are preparing to launch their own TV networks to challenge the major broadcasters. The deal also represents a dramatic departure from the traditional financial relationship between studios that produce television shows and TV networks. The venture will be a 50/50 split between the two sides, both in financing and in reaping the profits from syndication sales and other sources.

“We are sharing 50/50 in the risk and 50/50 in the potential rewards,” Iger said. “This deal allows us to apply our investment in one direction: not on overhead or real estate but on programming. . . . These three men were willing to put up a significant amount of their own money while giving us an opportunity to own 50%” of the company.

The two sides did not divulge much more about the deal, said to be the first joint venture between a network and a studio in which all aspects of the arrangement are shared evenly.

Katzenberg, Spielberg and Geffen said they would be personally involved in all aspects of the TV venture. Spielberg called it a “wonderful opportunity to put ideas on TV.” He said that he expects to push for his own pet projects and become more personally involved in television than he has been in the past. But he added, “For the most part, I’m interested in finding very talented producer/writers to create their own shows and also exist with us in a creative environment.”

Katzenberg, Spielberg and Geffen announced the formation of their studio in October. It subsequently became known as the “Dream Team,” based on their winning track records. Katzenberg fostered such hits as “The Lion King” as the former chairman of Walt Disney Studios. Spielberg is the most successful director of all time, with movies such as “E.T.” and “Schindler’s List” to his credit. Entertainment mogul Geffen, who heads Geffen Records and produced the current hit, “Interview With the Vampire,” is said to be worth $1 billion.

The partners are negotiating for 75 acres of space in Playa del Rey where, they said, they hope to locate their as-yet-unnamed studio. The TV part of the company will produce programming for other networks as well as ABC, but it is expected that a substantial number of the shows will air on the ABC broadcast network or ABC cable channels. The partners said they will begin developing shows and expect to have some programming on the air by the second half of 1995.

“This is a brilliant move for both sides,” said Jessica Reif, an analyst with Merrill Lynch. Going into TV, Reif said, “has advantages over movies because you can get TV up and running pretty quickly. And you know pretty quickly whether you have a hit or not.”

Deals involving movies and music are expected down the line.

Katzenberg, Geffen and Spielberg, who joined Iger in an interview at Capital Cities/ABC headquarters in New York, indicated they will pursue both new and established creative talent, including people already working on competing networks, for the new venture. They will also hire a TV chief. Although they declined to be specific, most Hollywood observers expect the three partners to pursue relationships with people they have worked with at their respective entertainment companies before announcing their “Dream Team” venture last month.

“The most important thing right now (in starting the new studio) is our relationship with talent,” Spielberg said. “We are looking to working with and discovering talented writers, producers and actors in a creative environment.”

“If a star has an existing deal with CBS,” Geffen said, “we will work with them on that network.” The three have argued that, without some of the traditional costs at a major studio, they will offer talent a bigger piece of the pie in their new company. Without giving any specifics, Geffen said of the new TV venture: “I think talent will do better with us than with anybody else,” in terms of their piece of the financial pie in the new venture.

The venture comes at a time when the broadcast networks and movie studios are seeking new alliances, with broadcasters looking to guarantee a stream of programming and studios seeking to capitalize on the distribution capability of networks.

“We would expect that when Warner Bros. or Paramount starts their networks, they will continue to supply programming to us,” Iger said. “However, it is of concern to us when suppliers of programming become distributors as well, because the pipeline of product potentially narrows. With this deal, we gain the creative talents of Katzenberg, Spielberg and Geffen. And, with the way the deal is structured, we can express the specific needs (for programming) on our own network--and have them met.”

Under traditional arrangements between networks and studio suppliers, networks license TV shows for airing on the network but do not share in the profits from syndication. With the lifting of the “financial interest-and-syndication rules,” networks will be able to share in some of those profits. Networks have also begun to make new alliances. ABC recently announced a partnership with Brillstein/Grey, one of Hollywood’s best-known management agencies, to create TV programming.

Katzenberg said, “With all the changes expected in the TV landscape, we believe this alliance is going to allow us to be an important force in network TV going into the next decade.”

Although Spielberg’s Amblin Television Co., which produces the hit “ER” and NBC’s “SeaQuest” has had several failures, including “Amazing Stories,” analyst Reif said, “having access to Spielberg and his partners is a great thing for ABC.”

* CROSS-POLLINATION: TV executives are crossing over to movies. D1