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Comcast in Talks to Buy DreamWorks Animation

27 Apr, 2016 By: Erik Gruenwedel

Universal Pictures sees tough Q1 comparisons following last year’s record-shattering box office

Comcast couldn’t acquire Time Warner Cable or Disney for tens of billions of dollars. Now it’s reportedly eyeing a smaller prize: DreamWorks Animation for $3 billion. The studio behind the "Shrek," "Kung Fu Panda," "How to Train Your Dragon" and "Madagascar" franchises has been looking for a fiscal partner as founder and CEO Jeffrey Katzenberg seeks help diversifying content offerings beyond theatrical releases.

The talks — which could amount to nothing and were first reported by The Wall Street Journal — would align DWA with NBC Universal’s Illumination Entertainment, the unit behind the successful "Despicable Me" franchise and headed by Christopher Meledandri. Any merger could see Katzenberg, who controls 60% of DWA stock, exit with a $21.9 million golden parachute.

Previous attempts by Katzenberg to sell DWA to Japan’s SoftBank and Hasbro failed. Last month, the CEO thought out loud about a possible union with Paramount Pictures, which is looking for a minority stake holder. DWA operates a significant home entertainment business, with its titles distributed by 20th Century Fox Home Entertainment. It also has a significant output deal with Netflix, with which Comcast has a love/hate relationship.

DreamWorks Animation shares were up more than 18% in morning trading, while Comcast was up less than 2%.

Comcast CEO Brian Roberts made no mention of a possible transaction during the cabler’s opening comments in a first-quarter fiscal call.

Meanwhile, Universal Pictures saw operating cash flow drop 43% to $167 million on revenue of $1.38 billion, which was down 4.3% from $1.44 billion during the previous-year period. The decline was primarily due to unfavorable year-over-year comparisons that included 2015 box office hit Fifty Shades of Grey. Home entertainment revenue declined 24.4%, primarily due to the strong performance of several releases in the prior year period, including Lucy — Universal’s top domestic box office hit in 2014.

Universal Pictures could likely see unfavorable year-over-year fiscal comps after coming off an outsized 2015 that saw the studio rank No. 1, generating more than $2.4 billion at the domestic box office, and $5.53 billion globally — the most ever by a studio.

Other revenue increased 27.1% due to higher Fandango and consumer products revenue, primarily driven by Minions and Jurassic World merchandise. Online movie ticket service Fandango just launched transactional VOD and Digital HD platform Fandango Now, which features cloud-based Ultraviolet functionality.

Comcast Cable said it upped video subscribers by 53,000, its best quarterly performance in nine years. It ended the quarter with 22.4 million video subs compared to 22.375 million last year.


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