Reports: NBC Universal Mulling DreamWorks Buy

LOS ANGELES – NBC Universal (search) is in talks to buy DreamWorks SKG (search), the movie studio whose hopes of becoming a major Hollywood player with a big lot and broad entertainment interests never panned out, according to various news reports.

The speculation was first reported on Wednesday in the New York Post. Hollywood's two trade papers, Daily Variety and the Hollywood Reporter, followed up in their Thursday editions, as did the Wall Street Journal. The deal could be worth as much as $1 billion, according to some of the reports.

In the New York Post, a DreamWorks official was quoted as denying the studio was for sale. But DreamWorks subsequently issued a statement saying the comment was "not authorized," and the studio's policy is not to comment. NBC Universal, a unit of General Electric Co. (GE), also declined comment.

Daily Variety attributed the sensitivity to a federal probe into stock trading at DreamWorks Animation SKG Inc. (DWA), which was spun off last fall. The company recently revealed that earnings will miss expectations because of lower-than-expected DVD sales, and it will cancel a planned $500 million secondary stock offering.

DreamWorks SKG was launched in 1994 by filmmaker Steven Spielberg (search), former Walt Disney Co. (DIS) executive Jeffrey Katzenberg (search) and music billionaire David Geffen (search), the "S," "K" and "G" in the company's name.

DreamWorks stumbled out of the gate, with its plan to operate on a large campus near the Pacific Ocean stymied in part by environmental concerns. Its first film "The Peacemaker," starring George Clooney, was considered a flop.

DreamWorks eventually found its movie groove with the "Shrek" cartoons, and the Oscar-winning dramas "American Beauty" and "Gladiator," the latter a co-production with NBC Universal's Universal Pictures. Its forays into television production, music and video games were less successful, and the studio eventually jettisoned the latter two businesses.

The last few months have been particularly tough. In addition to the woes at DreamWorks Animation, where Katzenberg serves as Chief Executive Officer, DreamWorks suffered a major setback at the box office last weekend with the sci-fi movie "The Island," a co-venture with Time Warner Inc.'s (TWX) Warner Bros. Pictures. It cost more than $120 million to make and sold just $12.4 million worth of tickets in its first three days.