As per sources, The Walt Disney Company DIS and DreamWorks Studio are planning to go separate ways after their multi-year film distribution deal expires in Aug 2016.

DreamWorks is reported to be in talks with Comcast Corporation CMCSA owned Universal Studios, for the film distribution agreement. There is no official word on the matter from any of the parties.

DreamWorks inked a film distribution deal with Disney way back in 2009 after months long negotiations with Universal Studios did not work out. As per the deal, Disney agreed to distribute six DreamWorks films in a year and provide financing to the studio.

However, sources observe that the relationship remained pretty stressed out from the beginning. It so happened that six months into the deal, Dick Cook, then chairman of Disney stepped down and Bob Iger took over Disney’s helm. Iger stressed on focusing on Disney branded movies and went ahead with the acquisitions of Marvel and Lucasfilm, thus sidelining DreamWorks.

Disney’s acquisitions of Pixar (2006), Marvel and Lucasfilm paid off brilliantly. After a spate of blockbuster hits at the box office, Disney is now engaged with production of several Marvel releases and the next Star Wars Trilogy. Consequently, it was clear that DreamWorks might not get the financial assistance from the entertainment giant as it expected.

In fact, DreamWorks had already sought financial help elsewhere in last few years despite being in partnership with Disney. India’s Reliance Big Entertainment came to DreamWorks’ rescue back then but its sordid run at the box office with releases like Need For Speed, The Fifth Estate and Delivery Man made financial distress all the more alarming.

If the Universal deal clicks this time, DreamWorks might be able to give itself a much needed boost. As per sources, the studio, under CEO Michael Wright has brought on board Participant Media to invest $200 million in the company whereas it is looking to raise another $150 million to $200 million from elsewhere.

As for Disney, with the kind of movie releases it has lined up for next couple of years, the loss of this distribution deal might not be a major cause of concern.

Disney now only has two more DreamWorks movies to distribute. Cold War drama, Bridge Of Spies releasing this October, and The BFG releasing on Jul 1, 2016. The BFG is based on a Roald Dahl book and is co-produced by Disney. Both films are directed by Steven Spielberg.

At present, Disney carries a Zacks Rank #3 (Hold). A couple of better-ranked media stocks include Gray Television, Inc. GTN and Entercom Communications Corp. ETM. Both carry a Zacks Rank #2 (Buy).

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