In an end of the week shocker, the currently reformed DreamWorks and Universal Pictures have ended their long expected partnership before it even got off the ground.

Today, Universal Pictures released the following statement:

Universal Pictures has ended discussions with DreamWorks for a distribution agreement.  Over the past several weeks DreamWorks has demanded material changes to previously agreed upon terms.  It is clear that DreamWorks' needs and Universal’s business interests are no longer in alignment.  We wish them luck in their pursuit of funding and distribution of their future endeavors.‬‪‬‪

It appears the worldwide financial crisis has affected Steven Spielberg and Stacey Snider's new venture more dramatically than first believed.  As first reported by The New York Times, DreamWorks began advanced talks to distribute its feature films through the Walt Disney Company instead of Universal, the studio Spielberg has a long history with going back to one of his earliest films, "Duel."  Because of the economic slowdown, DreamWorks was unable to secure the $500 million in funding Reliance Big Entertainment committed to re-build the studio after their dramatic separation from Paramount Pictures this past October.  If Disney comes on board, it is expected to infuse some cash into the new venture which is rumored to only have secured $150 million of financing.

In hindsight, Walt Disney Studios actually makes more sense as a home for the new DreamWorks entity as they have room for the up to 4-6 new releases Spielberg an Sinder plan to produce a year.  Additionally, the duo could fill a programming niche the mouse house has been unable to find success in: non-family oriented films of any kind.  

Disney's Miramax label has had commercial and critical success with Oscar winners such as "No Country For Old Men" and, more recently, "Doubt," but the company has only one provider of blockbusters in the vein of "Transformers," and its clear for all his talents Jerry Bruckheimer can't do it alone.

Over the past year, Disney has attempted more "adult" releases through its Touchstone label, but has seen disappointing results with films such as "Miracle at St. Anna" and "Swing Vote." While those two films were mostly distribution deals with little Disney investment, their failure is a clear sign the studio no longer has a pulse for the marketplace outside of its continuing successes in the family arena which include the Pixar films, "Bedtime Stories," "High School Musical 3: Senior Year" and "Beverly Hills Chihuahua."

Universal, on the other hand, has a crowded slate over the next two years and recently forged a deal to sell their Rogue Pictures brand to the investment and production entity Relativity Media which includes distributing at least four of their movies a year. In hindsight, with the economic difficulties affecting the non-entertainment divisions of parent company General Electric, the studio may have had second thoughts about investing in the additional resources needed to make the scenario work including new marketing and distribution hires.

DreamWorks SKG was originally founded by Steven Spielberg, David Geffen and Jeffrey Katzenberg in 1994 in an attempt to form a new Hollywood studio. The venture found its biggest successes in the animation genre and spun those operations into the publicly traded DreamWorks Animations in 2004.  In 2006, the remaining DreamWorks assets were sold to a group of private investors and Paramount Pictures.  That deal, which constituted private arrangements with both Spielberg, Geffen  and new DreamWorks co-chairperson Snider, provided a rebounding Paramount some big hits including "Transformers," "Dreamgirls," "Norbit," "Disturbia," "Eagle Eye" and "Tropic Thunder."  Unfortunately, after less than three years and numerous public squabbles played out in the press, Paramount decided to let the DreamWorks triumverate go.  With Geffen "retiring" from the entertainment business, Spielberg made a deal with Universal, where his original Amblin production company was based, but it appears fate has once again interfered with the famed director having permanent ties with the Universal City studio.

The biggest question remaining is whether DreamWorks will still be waiting for additional funding to begin operations or whether Disney is investing the remaining cash necessary to get Spielberg and Snider off the ground.

Look for more updates as warranted on HitFix.