Steven Spielberg is on the verge of announcing a six-year, 30-film distribution deal with Walt Disney after the collapse of negotiations last week with Universal Studios.

The deal, which would combine Hollywood’s most commercially successful director with its most sophisticated marketing and distribution machine, could be unveiled by Monday.

Under the deal Disney will distribute films produced by Mr Spielberg’s newly independent DreamWorks venture, which had been set to distribute its films with Universal until talks broke down over DreamWorks’ request for $250m in funding.

While there is some cash involved in the Disney deal it is in the form of a loan, rather than an equity injection. New DreamWorks films will be included in Disney’s pay TV deal with Starz, the cable channel owned by John Malone’s Liberty Media group.

Disney has unlimited slots for its films with Starz, which will provide a critical revenue stream for DreamWorks as it ramps up production.

Disney will receive a fee for each DreamWorks film it distributes. It is unclear what sort of deal the company has negotiated but people familiar with the DreamWorks talks said Disney would earn more than the8 per cent fee provisionally agreed between Mr Spielberg and Universal.

Disney will use DreamWorks films to revitalise its live action studio division which, in contrast to its animation business, has stumbled with the release of a string of flops, notably Spike Lee’s Miracle at St Anna and Kevin Costner’s Swing Vote.

DreamWorks’ recent track record is patchy. The company has scored big commercial hits such as Transformers, which was distributed by Paramount, but also released duds such as Ricky Gervais’s Ghost Town.

The group has spent heavily on edgier films, such as Revolutionary Road, which was well received by critics but did not become a big commercial success.

Privately, executives at Universal, which is part of General Electric’s NBC Universal unit, do not regret the decision to part company with Mr Spielberg, saying a DreamWorks deal could not be justified on cost grounds.

One person close to Universal said: “When you look at the business model here you have to look at the track record rather than their best year.

“And [DreamWorks] always spends a lot of money on production and on marketing.”

Disney is delighted to have Mr Spielberg on board. “DreamWorks films have always made money,” said one person familiar with the negotiations. The Disney-DreamWorks deal ends Mr Spielberg’s 30-year relationship with Universal.

Article by Matthew Garrahan
Source: The Financial Times