Saturday, February 07, 2009

DreamWorks Animation Woos Investing Class

DreamWorks Animation (let's set aside DreamWorks the Original, which is snuggling up to Disney -- after getting disrespected and snubbed by Universal-GE) is doing a full court press on many fronts.

... DreamWorks Animation has begun the biggest expansion in its history. A television arm sprouted in recent months, with series built around “Madagascar” and “Kung Fu Panda” coming to Nickelodeon. “Shrek the Musical” opened on Broadway late last year. Theme parks are moving forward in Dubai and Singapore. And the company is making an all-or-nothing charge into 3-D movies, which could add $80 million in profit to a “Shrek”-size hit because of premium ticket prices. Every DreamWorks film from now on will be in 3-D.

Still, all of this growth is coming at a time when bigger is not viewed as better among media investors, creating a tough balancing act for Mr. Katzenberg ...

When you think about it, Jeffrey has pulled off an amazing hat trick.

In the last two years he's out-Pixared Pixar, with DWA's films outgrossing the Emeryville outfit's by $1.4 to $1.6 billion (depending on whose stats you buy.) You can argue who has the best films aesthetically until the flying monkeys come home to roost; the simple question Tinsel Town's front offices use to keep score is: "Who's raking in the most loot?"

Yet all is not rose petals and scented water:

...After years of blockbuster growth, DVD sales slumped badly in the fourth quarter because of the downturn and increasing home entertainment options, with some new releases falling 20 percent below expectations and sales over all down about 9 percent compared with the year earlier, according to Adams Media Research ...

I' ve always been nervous about stand-alone animation houses that rely on a limited number of 'toons to be successful. The days when Hanna-Barbera did it -- back in the days of teevee animation outfits owning and licensing their own product -- are long over. And Pixar, despite its decade of blockbusters, has now been swallowed whole by Disney. How much longer DreamWorks can sustain the magical feat of smash hit following smash hit is known but to God.

I can only hope that She gives Jeffrey another decade or two of success. By then the economic malaise should be over, and DreamWorks Animation's stock price way, way up.

14 comments:

Anonymous said...

DW's growth I'd put squarely in the short term column. TV spin-offs weaken perception of original films in the long term. The Dubai theme park is questionable. You don't remake what Walt Disney did overnight by just adding water (or oil, for that matter.) The next year will show that Jeffrey, like most corporate leaders, was too ambitious. They are going to get creamed by the receding tide.

Anonymous said...

Maybe they will, maybe they won't. If anyone can pull it off Jeffrey can.
I suspect the first post would feel differently if the above article had the name Pixar in place of where Dreamworks' name was.

I hope they have tremendous success - as well as Pixar and Fox and anyone else making animation these days. I sure wouldn't wish failure on anyone.

Anonymous said...

I agree with the first Anonymous. Too-rapid expansion linked with a limited product line has spelled doom to many an ambitious company (Starbucks is probably the best latter-day example). And Dreamworks, unlike Disney, has no legacy or overarching theme to build a park on. With Disney, it's wishes and dreams. With Dreamworks, it's...uh...hmmm...ogres and pandas and penguins...oh my...that disparate assortment doesn't exactly build an iconic resonance that says "Dreamworks", does it?

Anonymous said...

Sounds to me like a good business strategy (although the timing coinciding with this economic recession is unfortunate). Obviously the idea is to diversify revenue streams, so that Dreamworks isn't strictly reliant on hitting a homerun every time an animated feature come out.

So far the naysayers have all been proven wrong on Dreamworks. And there they are again in this thread. Time will tell how it all works out, it's definitely a pretty ballsy gamble. Exciting times for Dreamworks.

Anonymous said...

I completely agree with Anon above.

The "just add water" with a fire hose analogy is perfect when it comes to Jeffrey. That is his M.O. He didn't build that company with precision or strategy. He built it with sheer force and throwing money at it.

It is a shame really. He is the poster child for meddlesome animation CEO's. The guy knows nothing about art or story...but demands complete final say on every sequence. I would love to see a list of how many directors he has fired in mid production of his films over the years. In my opinion, Kung Fu Panda was a fluke. That film was great in spite of Jeffrey...not because of him.

Unfortunately, other MBA types at smaller studios see the marketing machine that DWA is and how Jeffrey runs his business and believes that is the way. I actually think that is the reason we haven't seen other small or mid level studios make the leap to the big leagues. MBA's (instead of artists) are running the show.

Anonymous said...

No failure wished on anyone. But yes, Pixar has the leg up for long term success, and not just by quality of their films. I think you have to look at their innovation in all aspects of what they do. Like market leaders in other industries, they rounded the bases first, and they still sit at ground zero of the intersection of cutting edge technology and how to marry it with their films. They are just better positioned to ride this out. DWs will continue to compete, but the economics of Jeffrey's expansion is going to take more of a beating.

Steve Hulett said...

The which is better -- Pixar or DreamWorks -- will rage on. But money is the way Hollywood keeps score.

Reminds me of the Leno vs. Letterman dispute. Letterman has always been the critical darling, but Leno, year after year, has the bigger audience.

So ... guess which of the two is getting his own show in prime time?

Anonymous said...

In the context of how Dreamworks wishes to be perceived by investors, I'd say the Pixar/Disney relationship just simply has a leg up.

No one knows what 'money' is really worth since Lehman Bros. Hollywood math is now required to respond to real economics and it's making liars out of everyone passing the hat to sustain their market share, Jeffrey included. The position the other Dreamworks has suddenly found themselves in is just one more reality of the new market.

It's not a question of who's better today as much as who just simply IS. My 'better' guess is that a Shrek theme park in the desert IS NOT.

Bugsy was way ahead of his time in Nevada. But it KILLED him.

Anonymous said...

Dreamworks has done well recently and the immediate future looks really good. hard to predict what will happen with any of these studios. Nothing can surprise us anymore.

Kevin Geiger said...

How is it a "shame" when a man has created a studio that produces blockbuster animated films that employ hundreds of our fellow artists?

Is Jeffrey "Jeffrey"? Sure. But you've got to hand it to the guy. It says something that Disney's late-80's/early-90's renaissance was on his watch, and that the only remaining viable portion of the much-vaunted Dreamworks SKG is the animation studio.

Floyd Norman said...

The smart money also said the Walt Disney had overreached, and was bound for failure. Yet, the old man kept proving them wrong.

Jeffrey has managed to succeed in spite of the naysayers, and like Kevin said, employs hundreds of our fellow artists. Like him or not -- Jeffrey remains my hero.

Anonymous said...

My heroes are the artists who create the shit and the millions of parents and their children who pay for it, and not necessarily in that order.

It doesn't take a genius to figure out that there is a built-in and bottomless market for family fare. Every parent on the planet is looking for few hours of escape from the daily household grind once a month.

Kevin Geiger said...

Artists need a viable company to work for, unless they care to assume the incredible expense and risk of forming and (profitably running) their own.

Everyone plays an important part in this equation - audiences, artists, and yes... even executives.

Anonymous said...

It doesn't take a genius to figure out that there is a built-in and bottomless market for family fare.

Tell that to the many studios and filmmakers who aimed squarely at that supposedly huge and bottomless market and lost their shirts. It's so easy to write things like that when it's not your money, and you're only considering the hits.

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