In a nutshell, Eller writes, the scenario works like this:

Untangling the rights to various properties could be tricky. Steven Spielberg has attached himself as a producer to at least 30 DreamWorks projects, which Paramount will not be able to make unless it pays him substantial fees. The filmmaker is guaranteed 7.5% of every box-office dollar collected by Paramount until the movie breaks even. Once the studio recovers its cost and earns a distribution fee, Spielberg is then entitled to 50% of the film's profit.

And that's not even the worst part for the 'Mount: Take away Marvel's Iron Man, DreamWorks Animation's Kung Fu Panda, and DreamWorks' Tropic Thunder, and the only internally developed films in Paramount's Blockbuster Class of '08 are Indy 4 (directed by Spielberg) and The Love Guru (an abomination to God and man). What's in the pipeline if it sheds the 'Works? Benjamin Button? Star Trek? Mission: Impossible 4 (maybe)?

Moreover, will Brad Grey be as quick to claim credit for Paramount's future misfires as he was for DreamWorks' successes? Or will he even be around long enough to pat himself on the back for Untitled Wayans Brothers Comedy? Come to think of it, we kind of wish these guys would stay together for the children.

• DreamWorks- Viacom breakup could get ugly [LAT]

Writers Maya Forbes and Wally Wolodarsky have been hired to adapt it into a film, with Marc Evans overseeing for the studio.

Forbes and Wolodarsky, repped by ICM (which also handles rights for the Times), have TV comedy backgrounds — Forbes wrote on "The Larry Sanders Show" and Wolodarsky on "The Simpsons." They most recently wrote the Rainn Wilson comedy "The Rocker," due for release in August from Fox Atomic, and worked on "Monsters vs. Aliens," due for release in March from DreamWorks Animation.

Clearly, Paramount is seeing dollar-sign-shaped puffs of smoke floating out the chimney of this house of puzzling delights—a future classic that might one day stand shoulder-to-shoulder with Narnia, Pan's Labyrinth, Spiderwick, and the like. Perhaps they're even thinking franchise: If the story's heroes manage to solve the Mystery of the Really Expensive Upper East Side Townhouse by movie's end, the parents can always have the interior demolished and an entirely new cryptic design put up in its place.

[Photo Credit: NY Times]

• Mystery on Fifth Avenue [NY Times]
• J.J. Abrams to produce 'Mystery' [THR]

So this email went out this morning announcing that there will be a huge party tomorrow night on the Paramount lot and that parking will be at capacity on the lot, so everyone go home at 5.

"This will make it more convenient for your staff to leave the lot before the crowds arrive and provide a better experience for our event guests."

I find out later the party isn't for a premiere or anything, but rather for 1000 guests from the United Arab Emirates, sponsored by Emirates Airlines.

Obviously, the UAE and has been engaged in an ongoing flirtation with Hollywood for some time now—one that extends far beyond mere amusement park plans, to include the securing of Brad Pitt's foundation-compromising design services for a new hotel in its Grove-like capital of Dubai. Whatever Paramount plans to gain from tomorrow's soiree, you can bet it's something hugely significant, as it's not just any old function that features both Brad Grey and Sumner Redstone behind a table of entree warmers, offering a friendly, "Good evening, Sultan Bin Sulayem! We're featuring cornmeal-crusted ahi and sauteed arugula tonight. Did you get a chance to see Indy yet?" as the traditionally garbed VIPs make their way down the buffet line.

• Previously: Steven Spielberg, DreamWorks Ready to Join Other Hollywood Players Outsourced to India [Defamer]

The rest of the picture is still taking shape, but after the jump we have a few educated guesses as to where things might land — and it looks curiously like Bollywood.

Led by Anil Ambani, by Variety's count the world's sixth richest man (and the husband of a Bollywood actress), Reliance is apparently taking over Hollywood one A-list player at a time. Its film funding arm, Reliance Big Entertainment, made headlines at Cannes last month when it announced development deals with the likes of George Clooney, Brad Pitt, Tom Hanks and others, splitting with studios the costs of new productions costing up to $1 billion. Reliance's latest venture is decidedly more ambitious, expanding its vast media footprint to claim what will be roughly half of the new DreamWorks: Six or so films a year through a studio to be determined (probably Spielberg's old stomping grounds at Universal, where he still keeps an office).

