No ‘Guardians’ at DreamWorks Animation, 350 Employees Let Go26 Feb, 2013 By: Erik Gruenwedel, Chris Tribbey
Write-down of “Rise of the Guardians” and other movies undermine fiscal results
DreamWorks Animation Feb. 26 reported a fourth-quarter (ended Dec. 31) loss of $82.7 million compared to income of $24.2 million during the previous-year period. The studio said it would let go 350 full-time production staffers, about 15% of its 2,200 employees.
The animation studio cited $165 million in one-time charges, including the $87 million write-down of film costs for Rise of the Guardians, another $54 million charge related to its decision to return Me & My Shadow back to development, a write-off of other development projects totaling $20 million, and a $4.6 million charge related to restructuring activities.
Rise of the Guardians, which has grossed $302 million at the global box office, contributed $6.1 million of revenue in the quarter. The film will be released in retail channels March 12.
Revenue in the quarter increased nearly 21% to $265 million from $219 million last year. For the year, revenue increased 6% to $$750 million from $706 million in 2011. DreamWorks Animation posted a net loss of $36 million in 2012 compared with income of nearly $87 million in 2011.
"Guardians was the first movie of ours, after 17 in a row, that didn’t work," CEO Jeffrey Katzenberg said in a call with analysts. "When that happens, it really makes you rethink everything. We've taken this as an opportunity to significantly right-size the whole enterprise here, and to put it on what we believe is a much more profitable, better margin, long-term successful path."
The CEO attributed some of the labor cuts due to new technology developed in partnership with Intel that allows DreamWorks Animation to make movies more cheaply.
"We've done a reset, top to bottom," Katzenberg said.
Meanwhile, home entertainment underscored lone bright spots for DWA in the quarter.
Madagascar 3: Europe's Most Wanted contributed revenue of $95.2 million to the quarter, primarily from home entertainment and international box office. The film reached an estimated 6 million net home entertainment units sold worldwide through the end of the fourth quarter.
Puss In Boots generated $10.5 million of revenue to the quarter, primarily from pay television and home entertainment. The film reached an estimated 6.2 million home entertainment units sold worldwide through the end of the fourth quarter.
Kung Fu Panda 2 accounted for $4.8 million of revenue in the quarter, primarily from home entertainment. The film reached an estimated 6.5 million home entertainment units sold worldwide through the end of the fourth quarter.
Katzenberg said the home entertainment results outperformed industry averages for animation.
"Clearly, there were some positives in 2012," he said, adding that the fourth-quarter holiday period enabled the studio to stock additional titles on store shelves with positive results.
"When people love the movies instead of like the movies, your [sales ratios] really go up," Katzenberg said.
The CEO said that while Rise of the Guardians did not achieve the level of box office success to expect from a DreamWorks Animation film, the studio has made several changes to its future slate that he believes will position us well for the next two years.
"We are now looking ahead to our next release — and our first under our new distribution agreement with Twentieth Century Fox — The Croods on March 22," Katzenberg said in a statement.
The studio also said it would delay the theatrical launch of Mr. Peabody & Sherman from November to March 7, 2014.