Paramount Pictures confirmed Wednesday that the studio will be launching an in-house animation division. According to the Associated Press, the new division (called Paramount Animation) "will make one animated film per year with a fairly large budget by Hollywood standards--up to $100 million each," starting in 2014. Rather than hiring animators, reports the Los Angeles Times, "Paramount will seek outside companies to produce its animated films" and will also work with Viacom corporate sibling on character creation and branding.
The move leaves Warner Bros. the only major studio without an animation department. It also likely spells the end of Paramount's deal to distribute the offerings of DreamWorks Animation. At the Los Angeles Times, Ben Fritz describes the relationship between the two companies as "strained" and reports DreamWorks has been unwilling to give Paramount a bigger share of the profits for franchises like Kung Fu Panda and Shrek. "One person familiar with the thinking of top executives at Paramount" tells Fritz that "the studio offered DWA Chief Executive Jeffrey Katzenberg a one-year extension to his company's deal, which expires in 2012, for the same fee DreamWorks now pays Paramount: 8% of film revenues." Paramount wants a higher fee, which is a problem, because Katzenberg "has repeatedly told investors that he intends to seek a reduction in the fee."
Paramount has been distributing animated films for DreamWorks since 2006.