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Comcast to Bring DreamWorks Animation Movie Distribution In-House

23 May, 2016 By: Erik Gruenwedel

Theatrical and home entertainment agreements with 20th Century Fox will likely not be renewed

Expect to see DreamWorks Animation not renew theatrical and home entertainment distribution agreements with 20th Century Fox when they expire in 2017, Comcast CFO Mike Cavanagh told an investor group.

Speaking May 23 at the JPMorgan Technology, Media and Telecom Brokers Conference in Boston, Cavanagh was asked about cost synergies in Comcast’s recent $3.8 billion purchase of DWA. The executive said operating DWA as a public company making two movies a year didn’t make fiscal sense.

The same is apparently true for the Fox distribution deal inked in 2012, in which Fox assumed select marketing and distribution responsibilities both domestically and abroad for all DWA animated feature films produced through 2017. Fox obtained the rights after DWA’s agreement with previous distributor Paramount Pictures expired in 2012.

“About $75 million or so a year is what’s paid somewhere else to distribute the films, and in about two years time, we will take that [in-house] and immediately add that to the core earnings power of the company,” Cavanagh said.

DWA movies would probably be distributed by Universal Pictures and Universal Pictures Home Entertainment after 2017. The latter could see a fiscal windfall considering retail releases generated more than $100 million during DWA’s most-recent fiscal period.

Cavanagh said Comcast expects to see $250 million in reduced SG&A expenditures going forward, capitalization on DWA’s TV animation studio, which the CFO said NBC Universal lacked, and creation of animated TV content for subscription streaming services. DWA has an original content production pact with Netflix.

“In our minds, taking those couple of things together turns [the DWA purchase] into a deal that is a high single-digit [pre-tax] multiple,” Cavanagh said.

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