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Katzenberg Warns of Q4 DVD Logjam

31 Oct, 2007 By: Erik Gruenwedel

Shrek the Third home video revenues are expected to drive DreamWorks' Q4.

DreamWorks Animation expects fourth-quarter revenue to be largely driven by the Nov. 13 release of Shrek the Third on DVD and HD DVD.

Shrek the Third has generated about $793 million in global theatrical revenue since its May release, making it the third top-grossing animation film in history, according to the studio.

“We are confident it will be among the top performers this holiday season,” said Jeffrey Katzenberg, CEO of DreamWorks Animation, in an analyst call.

He downplayed the optimism, however, citing challenges facing new home video releases in the fourth quarter, including an unprecedented number of tiles being released on DVD.

“With four titles that performed over $300 million in domestic box office and several others reaching over $200 million, we expect a very strong home video market this holiday season,” Katzenberg said. “That said, it is difficult to see how this abundance of product will not impact the individual performance of each title.”

He said retailers have been aware of the pending juggernaut of new DVD releases and related catalog titles for some time and allocated shelf space accordingly.

“Retail sees them as a very attractive traffic builder for the holiday season,” Katzenberg said.

He said DreamWorks Animation has worked extensively with Toshiba to maximize the impact of its characters in HD DVD.But despite extensive marketing of HD DVD and Blu-ray Disc by the studios in the fourth quarter, Katzenberg said HD DVD would amount to a very small percentage of the studio's revenue.

More than $92 million in incremental revenue from the theatrical release of Shrek the Third helped DreamWorks Animation SKG Inc. post third-quarter (ended Sept. 30) profit of $47 million, compared to income of $10.5 million during the same period last year.

Shrek also is slated to make his first float appearance at the Macy's Thanksgiving Parade, and is slated for a New York Broadway show some time next year.

Continued incremental revenue from DVD and video-on-demand of Over the Hedge ($17.8 million), Flushed Away ($17.3 million), Wallace & Gromit: The Curse of the Were-Rabbit ($3.9 million) and Madagascar ($5.8 million) contributed as well.

“The DVDs are performing better than we had expected mostly because children's titles seem to remain fairly strong in the DVD market,” Katzenberg said.

Over the Hedge and Flushed Away have shipped 14.2 million and 5.7 million units, respectively, excluding actual and estimated future returns.

Glendale, Calif.-based DreamWorks Animation revenue exceeded $160 million compared to more than $55 million last year.

The studio's next theatrical release, Bee Movie (with Jerry Seinfeld), opens nationwide Nov. 2.

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