[UPDATE: Geoff Johns says that a Sandman TV series is being actively developed.]
Now there's word from Kripke himself that development of the project has stalled for the time being - but he remains hopeful about being able to tell the tale of Morpheus King of Dreams and his immortal siblings on the small screen in the future.
While attending the Supernatural panel at the 2011 PaleyFest, Kripke informed THR that:
"Unfortunately, for a lot of varying reasons, 'Sandman' is not in the works, at least for this season... [It] just didn't happen this season through nobody's fault, and hopefully we can do it again in the future."
This isn't the first time an attempt to adapt Gaiman's phantasmagoric creation for the television medium hasn't panned out. DC previously came close to striking a deal with HBO to produce a Sandman TV series (appropriate, given the adult nature of the original comics), but that plan ultimately failed as well.
Part of the DC Vertigo imprint, The Sandman ran for 75 issues from 1989 to 1996 and revolves around the anthropomorphic representation of dreaming - a pale-faced, black-haired entity who goes by the name of Morpheus. The Dream King is mistaken for his "sister", Death, by a group of humans is search of immortality, and is held captive for over seventy years, unable to escape his magical prison.
Once Morpheus is at last free of his bonds, he must restore his kingdom to its former glory, reclaim his powers, and adjust to the changes that have occurred in the world (and himself) during his absence.
The Sandman is a complex narrative that references and is influenced by an eclectic mixture of ancient mythology, religious iconography, classic literature, supernatural horror, and comic book lore - all filtered through Gaiman's own unique approach to storytelling (I'm a fan, can you tell? ;-)). Kripke has admitted to also being an ardent fan of the author's work, and even describes Supernatural as being essentially "'Sandman' meets [Gaiman's] 'American Gods'."
This surely won't mark the final attempt to transform Sandman into a television series, given the enduring popularity of the source material and how potentially lucrative the show could be. Gaiman has worked in the film medium before, and will continue to do so with upcoming projects like Journey to the West - so it's possible he could become more intimately involved the next time an attempt is made at adapting his most popular comic book for television.
Correction to world: The Sandman is AWAKE! :) Psyched to be working with [Neil Gaiman] on developing one of the greatest series ever!
Look to hear more about Johns' involvement with a TV adaptation of The Sandman in the near future.