After intense speculation that it was about to clinch a deal with AOL Time Warner's Warner Bros Pictures, DreamWorks SKG has extended for five years its distribution agreement with Universal Studios, now owned by Vivendi Universal.

The agreement first struck in June 1995 gives Universal international theatrical distribution rights to live action and animated films from DreamWorks as well as worldwide home video, music distribution rights and the rights to use characters and concepts created by DreamWorks in Universal's theme parks. This original agreement expires at the end of 2001, but has now been extended to 2006.

In a statement released yesterday (Monday), Universal Studios president and chief operating officer Ron Meyer pointed to the success of Gladiator and Meet The Parents which were co-financed by the two studios last year and between them grossed over $600m at the global box office. Gladiator was originated by DreamWorks while Meet The Parents was originally a Universal project.

DreamWorks partner Jeffrey Katzenberg referred to the discussions he had been having with other studios. "After months of discussions with various companies, Vivendi Universal demonstrated their belief in DreamWorks and their commitment to being the best partner we could ask for," he said in the statement.

"This alliance is particularly gratifying for me because Universal has been an important part of my life for 32 years," said DreamWorks partner Steven Spielberg. "I look forward to five more years of a collaborative and rewarding relationship."

And Pierre Lescure, co-COO of Vivendi Universal and chairman and CEO of Canal Plus said: "Our agreement with DreamWorks is very important to Vivendi Universal's TV and film division, and will continue to have great impact on a global scale."

DreamWorks, which lacks the library resources of the major studios, has nevertheless produced some of the biggest hits of the last decade including Steven Spielberg's Saving Private Ryan and Cast Away. However, in most instances, the company co-finances its pictures with other studios as it did with Paramount on Private Ryan. In the case of Gladiator, Meet The Parents and Small Soldiers, the co-financing partner was Universal; more recently Sony Pictures Entertainment struck a deal with DreamWorks for Almost Famous, An Everlasting Piece and Evolution.In addition, 20th Century Fox became a partner on What Lies Beneath, Cast Away, Spielberg's upcoming Minority Report starring Tom Cruise and a future directing vehicle for the DreamWorks co-founder. (In the case of Spielberg's most immediate release, A.I., which is slated to open later this year after a potential closing night slot at the Venice Film Festival, Warner Bros has worldwide distribution rights since it was originally a Stanley Kubrick project.)

Other films for which DreamWorks only retains company domestic rights include The Legend Of Bagger Vance, The Contender plus a trio of Woody Allen films.