When the pact was announced 18 months ago, I noted that, if a sucker is born every minute, all eventually land in Hollywood. And that, after exhausting the German dentist money, then the American tycoon scion money, warnerbroslogo-200.jpgthen the Greenwich hedge fund money, Tinseltown was now exploiting the Abu Dhabi real estate money. A lot was made of the Warner Bros announcement of a “long-term, multi-faceted strategic alliance” calling for a theme park, hotel, multiplex cinemas and joint fund to finance films, develop video games, and build out the infrastructure for Abu Dhabi’s new media. I was told it was a multibillion dollar deal, with the film and video game funds alone worth $500 million each, made with Abu Dhabi’s leading real estate developer ALDAR and the newly established Abu Dhabi Media Company. But that was then, and this is now.

BusinessWeek‘s excellent LA Bureau chief Ron Grover is reporting that the Warner Bros-Abu Dhabi Media overall deal is being renegotiated, and the $500 million agreement to jointly fund movie projects has stalled. “Sources in Hollywood and the financial industry say that Abu Dhabi Media and the Time Warner-owned studio are in talks to restructure their agreement but are not close to a resolution. The only movie Abu Dhabi has invested in under the deal is Shorts, a family film staring Jon Cryer and William H. Macy that is scheduled for release this summer. That movie was put into production shortly after the financing deal was announced. According to sources, the two sides haven’t discussed new film projects in months. Although unlikely at this point, Abu Dhabi could walk away from the film portion of the deal.”

“In light of the current economic climate, we are working with our partners in Abu Dhabi to ensure each company’s business objectives are mutually aligned,” Warner Bros said in a statement to BusinessWeek.

Grover continues: “Under the deal, announced on Sept. 26, 2007, Adu Dhabi and Warner agreed to split 50-50 the financing of films, with Time Warner retaining its rights to a generous distribution fee. The films receiving funds were to be “mutually agreed upon,” but sources say Warner had placed off limits its successful Harry Potter franchise. There are differing accounts as to what went wrong with the film deal. One source with knowledge of the ongoing talks says that because oil prices have fallen sharply in the last few months, Abu Dhabi is slashing capital-intensive projects and considers film production “low on the totem poll.” Another source, however, says Adu Dhabi was concerned that it wasn’t getting access to the best Warner Bros projects, which were being offered first to some of the studio’s long-standing financial partners, private equity firm Legendary Pictures and Australian film production company Village Roadshow.

“Some non-movie projects have moved forward. Abu Dhabi, for instance, has invested in four video games, including one based on this year’s film The Watchmen. The two sides are building a pair of multiplex theaters they will jointly operate when opened in 2011. Two other movie complexes are currently being designed. But a hotel and theme park—which Warner Bros. plans to license to the Abu Dhabi-owned ALDAR real estate development firm—is being redesigned and won’t break ground this year as planned.”