Paramount and DreamWorks Animation officially call it quits

It’s a divorce that’s been looming for months but yesterday it was made official. DreamWorks Animation and Paramount, who have been releasing films together since 2006, have called it quits. DreamWorks yesterday informed Paramount that it would be rejecting an offer to continue their current contract beyond 2012 when it expires, effectively terminating their current distribution deal. Though the deal expires next year, Paramount offered an extension at an increased rate but DreamWorks balked at the percentage Paramount was looking to get from their films.

So where does this leave DreamWorks?

Good question. Four of the five remaining major studios – Fox, Sony, Universal and obviously Disney – have their own in-house animation houses and the one that doesn’t, Warner Bros., has no interest in working with DreamWorks. If they’re unable to strike up a deal with a new distributor, they may revert to releasing their own movies, something DreamWorks hasn’t done since MADAGASCAR. Currently DreamWorks doesn’t have the resources to market and distribute a film (their live-action films go through either Disney or Universal), but they could use the money they’re saving from the Paramount deal to beef up staff.

So where does this leave Paramount?

Paramount was very pleased with the success of RANGO, their first foray into animation without DreamWorks. The film cost far less than most DWA films and was a solid return-on-investment. But it also means that in the past year or so, they’ve lost both Marvel and DreamWorks – two studios that were delivering a guaranteed blockbuster (or two) a year. Paramount does have the highest grossing movie of the year so far in TRANSFORMERS 3 but their other two films in the Top 10 grosses – THOR and KUNG-FU PANDA 2 – came from out of house. They’ll need to ramp up production and begin work creating new franchises to fill that void.