Universal Said to Be Eyeing DreamWorks

NBC Universal has been in serious talks to buy live-action film studio DreamWorks SKG, although no deal is certain, sources close to the matter said Wednesday.

Informal discussions between the two parties have occurred for months, but talks have become more serious over the last month, the sources said.

It is unclear whether NBC Universal parent General Electric Co. would give its blessing to pursue a deal. GE’s board is expected to meet Friday to consider whether to start exclusive negotiations with DreamWorks. It is unclear how much GE would pay, or what DreamWorks wants.

NBC Universal and DreamWorks officials declined to comment on the prospective talks, which were reported in Wednesday’s New York Post. Details were provided to The Times by four sources familiar with the talks, all of whom requested anonymity because of the sensitivity of the discussions.

Universal would presumably be in a favored position to buy DreamWorks, founded in 1994 by director Steven Spielberg, music mogul David Geffen and former Walt Disney Studios chief Jeffrey Katzenberg. The studios have been business partners for more than a decade, with Universal distributing DreamWorks films on DVD worldwide and in theaters overseas through United International Pictures.

Moreover, it was Universal that gave Spielberg his break as a young director, resulting in such studio blockbusters as “Jaws,” “E.T. the Extra-Terrestrial” and the “Jurassic Park” films. Spielberg still keeps his office on the Universal lot.

Despite their close ties, the timing of a deal for both Universal and DreamWorks may not be right. GE’s approval could be difficult because NBC is suffering from soft ratings and poor “upfront” fall ad sales. In addition, some Universal films, notably “Cinderella Man,” have been box-office disappointments.

Citing those problems, NBC Universal Chief Executive Bob Wright this week sent out a companywide e-mail urging across-the-board belt-tightening.

“I have asked operational and finance leaders to examine cost areas in every business across our company and rein in spending accordingly,” Wright wrote in a memo read to The Times. “This action is necessary to get through what will be a very tough period.”

For DreamWorks, discussions come in the wake of one of its most costly flops, “The Island,” co-financed with Warner Bros. The Michael Bay-directed film, which cost $126 million to produce and an estimated $90 million to market worldwide, debuted last weekend with a domestic gross of $12.4 million. Two media analysts, Jeffrey Logsdon of Harris Nesbitt and Harold Vogel of Vogel Capital Management, said each studio could lose about $50 million.

DreamWorks Animation, which was spun off publicly last year from the live-action business and would not be part of any sale, is wrestling with soft results, a falling stock price, shareholder lawsuits and a Securities and Exchange Commission inquiry into its stock trading. Although animation is now separate from live action, the two still share marketing and distribution.

Since that split, Katzenberg has run the animation company while Geffen has been overseeing the live-action operation at the behest of the company’s financial backers. Geffen has made no secret of his distaste for the volatile movie business and his desire to ultimately step back from it.

A sale would further dismantle a company founded with grand ambitions that once included movies, TV, new media and music. DreamWorks reaped two best-picture Oscars, for “American Beauty” in 2000 and “Gladiator” in 2001, and also released such critically acclaimed hits as Spielberg’s “Saving Private Ryan.” However, the studio has a relatively modest library of less than 50 films, many of which are co-owned by other studios, and also released such disappointments as “The Terminal.”

The business has become difficult for stand-alone movie companies like DreamWorks to survive. Metro-Goldwyn-Mayer Inc. was recently sold to an investment group led by Sony Corp.

“DreamWorks doesn’t have enough capital or [a] large enough library to go it alone,” Vogel said. GE and NBC Universal, he said, “have enough capital to make an asset like DreamWorks more viable.”

Times staff writer James Bates contributed to this report.