MONEY, NERVES SCUTTLE DEAL DREAMWORKS, NBC ACCORD IS OFF.

Byline: Brent Hopkins Staff Writer

The $1 billion proposed marriage between the upstart DreamWorks SKG and entertainment giant NBC Universal fell apart on Monday when DreamWorks got cold feet and its suitor came up short on cash.

The two had been in talks for two months, seeking to add the film studio to the entertainment wing of corporate behemoth General Electric Co. Neither DreamWorks nor NBC returned repeated phone calls seeking comment on the deal's souring, first reported Tuesday by The Wall Street Journal, but founder David Geffen told The Associated Press on Tuesday that the two parties had initially agreed on a sale price of $1 billion.

``We had come to terms with them on price and there were a million things that needed to be settled,'' Geffen told AP. ``At the very end, they tried to readjust the price, albeit for less than 10 percent. People had more time to rethink the thing.''

Geffen founded the company in 1994 with Hollywood heavyweights Steven Spielberg and Jeffrey Katzenberg with the idea of creating a super-creative entity producing films, music, television and animation. Though still a force in the industry, DreamWorks sold its record label to Universal Music Group in 2003, spun off its animation division into a public company earlier last fall and backed out of TV.

This leaves the movies, of central importance to director Spielberg, who used the studio to produce his films ``Saving Private Ryan'' and ``The Terminal.'' At the same time NBC was trying to bargain the music mogul down to a cheaper price, Geffen said his business partner began expressing concerns that he'd lose some of the directorial freedom he enjoyed with his own company.

``Spielberg's someone who really wanted to maintain creative control and as soon as that's wrestled away by a purchase, he'd lose it,'' said S. Mark Young, a professor of both accounting and communications at the University of Southern California. ``That's a big sticking point. When you begin to think that Spielberg could walk or not be as directly involved, maybe NBC starts getting a little nervous.''

NBC and DreamWorks still have their long-standing deal that gives NBC international theatrical distribution rights to the studio's films and worldwide home video rights. The pact, inked in 1995, has been extended several times, currently closing in 2010.

Though the two-month exclusive negotiation period between the pair has elapsed, observers believe a deal could still emerge if the terms become more attractive. With a library of titles including hits like ``American Beauty,'' ``Gladiator'' and ``Seabiscuit,'' and the reputation of its founders, the studio still has plenty of attractive assets.

``GE would only do it if everything lined up personally,'' said Jim Ragan, a GE stockholder and senior equity analyst with the Los Angeles office of the investment bank Crowell, Weedon & Co. ``They don't have to go out and get more business. This was a big one, but it wasn't going to work out.''

If the two don't pick up negotiations again, USC's Young said the smaller studio shouldn't have a problem finding more interested parties.

``Someone will approach DreamWorks and ultimately cut a deal,'' he predicted. ``Any of the major studios should be interested, and I can't think of any reason why they wouldn't, except for the price tag. That's a lot of money these days.''

Brent Hopkins, [phone]

brent.hopkins(at)dailynews.com