Even AOL Has Dreams, Studio Talks Show

AOL Time Warner (AOL Quote) is dreaming a little dream of DreamWorks. And, contrary to Wall Street rumblings provoked by tough economic times, AOL says it isn't just scraping by.

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Speaking at the Salomon Smith Barney/Broadcasting and Cable Magazine Big Picture Conference on Tuesday, AOL Time Warner CEO Jerry Levin acknowledged that AOL Time Warner could be the new home of the boutique Hollywood studio. "We are talking," he said.

Levin's statement follows reports earlier this year that DreamWorks, now closely allied with Vivendi Universal (V Quote), is in the process of negotiating a distribution deal with AOL Time Warner, which would also take an investment in the company founded by Jeffrey Katzenberg, Steven Spielberg and David Geffen.

If AOL were to complete the deal, it would stand in contrast to the usual news flow coming out of the company since the first of the year, primarily focused on making staff cuts and divesting assets such as World Championship Wrestling. Levin's comment comes one day after AOL Time Warner said it was an investor in MusicNet, an online music service, along with EMI Group, Bertelsmann and RealNetworks (RNWK Quote). ...