DreamWorks Animation has ruled out working with Paramount Pictures after next year.

The independent studio behind the "Shrek" and "Kung Fu Panda" movies officially informed Paramount Pictures that it was rejecting an offer to continue their distribution agreement on the same financial terms for one additional year, confirmed a person familiar with the matter who was not authorized to speak publicly.

As part of an announcement last month that it would start producing one animated movie of its own annually in 2014, Paramount told DreamWorks that it would extend a five-year distribution relationship in 2013 only for better financial terms. Their current agreement ends in 2012.

Under their existing deal, Paramount receives 8% of each movie's revenue for its distribution services. DreamWorks Chief Executive Jeffrey Katzenberg has made it clear that he is looking pay less in the future. COMPANY TOWN