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Just last week DreamWorks SKG announced it wouldn't be building the first new movie studio in Los Angeles since the 1930s.

Apparently, principals Steven Spielberg, David Geffen and Jeffrey Katzenberg decided spending $300 million on the ambitious--and environmentally controversial--seaside production facility wasn't the best way to go.

And not that Spieberg, Geffen and Katzenberg are hurting for change to tip the valet or anything, but they don't have the kind of personal fortunes that can prop up such a massive endeavor as a movie studio in the long term.

So what's DreamWorks' next dream plan?

According to the Hollywood Reporter, the financing-hungry studio is set to recommence merger talks with Seagram chief Edgar Bronfman Jr. that started a couple a months ago--talks that reportedly went pretty well.

Seagram's Universal Studios already rents a big portion of its backlot to DreamWorks; it also has deals in place to let DreamWorks use its international distribution network.

Under a new deal, DreamWorks would gain a long-term Universal backlot home--with room for expansion--as well as some much-needed financing. Seagram--the beverage-selling giant that was struggling mightily in the film biz until the recent box office successes of The Mummy and Notting Hill--would get some actual movie-making know-how.

According to one Reporter source, the two sides already got pretty close to a deal in the earlier meetings, but couldn't agree on some crucial management control issues.

"They got to the alter, but it broke down over control," the source said.

The trade says DreamWorks has also had some meetings with MGM majority owner Kirk Kerkorian, but those apparently didn't go very well.

Another possible alternative: a merger with cable systems owner Vulcan Ventures, which is backed by the cavernously deep pockets of Micorsoft cofounder Paul Allen.