The deal also continues Asia's incursion into Hollywood, perhaps epitomized by Sony's $4.8 billion takeover (with Comcast) of MGM in 2005. But India has been even more active in the last year, with TV producer UTV Software buying into Fox's The Happening and Lionsgate entering a development deal with Mumbai-based shingle Eros International. The Reliance/DreamWorks pact is the biggest by far, but as noted by WSJ, the Snider connection gives Reliance stable executive footing for its grand Hollywood experiment.

The paper also adds, however, that DreamWorks would be dealing with an Indian conglom with its own internal drama: Anil Ambani is embroiled in a feud with his older brother Mukesh over a multi-billion dollar acquisition in South Africa. The trouble would only touch DreamWorks if the communications arm were ever sold; the brothers have reportedly been fighting over controlling interest in that case.

Spielberg will obviously cross that bridge when he comes to it, as will he face inevitable concerns about investor influence over his and Snider's slate. To wit, are the Clooney/Hanks/Pitt et. al. projects earmarked for the 'Works? How will Reliance play ball with Universal, Fox or another studio enlisted to distribute DreamWorks' films? Will press inquiries forevermore be rerouted to a call center in Bangalore? So many questions!

• Spielberg, India Firm Near Deal to Ally With DreamWorks [WSJ]

Steven Spielberg aims to raise more than $1 billion in third-party financing to reinvent DreamWorks as a separate company that once again owns the movies it makes.

As for distribution, Spielberg wants to bolt his roost at Paramount for Universal, which wants to land Spielberg and DreamWorks after losing out to Paramount in that quest a couple years ago. But on recommendation from his advisers, Spielberg has allowed a bidding war to begin among studios for the rights to distribute future DreamWorks movies.

The chief suitors other than Paramount: Universal, Disney and Fox.

Raising $1 billion of other people's money is certainly more conceivable than spending $25 billion of your own—what Spielberg would have to spend to buy Universal outright, as the LAT once suggested he secretly fantasizes about doing. Whatever happens, this protracted divorce has gone on long enough, and we just pray some sort of closure is achieved before things turn all Sheen vs. Richards, and psycho/vengeful/clingy Paramount starts demanding a DreamWorks sperm-donation in the form of a verbal commitment for distribution rights to Kung Fu Panda 2.

• Steven Spielberg has $1 billion dream [THR]

"The new consolidated structure allows both Paramount and Paramount Vantage to leverage the strengths and resources of a combined talent base, while minimizing redundancies and optimizing efficiencies," Rob Moore, Vice Chairman, Paramount Pictures.

Those who didn't quite make the efficiency-optimizing grade: Vantage distribution executive vp Rob Schulze, plus two other executives, one of whom worked for Paramount proper. So why is the studio, enjoying the heartiest summer crop in ages, eating its own? A Defamer operative suggests their in-house reaper's scythe-swinging has just begun, with the re-organization providing a nice opportunity for big Paramount to clean out their theatrical marketing department. The moral of the story? Don't equate a Best Picture Oscar or thirteen-figure opening with job security: For every success, there's an A Mighty Heart or Love Guru that means your ass on a platter.

• Paramount Pictures and Vantage unit to combine operations [LAT]

1. Murphy's on-set meltdown when Ratner accidentally calls him "Chris."

2. Paramount can keep its coin. Unlike its distribution deals struck with Marvel Studios and Lucasfilm for its recent blockbusters Iron Man and Indiana Jones 4 (Dreamworks will be long gone by then), Paramount has 100% of the Beverly Hills Cop franchise to itself. Which is important, because early tracking hints this film will gross around $3,260.

3. Bronson Pinchot's inevitable holdout for more money to reprise his role as the gay, pronunciation-challenged art dealer Serge.

4. The unique apocalyptic ring to the words, "Beverly Hills Cop 4: A Film by Brett Ratner."

5. Harold Faltermeyer, a/k/a the Michael Bay of soundtrack composers, can finally have his career back.

6. We don't have to feel quite as bad about our morning drinking habit.

7. The Cannes premiere.

• Eddie Murphy Back in 'Beverly Hills' [Variety]

[Margin of error: +/- 9.5 trillion]

And we're off! At the stroke of midnight, Indiana Jones and the Kingdom of the Crystal Skull began screening on 4260 U.S. screens, and 12,000 more around the planet.

