The Sandman is owned by DC Comics, and Warner Brothers is said to be in negotiations to acquire the television rights. It is not the first time Sandman has been in development with previously mooted versions including a Roger Avery movie in the mid-90s and more recently an HBO series.
On 30 November 2010, an article in The Hollywood Reporter revealed that Eric Kripke was rumored to be the writer-producer associated with a project by Warner Brothers to adapt Neil Gaiman’s Sandman graphic comics for television. At Comic Con 2010, Kripke had teased about the projects he was working on since he had stepped down as showrunner for Supernatural. He mentioned having a “big” TV project and a movie in the works. The influence of Gaiman’s work is obvious in Supernatural, and at Comic Con 2007, Kripke acknowledged this: “I was hoping I would meet [Neil Gaiman] because he’s a huge influence on Supernatural, between American Gods and Sandman.”
At Paleyfest on 14 March 2011, Kripke reported that the TV series based on Sandman -- "my all-time favorite comic" -- would not appear this season although he said he was hopeful the project would still go ahead. Watch video of Eric talking about the project.
Through the project, Kripke did get to speak with the Neil Gaiman:
"I’m such a fan of Neil, and he’s every bit as smart as promised and every bit as cool and down-to-earth, and I just loved my conversations with him... I've ripped off Neil front, right and center. I mean Supernatural is basically "Sandman meets American Gods"
Kripke reported that he told Neil: "Just so you know, I rip you off all the time for the show," to which Neil responded "I really appreciate that because you and Kevin Smith have both been very public about ripping me off, and I don’t mind if people rip me off, I just want them to be public and admit it."
On 16 March 2011 DC Comics' Chief Creative Officer Geoff Johns confirmed that the project had not been abandoned "The Sandman is awake! Psyched to be working with Neil on developing one of the greatest series ever!" A few day later on 22 March Gaiman comments on his blog: "Nobody has actually optioned Sandman as a TV series from DC Comics, who own it. Eric Kripke (of Supernatural fame) pitched his approach to DC and to me last year, and we liked it and we liked him, but it didn't feel quite right at that point, so we passed."
He went on to say "if we find the perfect person with the perfect way of treating the material, it'll happen. And otherwise it won't."
See the Neil Gaiman page for references to his work in Supernatural.