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DreamWorks Q3 Profit Down; Company Talks Distribution Plans

25 Oct, 2011 By: Chris Tribbey

Kung Fu Panda 2

DreamWorks Animation reported third-quarter revenue of $160.8 million and a profit of $19.7 million Oct. 25, down year-over-year from revenue of $188.9 million and a profit of $39.8 million.

The studio pointed to the timing of theatrical releases as the cause of the declines.

“[Our] financial results tend to fluctuate due to, among other factors, the timing of our feature film releases and the number of our films in any given year,” said Lew Coleman, chief financial officer and president of DreamWorks Animation. “This is the case in the third quarter of 2011, in part because our financial results reflect the timing of the international theatrical release of Kung Fu Panda 2 this year compared to Shrek Forever After in 2010.”

The results come as the animation studio mulls its distribution future, as it faces an expiring distribution contract with Paramount at the end of 2012. Paramount has launched its own animation unit, making it unlikely to distribute DreamWorks past 2012. During a conference call with investors, DreamWorks Animation CEO Jeffrey Katzenberg said the studio is mulling all its options, including self-distribution.

“There are a lot of complex and challenging issues to self-distribution,” Katzenberg said, noting that the main challenges come with home entertainment and marketing, not theatrical.

Katzenberg noted that in the five years since Paramount has distributed DreamWorks, his studio’s films have generated approximately $10 billion worldwide, nearly half of that from home entertainment, including broadcast licensing. During that time DreamWorks Animation has only spent $700 million in distribution fees, he estimated.

To help the studio decide what it wants to do with distribution, DreamWorks has hired Chuck Viane, former president of global distribution for Walt Disney Studios, to consult.

“I’ve known Jeffrey Katzenberg for 26 years and he was a close colleague of mine during our time together at Disney,” Viane said. “Under his leadership, I believe that DreamWorks Animation has truly become a studio for the 21st century and I look forward to helping shape their future distribution strategy.”

Katzenberg said the studio would have to set its distribution plans by summer 2012, if it wants to be prepared for its spring 2013 release of The Croods.

For the quarter, Megamind contributed $25.8 million in revenue, most due to pay-TV revenue, with an estimated 4.6 million home entertainment units sold. Shrek Forever After and How to Train Your Dragon contributed $15.0 million and $9.2 million of revenue in the quarter, respectively, driven primarily by international pay television and worldwide home entertainment. Each film has reached an estimated 9.0 million home entertainment units sold worldwide through the end of the third quarter, including estimated future returns.

For the fourth quarter, DreamWorks is looking to the Dec. 13 home video releases of Kung Fu Panda 2 to carry its results, Katzenberg said.

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