Spielberg's longtime producing and distribution partner, Universal Studios has broken-off 'several weeks' of talks on a distribution deal, after DreamWorks SKG, the privately held movie studio controlled by Steven Spielberg, 'demanded material changes to previously agreed upon terms'.

In October, Universal and the smaller studio stated a deal had been reached, with Universal distributing DreamWorks films in a new partnership with Reliance ADA Group of India, for which Universal would take an 8% fee for roughly six films per year, over the seven-year life of the contract, which was to begin this year.

DreamWorks asking for newer and richer terms led to the break-down in talks, as Universal already has a slateful of its own films to distribute in 2009.

Industry watchers expected Spielberg would close a new distribution deal with Universal after DreamWorks left Paramount Pictures last year, due to his long-time association with Universal, but citing a declining economy, sources say Universal and DreamWorks were unable to come to terms on an agreement.

The honeymoon between the two seems to be over, and while Disney's representative was unavailable for comment, DreamWorks declined to comment.