With a 4-day opening weekend poised to topple all previous box office records, we thought we'd celebrate the iconic treasure seeker's historic return with an Indy PlunderWatch gross earnings projections clock. Using a complex algorithm that carefully calibrates screen count, market research, other openings, and hyperbole divided by fanboy prattling, our calculations* suggests that the sequel has in just nine short hours of release already laid waste to current title-holder Pirates of the Caribbean: At World’s End's $137 million take by well over nine-and-a-half trillion dollars.

*Margin of error: +/- 9.5 trillion.

• 'Jones' eyes box office bonanza [Variety]

Paramount, producer George Lucas and director Steven Spielberg have made some changes in their game plan to avoid the Da Vinci scenario. For one thing, they're not having a big party. ...

In contrast, Indy's producers have skedded a "filmmakers party" for 250 people — no press invited. There will be the usual press conference following the screening; the only TV and print junket interviews with the cast are scheduled the day before the screening, instead of afterward; access to Spielberg outside the press conference is strictly interdit.

We didn't want to go to your stupid party anyway; we're too busy joining Pete Hammond in handicapping the Oscar chances of this year's higher-profile fest selections. Actually, we're doing no such thing, and we wish Hammond wouldn't either, but there it is: Jury chair Penn might help shepherd his ex-director Clint Eastwood's Changeling to the Palme d'Or! Che is a front-runner, except it's not finished! Kung Fu Panda is an animated film contender! Only 10 more days of this; thanks for nothing, LA Times.

Elsewhere, Anne Thompson is making the rounds in smoke-filled rooms, and Jeffrey Wells was on the scene at a panel during which David Poland — via Skype! — apparently predicted the end of The Hollywood Reporter within three years. So, you know, don't renew your subscription.

It depends on what Steven Spielberg and David Geffen want. Most important is autonomy, which they won't get without once again going the independent route: self-funding their own projects and paying out a distribution fee to a studio with the infrastructure to put their product in theaters. If Marvel can do it, God knows DreamWorks can, but Spielberg wants more — like full-blown "studio" more. That's why we kind of like the Universal prospect floated today by Goldstein:

Pros: No studio has the same emotional tug as Spielberg's ancestral home. Studio boss Ron Meyer would love to have DreamWorks back in the fold, while Spielberg and Snider (a former chairman at the studio) have an easy familiarity with Uni's marketing and distribution machinery.

Cons: After the dysfunction of Paramount, would DreamWorks want to be anywhere near the tightly controlled GE corporate culture that drove away Snider in the first place? GE remains the antithesis of DreamWorks' bureaucracy-free model.

Nevertheless, with everybody else overextended (Warner Bros., Sony) or content with their classier, "independent" outlets (Fox with Fox Searchlight; Disney with Miramax), Universal is the only studio that has would have the 'Works on its own terms. What Universal needs is development, and DreamWorks has that in spades. The bureaucracy would pare down pretty fast if (or rather when) DreamWorks is producing six films a year including one from Spielberg — while Snider is clearing the brush on his behalf. Goldstein even suggests that Spielberg might buy Universal, which, at a valuation of up to $25 billion, is ludicrous (even without NBC involved). But if this deal doesn't happen, it won't be for its principals' lack of trying. And hey, if not, then sure: Hellooooo, MGM!

• DreamWorks is ready to bolt from Paramount [LAT]

1. The Schlub Factor. Like Sam Raimi, who guided Marvel's previous blockbuster franchise Spider-Man to its own record openings in 2001, 2004 and 2007, director Jon Favreau is kind of a schlub — a normal dude who came up through the ranks and pretty much is his audience. He's not Ang Lee, whose misunderstood Hulk is disavowed to the point that its own studio is remaking it this summer (with another non-schlub, French action auteur Louis Leterrier), or even Bryan Singer, whose X-Men franchise coasted on star power before burning itself out at the hands of patronizer extraordinaire Brett Ratner. Favreau imposes a fan's vision and an indie mandate (i.e. character development, budget-mindedness) that works primarily because it threatens no one — neither the studio that paid for it nor the viewers spreading word-of-mouth months in advance and lining up around the block on opening weekend.

