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Impressive 'Dragon 2' Early Digital Sales Among Q3 Positives for DreamWorks Animation

29 Oct, 2014 By: Erik Gruenwedel

Early access to sequel propels DreamWorks Animation’s heretofore unremarkable digital sales to No. 1 at iTunes

Studios love sequels because they typically have a built-in fan base. DreamWorks Animation loves How to Train Your Dragon 2 as it helped resurrect the studio from recent missteps and invigorate sluggish electronic sales.

DreamWorks Animation said Dragon 2 contributed to the studio generating third-quarter (ended Sept. 30) net income of $11.9 million, up nearly 18% from net income of $10.1 million during the prior-year period. Revenue increased 17% to $180.9 million, from $154.5 million a year ago.

The sequel, which generated $615 million at the global box office since launch to become the highest-grossing animated movie of the year, was released digitally Oct. 21 — three weeks ahead of the DVD and Blu-ray Disc editions slated for retail shelves Nov. 11.

The title was DWA’s first early digital release and spiked EST sales by double digits, according to studio president Ann Daly.

Speaking Oct. 29 on the company's fiscal call, Daly said Dragons 2 is currently the top-selling digital movie on iTunes.

“We are just thrilled,” she said. “In week 1, digital sales were more than two-times higher from what we’ve seen from the average previous three titles [Mr. Peabody & Sherman, Turbo and Rise of the Guardians].”

Daly believes Digital HD’s percentage of overall home entertainment revenue will continue to grow. “We [also] look forward to releasing Dragon 2 on [disc],” she said.

The financials are a plus for CEO Jeffrey Katzenberg, who has seen DWA struggle with underperforming titles. He has made no secret his desire to sell the studio (Japan’s Softbank kicked the tires last month) as it ups TV production in an effort to offset declining box office fortunes. Three of the past five theatrical releases performed poorly compared with expectations, resulting in early financial write-downs for Mr. Peabody & Sherman, Turbo and Rise of the Guardians.

Indeed, the Oct. 14 packaged-media release of Mr. Peabody was softer than expected, Daly said there is a concerted underway to jumpstart the title’s disc sales through Christmas.

Regardless, How to Train Your Dragon 2 put an end to the handwringing for now anyway. The film contributed revenue of $74.2 million in the quarter, primarily from its continued performance at the global box office.

Separately, DWA has launched its branded DreamPlace 2,000-square-foot retail concepts at assorted shopping malls nationwide. The stores, which can be reconfigured throughout the year, are designed to lure family consumers via interactive features and storytelling involving DreamWorks characters.

Daly said DreamPlace is largely a licensing business expected to generate incremental revenue on a regular basis.

“We think there is a significant opportunity to expand DreamPlace in many more locations in the U.S. and abroad,” she said.

Meanwhile, Turbo, The Croods and Rise of the Guardians contributed home entertainment revenue of $12.7 million, $1.8 million and $3.5 million, respectively, and reached an estimated 5.3 million, 7.8 million and 5.8 million home entertainment units sold worldwide, respectively, net of actual and estimated future returns. Library titles contributed feature film revenue of $50.2 million to the third quarter.

"The third quarter was strong for DreamWorks Animation,” Katzenberg said.

About the Author: Erik Gruenwedel

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