So Where Will DreamWorks Animation End Up?

Now with full-flavored Add Ons!

Variety tells us that as DreamWorks' live action arm ankles Paramount/Viacom, DreamWorks Animation stays put:.

DreamWorks Studios may be re-launching with a new infusion of cash, but DreamWorks Animation remains in a distribution deal with Par that runs through 2012.

Originally spun into a public company to help investor Paul Allen liquidate his early investments, DreamWorks Animation is now in the unexpected position of having absolutely no business relationship with DreamWorks Studios.

Technically, the live-action studio hasn't been connected to its toon sibling in over two years, but it's no coincidence that the latter signed a seven-year distribution deal with Paramount at the same time the former was acquired by it ...

DWA toons have performed well for the past two years, grossing an average of $441 million worldwide. Overseas B.O. has been particularly strong, with this summer's "Kung Fu Panda" and last year's "Shrek the Third" grossing $409 million and $476 million, respectively, from foreign markets. Home entertainment perf has also been solid is a slumping market -- "Shrek the Third" has sold more than 20 million units so far.

... DreamWorks Animation stock is up 27% since 2006 ... Meanwhile, Par is getting into the toon biz on its own. The studio just greenlit its first animated feature (save for cheap Nickelodeon spin-offs), "Rango," which will star Johnny Depp, be directed by Gore Verbinski, and be produced at Industrial Light and Magic.

Insiders say it may be no coincidence that the pic has been scheduled for March 2011 -- perhaps as a sign that Par can do animation on its own, if needed. Katzenberg is rumored to be peeved, since DreamWorks Animation has its own film set to come out that May -- possibly "Kung Fu Panda 2." ...

As the only big domestic, stand-alone cartoon house still standing, how much longer will DWA remain on its own? Will it go back to Universal for a new distribution deal? How about getting purchased by General Electric lock, stock and barrel?.

The problem for me is that in a universe of conglomerates, a solitary animation company with no distribution network is a really rugged business model. Two flops in a row and staffs are cut, then desks and hardware start getting sold to pay the bills.

It's been a fabulous high-wire act so far, but how much longer can it go on? (I guess forever ... as long as those hits just keep on a-coming.)

Add On #1 We morph into a full-throated Jeffrey K. post with Mr. Katzenberg's ringing defense of 3-D films in Variety:

... [D]igital 3-D has arrived and, I believe, will eventually become the standard because, quite simply, human beings see in 3-D. Again, this is pretty basic stuff. And it's also pretty breathtaking stuff. ... [D]igital 3-D is very real, enriching the filmgoing experience in truly phenomenal ways. It provides filmmakers with an entirely new visual vocabulary and it provides filmgoers the chance to finally cross the threshold of the screen and enter other worlds. This is why many of the industry's greatest directors are currently working on 3-D projects.

Initially, as with color, the economic bar for 3-D is high, so for the foreseeable future many films will continue to be produced in 2-D. But, eventually, I believe that all films will be shot in this remarkable medium ...

Add On #2: And Mr. K. here explains why DVD sales are currently sucking. It's those damn video games ...

On a conference call with analysts today, he blamed videogames in part for the soft performance of "Shrek the Third" on DVD compared to "Shrek 2":

"Competition at retail from other sources such as videogames has had an impact on the overall homevideo market and on the performance of individual titles including "Shrek the Third."

My take on video games? Teen-aged boy spend freaking hours at their consoles. That obviously cuts into the time they could spend doing other things ... like going to movies at the mall or watching Shrek or Cars or whatever other animated title is out there. (That's why the studios license and create Shrek and Cars video games, no?)