2. The Downey Factor. Repeat everything above, but substitute Tobey Maguire and Eric Bana (the miscast Hulk whose 2008 replacement, the relatively inaccessible Edward Norton, will likely suffer a similar fate). Robert Downey Jr. is a smart, funny adult actor who appeals to men and women alike (especially women), while also an innocuous enough leading man who won't overshadow the brand among fanboys. He's also his generation's most powerful Hollywood comeback story; this guy was virtually uninsurable after his umpteenth drug bust six years ago cost him his role on Ally McBeal. His casting was about as brilliant as it gets.

3. The McDreamy Factor. Or: There was nothing else to see over the weekend. Sony says it's happy having done $15 million with Made of Honor, but it thought its Patrick Dempsey rom-com would pull in at least $6 or $7 million of what went to Iron Man — on the basis of counterprogramming alone. What it didn't count on was...

4. The Female Factor. Iron Man was more of a chick flick than most "experts" anticipated, which Variety noting today that women made up 38% of last weekend's audience. Again, Marvel can thank Downey, but it shouldn't forget leading lady Gwyneth Paltrow. Her presence likely accounts for at least $12 to $15 million of that opening windfall.

5. The Critic Factor. The film was arguably critic-proof, but no one can deny the taste- (and profit-) making influence of reviewers who pushed Iron Man to a 94% positive rating at Rotten Tomatoes. That is the stuff of franchise phenomena — Iron Man 2, here we come.

The good news: You can wait and watch Made of Honor on your iPod in about three months! The bad news: It'll cost you $14.99 to download it. (Or $9.99 three months after that.) And for digital media that costs exactly nothing to reproduce, package or distribute, we think that amounts to little more than information highway robbery. And just in time for the studios to stonewall SAG on new-media revenues!

Or maybe they're not quite connected — yet. Conceding it would get paid for new media when studios got paid, the WGA settled its strike in February by negotiating for roughly 2% of studios' online grosses each year through 2011. But in an earnings call yesterday, Time Warner CEO Jeff Bewkes cited a 60%-70% profit margin during a VOD trial for Warner Bros. films on cable — more than twice the return on Time Warner DVD rentals. It's anyone's guess how that shakes out in terms of purchases, but with DVD sales last quarter at $3.5 billion, and with a fairly clear break between online and traditional media consumers, even a tenth of that revenue online would be enough for SAG president/time-bomb Alan Rosenberg to reinforce the hard line as the first round of negotiations come to a close Friday.

Moreover, as an observant tipster pointed out to us this morning, the markup on these downloads is pretty obscene, maybe even illegal. After piracy concerns were allayed in the last year, pricing was the only remaining sticking point for Apple — which wanted to keep purchases at $10 — and studios, which compromised at $15. Albums on iTunes cost an average of 40% less than their CD counterparts; but with online retailers and box stores pressuring DVD prices below $20, why should they get away with a difference as little as 15% in some markets — especially with no extra features or deluxe packaging? The courts have even addressed this before, but it usually applies to manufacturers complaining about suppliers, not the other way around. Someone! Get the FTC on the line!

• Purchase New Movies on iTunes [Apple]

"In order to access Showtime's channels, Weinstein has been sending many of its films through a distribution agreement with MGM," notes Reuters. "But that agreement ends this year, and Weinstein could find itself striking a new pay deal directly with Showtime." For the Weinsteins, it beats the new-channel question mark facing MGM in its partnership with Paramount and Lionsgate. On the other hand, Showtime is going to nickle-and-dime Harvey to death on every single film, and many of the network's carriers will likely object to any "replacement" not affiliated with an actual studio.

Or, as today's story adds, we can have another three years of Earth-shattering Showtime original films. Which, well, no. We'd watch a million Nanny Diaries before sitting through one more Reefer Madness.

[Photo Credit: Getty Images]

• Pinched pipeline plagues Showtime [Reuters]

The marketplace reaction to the fourth feevee was predictable: Who needs it?

"On its merits," says Rob Stengel, cable consultant and a principal of the Boston-based Continental Consulting Group, "I don't think you'll be able to find any distributors jumping up and down with eagerness to get their hands on another pay TV network."

