Katzenberg Sees ‘Stabilization’ in DVD Market

31 Jul, 2012 By: Erik Gruenwedel and Chris Tribbey

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DreamWorks Animation CEO said he would disclose new distributor by Labor Day; home entertainment accounts for 60% of studio’s quarterly revenue

DreamWorks Animation July 31 reported second-quarter (ended June 30) net income of $12.8 million compared with net income of $34 million during the previous-year period.

Revenue declined 26% to $162.8 million compared with $218.2 million last year.

Glendale, Calif.-based DreamWorks Animation in Q2 was only able to account for about three weeks of revenue from theatrical blockbuster Madagascar 3: Europe's Most Wanted, which has generated more than $500 million at the global office since its June 8 release.

Indeed, the third installment of the popular franchise is the seventh highest-grossing box office title thus far in 2012, according to CEO Jeffrey Katzenberg, who added that 50% of box office revenue has come from 3D.

The CEO said Madagascar 3 has been distributed in 55% of international markets, with the remaining territories to open after the Olympics conclude Aug. 12.

In a call with analysts, Katzenberg said the studio would announce a new major studio distribution partner by Labor Day. He admitted DreamWorks Animation has no interest in self-distributing titles. The studio’s current deal with Paramount Pictures ends at the end of the year.

Madagascar 3: Europe's Most Wanted contributed approximately $54.8 million of revenue to the quarter, driven primarily by its performance at the worldwide box office. The film has grossed approximately $210 million at the domestic box office and $293 million at the international box office to date.

Katzenberg said he remained bullish on packaged media, characterizing the format as “settled in on a plateau” for the better part of a year — a trend the studio has seen globally.

“We've seen pretty strong stabilization ... in the [DVD] market," he said. "On a title like Madagascar 3, as an investment and return-on-investment, it is a very, very strong title for us and will be very profitable for us [due to disc]. I wish it were like it was in 2003 or 2004 or 2005 [where home entertainment] was widely profitable. This is a very strong performer for the company.”

Indeed, Puss In Boots contributed $22.8 million of revenue, driven primarily by home entertainment. The film reached an estimated 5.2 million home entertainment units sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Kung Fu Panda 2 contributed $46.4 million, driven primarily by domestic pay television. The film reached an estimated 5.7 million home entertainment units sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Megamind contributed $1.4 million of revenue to the quarter, driven primarily by home entertainment. The film reached an estimated 5.5 million home entertainment units sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Catalog revenue, which now includes Shrek Forever After, contributed approximately $27.4 million of revenue to the quarter. All other items, including non-feature film businesses, contributed $10 million of revenue to the quarter, of which Shrek: The Musical in London was the single largest contributor.

Katzenberg said that due to staggered foreign theatrical releases of Madagascar 3 in September and October, packaged media releases of the title in Germany, United Kingdom and Australia wouldn’t occur until early 2013.

Finally, the CEO said DreamWorks Animation is in talks with distributors about creating a TV channel, which would include content from the recent Classic Media acquisition, including such properties as Archie, Casper the Friendly Ghost, The Lone Ranger, Lassie, Rocky & Bullwinkle, Gumby, Underdog, Fat Albert, Rudolph the Red Nosed Reindeer, Godzilla, He-Man, Dick Tracy, Frosty the Snowman and Mr. Peabody & Sherman.

“This will go a long way toward helping us to realize the idea of a DreamWorks branded channel,” Katzenberg said.
 

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