A few weeks ago, when Brad Grey visited Steven Spielberg in Connecticut where Indiana Jones 4 was shooting on location, the DreamWorks partner put the Paramount boss’s mind at ease. “Steven said to Brad that he intended to be in business with him a long time,” a source tells me. As a result, Grey was flabbergasted when he saw the headline “Paramount & DreamWorks: Splitsville?” from the new issue of Business Week which was reporting how it’s “entirely possible” that Spielberg could want to leave Paramount as soon as late next year. The timing couldn’t have been worse for Grey. dpar.jpgThanks to yet another DreamWorks pic Transformers performing spectacularly at the summer box office, not only had Paramount climbed to No. 1 in studio market share this year but boasted a new movie franchise to exploit. Grey had been celebrating. Now, because of the article, Brad was “bummed out”, a source close to him told me. Also Grey knew that every other Hollywood mogul like him attending Jack Valenti’s memorial service last Thursday had heard about the bombshell. So the Paramount chief needed to know if this was real or not. He spoke to Spielberg right away. This time, the director was on location in Hawaii. “And Steven continued to tell Brad he is ‘very happy’,” an insider tells me.

I, too, was shocked by the article. After all, I’d broken the first story about Brad Grey’s rocky relationship with DreamWorks (Brad’s Boorish Golden Globes), and also Paramount’s reliance on DreamWork’s hugely successful pics (Deal Looks Better With 20/20 Hindsight), and then Grey’s behavior modification towards DreamWorks (Brad The Transformer Stops Bossing D’Works). I also chronicled the entire saga for LA Weekly here, opining that relations were somewhat better between Paramount and Dreamworks. No one came to me to correct even a word. Most recently, I reported Grey’ charm offensive toward Spielberg after Transformers opened giganicc. (“Understandably, Brad Grey’s head right now is so far up Steven Spielberg’s ass that the Paramount chief may never see daylight again.”).

transformers_bigfinalposter2.jpgThe article’s author, BW‘s Los Angeles bureau chief Ron Grover, has been on vacation and not replied to my calls and emails. But I know him to be a good and accurate journalist. (It’s a small thing, but I’m told Grey hand delivered that Paramount goodwill gesture in the form of a $1 million check to Spielberg for his Shoah Foundation Institute in early July on the set of Indy 4 in Connecticut, not at Steven’s East Hampton compound as BW had reported.) Still, a Paramount insider insists to me, “All indications point to Ron Grover’s story being wrong. We’ve got no real indications that Steven wants to leave. Brad’s tried really hard here. He hoped he was making progress. But that’s a question better put to DreamWorks. This is not for us to answer.”

So I asked DreamWorks about the article. “I think it’s a lot of nothing,” one source there told me. True, Grover never actually says Spielberg is going to leave at the end of the three years in 2008, just that he could contractually and take the DreamWorks name with him (something not many in Hollywood knew). “Grover had the deal info. Everything in the piece is absolutely true. But the timing is odd.”

dreamworkswallstreet.jpgYes and no. Right now, hot streaking DreamWorks has the most leverage it probably ever will to throw its weight around Paramount. And no one is smarter at exploiting this kind of success than David Geffen who negotiated the $1.6 billion takeover deal in the first place and who wants payback from Paramount for all that bad treatment of DreamWorks early on. I understand Brad just had a very cordial dinner with David at Mr. Chow’s. But that’s meaningless. For instance, Grey let DreamWorks have its way in making executive decisions, and they kicked out longtime Paramount personnel for their guys. But Geffen, who contractually can walk as soon as this fall, has been saying that if he leaves, everybody else leaves too. He recently strongarmed Paramount for a richer greenlighting deal for Spielberg and Stacy Snider that also gives DreamWorks more power and autonomy. But Geffen still wants more. “David asks for things every minute. I can only imagine what he must want now,” a source close to Geffen laughed. “I’m sure this article is David stirring things up. I don’t think Steven even thinks about it. But David is his guy.” There’s also a lot of loyalty there; I’m told David feels responsible for taking Steven to Paramount in the first place (knowing Spielberg’s emotionally attachment to Universal which he sees as his home and can’t bring himself to leave), and then turning the superstar director / producer from a very rich owner to an even richer employee. So Geffen has assured Spielberg he’ll make everything right again which in David’s eyes means DreamWorks running Paramount instead of vice versa. (Brad who?) And Geffen, I’m told, intensely dislikes Sumner Redstone and Phillippe Dauman. They’d better watch out, since it’s well-known what a great friend and terrible enemy David can be.

When it comes to Hollywood, the expression “where there’s smoke, there’s fire” often turns out to be true or a self-fulfilling prophesy. On the other hand, if it weren’t for juicy behind-the-scenes turmoil like this, I’d have nothing to post.