Cable ops and satellite distributors "are crapping all over the idea in public," says a Viacom spokesman, "but privately, the early discussions are promising."

Oh, really? OK, then! Seeing as we apparently take everything publicists say at face value around here, we also pick up on what they don't say: specifically, as Variety's John Dempsey also notes today, the joint 'Mount/Lionsgate/MGM press release from last weekend bore no mention of a single cable company who had agreed to broadcast the channel. But seeing as that's the biggest public crap they could have taken so far — well, that, and not having jumped when Viacom said so — we figure the next round of battles can only go better for the dinged-up Dauman. We wish him luck!

[Photo Credit: Getty Images]

• Showtme-Viacom Split Feeds Drama [Variety]

Paramount spent about $185 million to make the movie and will pay at least $150 million to market it worldwide. The studio will earn a distribution fee of 12.5% of the revenue it receives from the film's release in all media, including theaters, DVD and television.

"Crystal Skull" will have to generate around $400 million for Paramount for the studio to make its money back and earn its distribution fee. Only at that point will Lucas, Spielberg, Ford and smaller profit participants, including screenwriter David Koepp, begin collecting their portion.

Paramount will take 12.5 cents from every dollar thereafter, while Lucas and company will earn 87.5 cents.

In the event that "Crystal Skull" fails at the box office, this arrangement will leave the filmmakers and talent empty-handed. Paramount would lose part of its investment, but not as much as it would have under a conventional deal with top talent.

We take a moment to allow you to recover from any lightheadedness or shortness of breath you may have experienced upon reading the words "fails at the box office," as certainly nothing will prevent the second-most beloved film franchise of all time from ridding billions of Indy fans the world over of the Euros, pesos, and rubles weighing down their wallets since the announcement of Skull's global release date of May 22nd. Still, as perpetual Eeyore George Lucas explained, the inevitably disappointing movie "is not going to make much money for us in the end." Paramount should take heart, however, as anything short of 87.5% of 7 katrillion dollars barely registers as "much money" on the Lucasfilm ledger.

• Ford, Lucas, Spielberg on risky quest for treasure [LAT]

In the end, the studios just wanted more for their films' pay-cable rights than Showtime was willing to pay. This much was somewhat old news; Viacom and Paramount haven't quite seen eye-to-eye with CBS boss Les Moonves and Showtime chief Matt Blank for some time. The vertical integration implied by their output deals — Showtime had rights to Paramount releases through the end of 2007 — was less a function of convenience than an increasingly forced pairing, especially as Showtime's original programming (Weeds, Dexter, The Tudors) took off over the last few years. Showtime's output deals with MGM and Lionsgate — booked through the end of this year — were just as fragile in the Redstone and Viacom CEO Phillipe Dauman's volatile corporate culture.

Nikki Finke was first on the scene when news broke on Sunday:

Moonves wanted to drastically cut the price for Paramount pics, arguing that "the pay channel world isn't what it used to be" and the value of movies on pay TV has decreased while the importance of hot new scripted original series have increased. I'm told that, as the bargaining dragged on, the Paramount/Viacom camp, once optimistic that it would all work out, lost patience with Moonves' "hard line" and resented being lowballed. Now it looks like Les over-negotiated because Paramount, MGM and Lionsgate have found refuge thanks to Viacom. This new premium TV channel by Viacom, Paramount, MGM and Lionsgate is that old Hollywood maxim at work: Don't get mad. Get even.

Well, yeah. One observer told Finke that Moonves is "royally screwed" — for starters, there are no studios left on the market for output deals. A defiant Blank, however, is standing tall this morning in Variety:

"We're not willing to sell our network down the river for product that's not as valuable as it used to be," he said. "We wish them well. ...

"We've been having unbelievable success with our original programming," Blank said. "Can you name one movie Showtime has aired in the last three years? But people sure do know The Tudors and Californication and Dexter and Weeds."

Take that spin for what you will, but we're of a mind with David Poland: Apart from drunken Sunday-afternoon pissing contests, what's really in this for the 'Mount? Showtime keeps the studio's library for a while still, leaving MGM and Lionsgate's libraries (along with upcoming, inconsistent Paramount product ranging from Iron Man to The Love Guru) the primary source of programming. (DreamWorks films are aligned separately with HBO.) As such, reports The New York Times, original programming may be in the cards when the new channel launches in late 2009. But why pay hundreds of millions to enter that fray when HBO and Showtime have spent years establishing the institutional upper hand?

