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Paramount chief Brad Grey is launching a new animation studio with a plan to release a $100-million-budget flick every year.
While every studio is getting bigger in that kid-friendly field, the move likely spells the end of Paramount’s distribution agreement with Jeffrey Katzenberg’s DreamWorks Animation — which expires at the end of 2012.
Extending that pact got hung up when Paramount refused to cut its 8 percent distribution fee. Paramount countered with an offer to extend it for one year at the same rate.
Katzenberg, 60, has been lobbying for a better, cheaper fee, and threatening to take the business elsewhere.
Katzenberg, while having already arrived here at the Allen & Co. annual media mogulfest, was busy at Zynga’s board meeting here.
He is expected to respond to the Paramount announcement today.
Grey told The Post: “We’ve been thinking about this for a few years.”
He said the potential to grow a consumer products business in concert with Viacom sibling, Nickelodeon, had great appeal.
Grey, who has been the Paramount boss for 6½ years, is hiring a new boss to run the animation studio — which is expected to rely heavily on third-party animation houses around the globe.
The 53-year-old media boss declined to discuss the future of the DreamWorks-Paramount relationship.
Their first fully funded production, “Rango,” earned some $240 million. It was released earlier this year.
Ben Mogil, an entertainment analyst with Stifel, sent a note to investors yesterday saying, “Clearly, a new in-house competitor to DreamWorks is a negative, and we suspect that DreamWorks may choose to go elsewhere regardless when its deal is up.”
Mogil has a “sell” rating on DWA shares. He suggested Fox and Sony as potential partners.
One Hollywood source suggested DWA could explore a privatization as a way to reorganize its efforts away from a reliance on DVD sales.
Katzenberg has reportedly been feeling out potential buyers this past year.
DWA shares yesterday closed down 2.6 percent, at $20.12. Paramount parent Viacom’s shares closed at $58.66, down a penny. catkinson@nypost.com
