By Lauren A.E. Schuker 
   Of THE WALL STREET JOURNAL

The principals of DreamWorks SKG and General Electric Co.'s (GE) Universal Pictures have ended talks for a planned distribution agreement, and Steven Spielberg's new film venture is now in discussions with Walt Disney Co. (DIS) to distribute the roughly six films a year it plans to produce, according to people familiar with the matter.

A deal with Disney could come as early as Friday, according to the people familiar with the matter.

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)

The abrupt change in plans comes amid a global credit crunch that has hit Hollywood, pressuring studios to cut back on slates, talent deals and other expenses. Last year, DreamWorks' principals cut a deal with Mumbai-based Reliance ADA Group to fund a $1.2 billion film venture. That agreement gave Spielberg and his business partners the financial independence they needed to pull out an alliance they had with Viacom Inc.'s (VIA) Paramount Pictures. In October, DreamWorks SKG reached an agreement with Universal to distribute six films a year. Turmoil in the credit markets, however, slowed DreamWorks's ability to raise the debt financing to match the $500 million in equity that the Reliance pledged to the new venture.

That struggle caused DreamWorks to alter its planned agreement with Universal, asking for more money, says a person familiar with the matter. In a statement Friday, Universal said that it ended talks because DreamWorks "demanded material changes to previously agreed upon terms," adding, "it is clear that DreamWorks' needs and Universal's business interests are no longer in alignment."

A person familiar with the matter says DreamWorks is looking for at least $200 million in additional financing from its distribution partner. The studio may find that partner in Disney, which was widely said to be a possible home for DreamWorks in October. But Spielberg, who began his career at Universal, wanted to stay at the lot where he still keeps his offices and chose Universal over Disney as a distributor.

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