Sometimes there is no explanation for this kind of stuff besides entertaining Emperor Redstone — and us. We could watch Brad Grey cannibalize Les Moonves all day. Nevertheless, somebody out there knows something the rest of us don't; maybe an original program is jumping ship? Moonves lost a poker bet with MGM chief Harry Sloan over the weekend? Your guesses are as good as ours.

[Photo Credit: Getty Images]

• Studios team on VOD venture [Variety]

We could buy Indiana Jones training a rocket launcher on Nazis 27 years ago in Raiders of the Lost Ark, but there's something more self-parodic than self-referential going on in the above photograph. This could very well be Paramount's stab at viral marketing, encouraging fans to circulate the artwork in pursuit of the most ludicrous caption invoking the "good old days," relative star-power, women drivers, erectile dysfunction, the film's box-office prognosis... you get the idea. For our part, we're happy to play along, and we hope you will, too — it's the only thing really sustaining our interest at this point.

• 140 Minutes Plus [Hollywood Elsewhere]

There.com and vMTV members will be able to express themselves with seconds-long video clips of movie one liners — say, Danny Zucko's "Be cool, huh?" from Grease — with the service called VooZoo. The application from Los Angeles-based developer FanRocket was introduced on social-networking site Facebook last month and on mobile devices Tuesday.

The PG-13-or-tamer snippets will cost There.com and vMTV members about $1 and will play in a small window above avatars' heads inside the online realms. In addition to archive footage, Paramount hopes to use the application to virally market upcoming releases, such as Indiana Jones and the Kingdom of the Crystal Skull.

Of course, the "PG-13-or-tamer" criterion sucks most (if not all) of the joy from this little exercise, disqualifying most of our favorite R-rated moments from Paramount winners like Coming to America, Chinatown, Zodiac and the must-have viral zenith of a pubescent Corey Feldman whacking Jason upside the head with a machete in Friday the 13th: The Final Chapter. We presume an exception must be made for the catchphrase-rich There Will Be Blood, and worst-case scenario, we'll have plenty of snippets ahead from The Love Guru to symbolize those moments of virtual bitter disappointment with our old friends.

• Paramount to Open Virtual Movie Vault [AP]

Father Charles T. Durante, a Catholic priest well respected in northern Nevada for his various community outreach efforts, in a statement, said, "...it is important that we respect those parts of every faith tradition which are held especially sacred. I applaud Paramount Pictures for being open to the request of Hindu leaders to preview this film and listen to any concerns that may arise for them..."

Rabbi Jonathan B. Freirich, a well known Jewish leader in parts of California and Nevada, in a statement today, stressed, "While The Love Guru appears to be a funny take on New Age spirituality, it seems like it may portray many Hindu practices in a less than sensitive light...it would be appropriate for the producers of The Love Guru to make efforts to assure the religious communities of the United States that they in no way wish to make any general statements about Hinduism."

It's a little late for that, according to one of Zed's more incensed allies, who yesterday told Toronto's Eye Weekly: "Gurus don't exist to fix your love life. ... From what I could tell this movie will only help to spread ignorance." Meanwhile, America's outraged, pan-spiritual dwarf community is expected to speak out soon against the egregious mishandling of old Myers chum Verne Troyer, subject in the trailer alone to "shrimp" jokes, hockey injuries and stand-ins for an Oscar statuette. Insult, meet injury.

• Hindus get some non-Hindu support... [Yahoo! India]
• No love for Mike Myers? [Eye Weekly]

Delicious as they were, Redstone's takedowns of Cruise during the pair's 2006 bust-up never exceeded the realms of showmanship; the hard feelings that surfaced in the press aren't quite what you'd call insurmountable. Especially under these circumstances, with Paramount facing the loss of its disgruntled moguls (and their properties) at DreamWorks and Cruise (with producing partner Paula Wagner) wedged into an already over-budget, so-far-so-bad production and distribution deal with MGM — which owns about 65 percent of UA but is also hedging with reliable, low-maintenance new hires to create a totally separate production slate. None of this pleases Cruise and Wagner, who are reportedly disappointed enough in MGM's feeble infrastructure to buy MGM out with a percentage of future deals headed back to the studio. If they did it at Paramount, though, with Redstone capping budgets around $60 million, would it even be worth it?

