This post has been updated. See note below for details.
Walt Disney Studios will no longer release movies from its partner DreamWorks Studios everywhere around the world.
The two companies have renegotiated their longstanding agreement. Going forward, Disney will release movies produced by DreamWorks, the independent studio led by Steven Spielberg and Stacey Snider that made "War Horse" and "The Help," in the U.S., Canada, Latin America, Australia, and most of Asia.
DreamWorks has signed a deal with Mister Smith Entertainment, a new company headed by Summitt Entertainment co-founder David Garrett, to handle sales in Europe, Africa and the Middle East.
Mister Smith (whose name was inspired by the Frank Capra classic "Mr. Smith Goes to Washington") will pre-sell foreign distribution rights to upcoming DreamWorks productions such as "Need for Speed," based on the car racing video game, and an untitled comedy from French-Canadian filmmaker and comedian Ken Scott, to local distributors in each foreign country.
That arrangement, which is commonly used by other independent studios such as Lionsgate and Relativity Media, will give DreamWorks more money for production, as the foreign partners will pay a guaranteed amount of money up front for the rights to release films.
Previously, DreamWorks fully financed its movies and then received all of the foreign box office receipts, minus a fee paid to Disney.
After several high-profile flops last year, such as "Cowboys & Aliens" and "I Am Number Four," and a new financing deal with backer Reliance Entertainment in April, DreamWorks' financial resources have been significantly decreased. The new international arrangement is thus a critical component of the studio's ability to continue making movies.
Mister Smith will not be involved in the release of upcoming DreamWorks movies "Lincoln" and "Robopocalypse," both directed by Spielberg. 20th Century Fox co-financed those films and will release them overseas.
Garrett, a former president of Summit's international unit, launched Mister Smith at the Cannes Film Festival in May together with backer Constantin Film.
[Updated at 2:56 p.m. to specifiy which foreign markets will still be handled by Disney and which by Mister Smith.]