DreamWorks Animation's Profit Tumbles 67%

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DreamWorks Animation's Profit Tumbles 67%
By MERISSA MARR
March 10, 2006; Page B3

DreamWorks Animation SKG Inc.'s profit took a 67% tumble in the fourth quarter, as DVD sales of "Madagascar" failed to match a strong year-earlier quarter, when the "Shrek 2" DVD hit stores.

The Glendale, Calif., animation studio reported net income of $63.2 million, or 61 cents a share, compared with year-earlier net of $192 million, or $1.99 a share. Revenue fell 65% to $172.9 million.

DreamWorks' bottom line got a 12 cents-a-share lift from the balance of a tax benefit from two discontinued projects and a write-off for "Wallace & Gromit: The Curse of the Were-Rabbit," which hasn't performed as well as expected.

After hauling in just over $525 million at the box office world-wide, "Madagascar" sold 14.2 million DVD and video units to contribute 88% of fourth-quarter revenue. Still, DreamWorks said it remains "cautious" about the DVD market.

The next big event for DreamWorks is the May 19 theatrical release of "Over the Hedge," about the adventures of a group of woodland animals in suburbia. DreamWorks said that movie would be its prime driver for 2006, although it declined to give specific earnings projections for the year. The company said it didn't expect any "significant earnings" for the first half, given that it has had to write off "Wallace & Gromit" and will recognize revenue from "Over the Hedge" only after costs are recouped by its distributor.

The fourth-quarter results mark the end of a rocky first full year for DreamWorks as a public company. The studio was forced to revise earnings forecasts twice in 2005 after DVD sales of "Shrek 2" fell short of expectations. The SEC last year launched informal inquiries into DreamWorks and its rival, Pixar Animation Studios. Pixar said this week it had been informed the SEC had dropped its inquiry. DreamWorks said it was continuing to cooperate with the SEC.

DreamWorks has committed to two computer-animated movies a year; its second this year is its November release, "Flushed Away." Next year, the company will release the third "Shrek" movie and "Bee Movie," with a long list of stars, including Jerry Seinfeld. Because of the talent involved, the studio said, the contingent compensation for that movie will be more in line with the higher cost traditionally associated with a sequel.

Write to Merissa Marr at merissa.marr@wsj.com

 

[clarksfan95]

I don't find this too surprising. They are definitely still having growing pains even though they are approximately 10 years old. In a year when you have a movie like Shrek 2 come out in theatres and it does bazillions of dollars, it's hard to follow up that following year. Shrek could be Dreamworks Mickey Mouse.

I think one of the traps they are falling into (Disney also does this) is trying to hire the biggest name stars they can to fill these voice roles. The bigger the name, the bigger the paycheck. SharkTale is a great example of this..leading up to the movie, I knew hardly anything about it, but I could tell who was going to be in it. A lot of animation companies, Dreamworks especially seems to depend on these high priced actors to bring people into the theatre. Perhaps they didn't realize that Mike Myers really wasn't "that big" when they cast him for the Shrek movie...and to be honest he's still not "that big" of a star. (Granted he has Waynes World..and that's always a plus for me)

I feel bad that the Best Animated Feature was considered a write-off. That was the absolute best movie I saw all year. It was witty, chraming, touching (I cried near the end) and so funny. I knew that it was a movie that was going to have a tough time in the U.S., because Wallace and Gromit are virtual unknowns over here - sure they released a small DVD that included all of the W&G cartoons on it right before the movie came out, but it came out with absolutely no hoopla. (Kinda reminds me of Warner Bros. animation:lol: )

Next years report will be a lot stronger due to Shrek 3 coming out, but I think they really need to try and get something strong...not Madagascar 2 or SharkTale 2....Madagascar 2 will probably do better than the first tho' since they already have established characters. I can't even remember what SharkTale was about...Will Smith was in it tho'.

As for the Shrek 2 DVD overestimation, I was working at Toys R Us at the time and when those DVD's came in, I was like "Wow, there are way too many"...the manager was like "We're going to sell these so fast" and I just raised an eye brow at her..she didn't understand. It's odd that a movie can do so well, but yet have mediocre DVD sales.

Oh well...just thought I'd throw my input in here and maybe someday we can start a thread about the marketing blunders of Warner Bros Animation. (IE. Iron Giant and Cat's Don't Dance (never heard of this last one.....look into it, watch it and love it....it's an amazing cartoon with wonderful animation and characters)