We're just saying, of course. There's no accounting for ego and/or hard feelings, but really, there's not that much water under these guys' bridge. And we all know lunch at the Polo Lounge is never just "lunch." Is it?

• Mission Possible: Redstone, Cruise Re-Establish Ties [WSJ]
• All Forgiven? [NYP]

A key issue, these people said, turns on the extent to which Mr. Spielberg's personal contract, which expires in January 2010, grants him power over projects to which he has some creative attachment.

The DreamWorks side might assert that he, by virtue of his position with DreamWorks, is effectively attached to the entire development pool — more than 100 projects have been listed by the Studio System, an industry data base owned by The New York Times Company — not just the 30 projects or so with which he has been actively involved.

Given the reach of Mr. Spielberg's contract, attachment to all the projects could let him block Paramount from using them without his consent — enormous leverage in any negotiation over taking the projects elsewhere.

As is so frequently the case in high-powered Hollywood divorces, the silent victims here are the kids—those still-in-development projects conceived during the blissful post-honeymoon phase, who could well wind up irreversibly scarred by all the parental infighting. The best case scenario at this point is that little Transformers 2, Shrek Goes Fourth, and the rest become the beneficiaries of a joint custody ruling, spending week days with their three SKG daddies, then piling into the station wagon and getting plopped at the Bronson Gate for some quality time with "the person who nearly broke my back carrying you for nine months—and don't you ever forget it," Brad Grey.

• In Potential Studio Split, Who Keeps the Movies? [NY Times]

We can hear the legal saber-rattling from here, but we also know there's precedent — and it favors Wall Street.

In a nutshell, the two-phase Melrose fund underwrote up to 20% of net production costs on films like Mean Girls, War of the Worlds and even The Stepford Wives — titles with wide-ranging but ultimately profitable gross performances based on factors beyond box office (product placement, television licensing, toy deals and more). The Melrose group said that results for Melrose I "collapsed" after Dolgen and Lansing left, with even successful films failing to turn a profit for the investors.

Making matters worse, a source close to the situation tells Defamer that spending on P&A went up almost 50% under ex-Paramount COO Rob Friedman and nearly doubled under Grey; an advisor to the group describes Grey's takeover as "[o]ne of the most stunning exercises in spending (he's) ever seen in his thirty-five years."

A studio source said the results of Melrose II "make Melrose I look like investing in Google pre-IPO," while an investor said: "Since we had no say in what movies were being made, what [we] were backing was Dolgen's conservative risk management strategy which had proven successful in the past. Once he was gone, fiscal controls began to deteriorate and when Brad Grey took over they went out the window altogether."

With Melrose II still in force and Grey apparently tightening the reins of late, we hear the investors reportedly want Paramount to credit a "retroactive reduction in P&A spending" to its account — like, yesterday. Again, this isn't necessarily new: Sony agreed to something similar earlier this year for investors in its Gun Hill Road fund. But Melrose's financial terms aren't specific, and best of all, even Viacom CEO Phillippe Dauman reportedly has told the investors to stand down or face a counterclaim.

It's not the sexiest contretemps in the Official History of Hollywood Pissing Contests, but with Grey on the hook, it bears noting. What do you know about it?

[Photo Credit: Getty Images]

· Battlestar Galactica fans: sad face. The hit Sci Fi Channel series won't be getting a motion picture treatment. [THR]

Of course, with Raimi's horror project Drag Me to Hell also in the pipeline between now and then, the Paramount deal doesn't bode well for Raimi's involvement in the next three Spider-Man films rumored to be on Sony's production slate through 2015. That's not to say his deft touch with big-budget emo heroism is disappearing in the transition, according to Variety:

The intention is to generate several films Raimi would develop and direct, featuring Ryan at a younger, more formative point in his career than previously depicted. One invention the studio is considering is to set the film in the present, with the action triggered by a global threat.

