Will the success of Rango mean trouble for DreamWorks?

Most estimates have RANGO opening this weekend with the biggest numbers of the year so far – around $50 million for the first three days. That’s great news for Paramount and Nickelodeon who teamed up for the ILM-animated film from director Gore Verbinski. It’s not such good news for DreamWorks who has a long-standing distribution deal with Paramount that expires in 2012. If Paramount can create and release successful animated movies on their own, what do they need DreamWorks for?

As part of their renegotiation, DreamWorks head Jeffrey Katzenberg was looking to reduce the per-picture distribution fee they pay Paramount, which currently stands at 8%. Paramount was unwilling to take a reduced fee and the success of RANGO would give them the leverage to turn down any deal that would bring them less than their current deal. Previously DreamWorks held a good deal of the cards because Paramount was the only major studio who wasn’t releasing their own in-house animated films.

If RANGO opens at more than $50 million, it could give them the power to wish DreamWorks the best of luck elsewhere. The last film that DreamWorks released was MEGAMIND, which opened to only $46 million. Paramount has been quietly working on their own private animated slate, which will include a new SPONGEBOB SQUAREPANTS movie, Steven Spielberg’s THE ADVENTURES OF TINTIN and a RANGO sequel.

But worry not – surely DreamWorks Animation isn’t going anywhere. It’s highly likely that Paramount and DreamWorks will reup their deal but it will likely mean that DreamWorks will have to consider cutting the budgets on their highly expensive films.