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DreamWorks Bullish on DVD

6 Dec, 2006 By: Jessica Wolf

DreamWorks Animation is banking on its strong franchises and sees life in the DVD market, said company CEO Jeffrey Katzenberg, speaking at the Credit Suisse Media conference this week.

The company is pondering its relationship with British animation house Aardman after another tepid outing, Flushed Away, and gearing up for the May 2007 release of a title the studio can pretty much take to the bank — Shrek the Third.

A new theatrical release boosts home video sales of prior installments in a strong franchise with resonant characters and storylines, Katzenberg and fellow presenter Kristina Leslie, DreamWorks CFO said.

DreamWorks saw a 5 million-unit increase in year-over-year sales of the first Shrek DVD, originally released in 2001, when Shrek II hit theaters three years later, Leslie said.Now, six years into the franchise, there's a whole generation of kids who will want to get to know Shrek and his crew when the third installment hits theaters, Katzenberg predicted.

“There seems to be a real opportunity for a video event for Shrek 1 and 2 around the release of 3,” he said.

Indeed, DVD remains a robust and lucrative arena for CG-animated product, Katzenberg said.

“The DVD market has clearly stabilized,” he said. “We've seen strong performance for our titles and related titles. Clearly there is not the rate of growth that we had seen in past years but it's a strong market and our product and other CG product are still the leading titles and seem to still play strongly in the market.”

“In terms of going forward, we really do feel that market is going to remain a primary revenue driver for us. The consumer still feels that the price value for high end CG animated movies is very good. We continue to see that in our research.”

DreamWorks is one of the few studios to remain decidedly mum on high-definition or digital distribution plans for its titles.

Katzenberg said that digital distribution is a good thing, and could be very valuable but still is a bit “over the horizon.”

“I think everyone is committed to the growth of digital,” he said. “I just caution everyone that I don't think it is going to be this transforming new platform that is arriving next week or even next month.”

Katzenberg pointed to the music market as an example. Music has been available digitally for nearly nine years. There are 70 million iPods in the market, 250 million cell phones enabled for digital music and any number of other MP3 devices out there and still more than 80% of sales in the music market come from physical goods, he said.

Still, Hollywood is traditionally very good at finding ways to get its product to consumers the way they want it, Katzenberg said. That's not going to change, he said.

The goal at DreamWorks is to focus on franchises, which provide as sure of a thing as you can get in this business, he said.

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