HD DVD Studio Payoffs Continue to Haunt DreamWorks

How much money did Toshiba lose developing and promoting its doomed disc format? We may never know the wealth hemorrhaged by the Japanese electronics manufacturer. News of studio payoffs have come to light and continue to haunt DreamWorks.

Toshiba spent millions keeping studios on its side. It was rumored last summer that Toshiba paid Paramount (and sister company DreamWorks) $150 million to keep away from Blu-ray.

Since the announcement that Toshiba is dropping the format, HD DVD holdouts Universal and Paramount have been quick to jump on the Blu-ray bandwagon. But Paramount’s walk across the floor didn’t translate to DreamWorks and the studio is finding that it still can’t jump off the HD DVD train.

DreamWorks is still bound by its contract with Toshiba to keep releasing movies on HD DVD. Neither Toshiba’s surrender in the format war nor Paramount’s move to Blu-ray has apparently altered DreamWorks obligation.

The studio’s Chief Executive, Jeffery Katzenberg said yesterday:

“We have a partnership with Toshiba and have an obligation to see this through.  A you know, we have been well compensated for our support. It really is in their court at this point…”

So, DreamWorks is stuck until Toshiba releases them from its obligation. One estimate from Pali Research has Toshiba committing $100 million to help DreamWorks Animation promote three of its movies: Shrek 3, Bee Movie and the upcoming Kung Fu Panda.

Considering the sales of high-def discs is still quite small compared to DVD, it might be cheaper for DreamWorks to simply stay the course and continue to release movies to HD DVD than to break its contract.

Contracts or payoffs to studios that some may call a bribe aren’t unique to Toshiba. Sony allegedly anted up $400 million to get Warner Brothers on its side last January. It turned out to be the studio that broke Toshiba’s back.