• Raimi, Paramount Revive Jack Ryan [Variety]

And while Owen Wilson pulled out of the production due to, uh, the incident, his enabler Steve Coogan appears to be relishing the opportunity to play the director of a runaway production. And we haven't yet even touched about the (Jack) Black confusingly alluded to above-the-title. (We're now honestly beginning to question if Downey Jr. relinquished second billing just to get that visual joke on the promotional material.)

• www.tropicthunder.com

· Hollywood NepotismWatch: Smith Edition. Willow and Jaden Smith attached to star in Warners' adaptation of Kazu Kibuishi's Amulet, a graphic novel about siblings who move into a dead relative's house and find a magical object and secret porthole, etc etc. You know the drill. [Variety]
· NBC is reportedly close to a series pickup for an untitled drama starring Christian Slater, and pitched as The Bourne Identity meets Jekyll & Hyde. This really should have starred David Hasselhoff. They broke the Jekyll & Hyde mold with that guy. [THR]
· Carla Gugino joins The Rock in Disney's Escape to Witch Mountain reimagining! Is that good? Is it bad? We don't know! Just don't fuck this one up for us! (Granted we haven't seen the original in about 30 years, and we plan on keeping it that way. Some levitating-over-a-chain-link-fence moments are best preserved in your wide-eyed youth.) [THR]

The prosecutor asked Shandling if he knew Pellicano was on board working against him.

The comedian said yes — and claimed that 5 yrs earlier Brad Grey had told him that, "With Bert Fields, you get Anthony Pellicano." Shandling went on to explain that his friend, security expert Gavin De Becker, immediately recommended they do a "bug sweep of Shandlings' phones "because of 'Bert Fields' reputation' ".

Shandling alleged that "they [presumably Brad Grey and/or Bert Fields and/or Anthony Pellicano] began a spin campaign to destroy my reputation by planting stories in newspapers that amounted to character assassination. It was a spiritual test." Shandling turned to the jury and spoke about "The creep factor. It's a feeling that's hard to communicate when you read articles about yourself that aren't accurate. I put up with a lot of pain and soul-searching to get through it."

Sensing what this kind of stinging indictment might do to his reputation as the firm but fair-minded Emperor of the Paramount kingdom, Grey has already issued a response to Shandling's morning testimony:

"I am extremely saddened by Garry's recollection of events dating back more than a decade. His representation is very different than what I remember and what I know to be true. Garry and I had a long personal and professional relationship, which frankly ended when he hired David Boies, and sued me and Brillstein Grey for $100 million. His actions forced us to hire our own lawyer — Bert Fields — and our friendship was overtaken by a legal process that was directed by lawyers and which ended with an equitable settlement. Even though we haven't spoken since that time, he remains one of the most talented people I have known and I wish him only the best."

It's a sad example of the damage Hollywood success can reap on an interpersonal level: One day, you're chasing aspiring actress ass with your best friend and client as you plot his eventual conquest of the primetime TV landscape; the next, the two of you are locked in a bitter feud, and some tech-savvy surveillance whiz your lawyer only calls "The Ears" is monitoring his conversation with a Morton's hostess for anything that might poke holes in a nine-figure lawsuit.

• WHAT A MORNING! Garry Shandling Gives Brutal Testimony About Brad Grey And Bert Fields At Pellicano Wiretapping Trial [Deadline Hollywood Daily]

That's four days before "Indiana Jones and the Kingdom of the Crystal Skull" opens day-and-date worldwide May 22.

The cast, which includes Harrison Ford, Shia LaBeouf and Cate Blanchett, have already been notified to pack their black-tie outfits for the French Riviera's red carpet unspooling even though the fest has yet to confirm its official lineup. That won't happen until April.

If Paramount expects their release to incite the kind of mouth-foaming, Da Vinci Code-mania that sent millions of Frenchmen storming the Louvre in search of mysterious Sudoko puzzles printed on the back of priceless canvases, they'll have to up the ante. Perhaps their stars can board a Skull-branded Eurostar train at Waterloo station, an atrophied Ford thrilling thousands on the journey to Cannes as he grunts his way onto the roof of a moving diner car for a whip demonstration.

• Cannes premiere for 'Indiana Jones'? [Variety]

They used the unusual, malt-based metaphor as the centerpiece of