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Paramount buys rival Dreamworks

Spielberg's more recent films have been released on DreamWorks

Hollywood giant Paramount Pictures has bought one of its best-known rival studios, Dreamworks SKG.

Viacom, which owns Paramount, has agreed to pay $1.6bn (£914m; 1.36bn euros) - more than $1bn in cash, plus taking over Dreamworks' debts.

It gives the company the talents of one of the most famous filmmakers in the world, ET director Steven Spielberg.

And it appears to show that even a top name like Spielberg cannot create a new independent film studio these days.

Dreamworks was established 11 years ago to combine three talents in the world of film, animation and music - Spielberg, David Geffen and Jeffrey Katzenberg.

Spielberg is known around the world for directing huge Hollywood hits like Jaws and Schindler's List.

Geffen had been a top record producer and Katzenberg a leading light at Disney.

NBC outbid

By buying Dreamworks, Paramount has now acquired an impressive library of films, which includes Gladiator, American Beauty, and Saving Private Ryan.

It reportedly plans to sell off the library, expecting it to fetch $850m to $1bn.

The deal does not include Dreamworks' animation studios - the creators of hits such as Shrek - but it does include the right to distribute already-made animated Dreamworks films.

Paramount will also take over a television division with long-running popular shows like Spin City.

NBC Universal, a unit of GE, had offered $900m but was outbid. Last Friday, it was given an extra hour to improve on its offer but walked away.

BBC North America business correspondent Guto Harri says Viacom hopes the deal will enable it to establish Paramount as an industry leader.

He adds that for Dreamworks, the deal is the final proof that despite the talents involved, the company has failed to become the ambitious media conglomerate that it had once hoped to be.

Recent Dreamworks films include Wallace & Gromit: The Curse of the Were-Rabbit and War of the Worlds - coincidentally a joint production with Paramount.

Spielberg and Geffen will reportedly stay with the company.