Monday, May 24, 2010

Shrek IV, the Day After

The whole stock market went down today. Even so, the market seems to be saying: "The ogre's opening? Could have been better..."

DreamWorks shares dropped 10% to $31.31 in early morning trading after the Glendale studio reported far lower box office numbers for the final "Shrek" film than investors had anticipated. The fourth movie in the series generated an estimated $71.3 million in revenue in the U.S. and Canada this weekend, compared with $121.6 million for "Shrek the Third" ... [Update, 1:16 p.m.: The actual weekend gross for "Shrek Forever After" once Sunday ticket sales were fully calculated was $70.8 million.]

Although the film will probably still be profitable, the results stunned Wall Street analysts who had been banking on a much bigger opening ...

You could have fooled me about the opening weekend numbers. I saw the feature early on Friday, and thought the picture was going to come in at the century mark. Which only goes to show that William Goldman is a lot smarter (and more correct) than I am.

When you come in "below expectations," the carving knives come out. For instance, Steve Mallas of Blogging Stocks was sort of brutal:

Jeffrey Katzenberg, CEO of DreamWorks Animation (DWA), must be feeling just awful. The new Shrek bombed. There's no way to spin the statistic (although I can't wait to see how the company tries). ...

Mr. Mallas employ a generous dose of hyperbole, but he's likely reflecting Wall Street's opinion this Monday.

29 comments:

Anonymous said...

The new Shrek isn't GREAT, but it's OK. But still, I can hardly FATHOM why a $71 million opening can be considered a failure.

Anonymous said...

Why is anyone quoting Wall Street at all anymore about anything? Financial analyst for a movie opening? What a gigantic waste of time. Take DW private again, if only to shut New York bankers the f*** up already. It's these same idiots who think a futures market on Hollywood is a good idea. ?!?

And yes, it is a tired tv show, the Shrek thing. You don't need an MBA and CNBC to deduce that one.

Tim said...

A $70mil opening is a flop? Some animated films are lucky to make that during their total domestic theatrical run (Treasure Planet, Fantastic Mr. Fox, 9, Spirit, Stallion of the CImarron, to name a few).

Are they really worried that it won't recoup its cost? Or are they really worried that they won't make their bonuses because it didn't hit certain high water marks by a certain date?

Anonymous said...

What a diaperload of crap. Two months ago, they were blaming woes on Dragon. Back in December, the boys at Disney got a whole whopping 24 million on the opening weekend for Frog. Whats wrong with the picture? Jeffreys' got balls all the way. His cartoons are making big money. Disney can hardly even compete on the CG young adult-on-up cartoon level. Pixar has good drive, but Jeffrey's got carte blanche to make his characters less-than-pretty because he has good writing behind the projects. Why is WallStreet a barometer for Dreamworks success? Because they are bored? More like boring. Too many of them not out of work. Take away their priviledge of telling US what to watch and not watch. We'll get around to seeing these pictures if we feel like it or not. Till then, just keep producing. They'll make their money back.

Anonymous said...

Disney can hardly even compete on the CG young adult-on-up cartoon level. Pixar has good drive, but Jeffrey's got carte blanche to make his characters less-than-pretty because he has good writing behind the projects.

Yeah, it's only the BOLD filmmakers who can dare to make their characters ugly and unappealing to audiences! ;)

(....Security?)

Anonymous said...

Let's see, a $165m budget, with another $20m thrown in for creative accountancy. Then add roughly $15 million for film prints, and a good does of marketing, say $50m.

So now we are up at around the $250m mark. The actual take from the box office is generally half or a little less. So this film has to make a BO of $500m - $600m to come out about even. Then there are the profits that investors expect, and the bonuses that need to be paid to the execs and the facilities to maintain. I'd wager that this film needs to make around $700m - $800m to satisfy everyone's expectations.

So when it weighs in with a BO of $70m on opening weekend, suddenly the skies aren't that bright anymore. And this film isn't one that will have a lot of legs like Dragon. Dreamworks were expecting for a big opening weekend and they didn't get it.

Anonymous said...

DW's films are for the 6 and under crowd--so immature, derivative, and mundane. And ugly.

Leave it to Pixar to create MATURE films, with engaging themes, and that look great. And make TONS more money than dw. DW doesn't seel ancilliaries well. Pixar does. And the after market for Pixar films outsells dw by a HUGE margin.

Anonymous said...

yeah, but Dragon was close to Pixar level, so....

Locall said...

As much as I love Pixar's work, why do we always have to compare the two... this topic is about Shreks opening weekend, no need to bitch around about how much better you think Pixar is :S

Anonymous said...

" And make TONS more money than dw. DW doesn't seel ancilliaries well. Pixar does."

You know Pixar has never had an opening as strong as Shrek 4's right? idiot...

Justin said...

This post was about the financial aspects of Shrek, so here it goes. Dreamworks is a publicly owned company and it's shareholders expect a certain amount of return on their investment. The stock price of Dreamworks was set based on the expectation that Shrek 4 would open with $100 million or more. When it didn't meet those expectations the stock price dropped to reflect reality. The reality is saying that Shrek 4 might be the lowest grossing Shrek of the franchise which is going to seriously affect the returns for Dreamworks' investors. Like it or not that is the financial reality. The investors invested in Dreamworks with the expectation that Shrek 4 would deliver a certain return on their investment and it isn't going to do that. Now, is the film a bomb? Not at all. Will it still be profitable? Almost certainly. Is it a good film? From what I've heard it isn't bad. However if I made an investment expecting a certain rate of return and that investment made significantly less than I was expecting I would be very disappointed. If I had known the outcome maybe I would have chosen to invest somewhere else.

Anonymous said...

""So now we are up at around the $250m mark. The actual take from the box office is generally half or a little less. So this film has to make a BO of $500m - $600m to come out about even. Then there are the profits that investors expect, and the bonuses that need to be paid to the execs and the facilities to maintain. I'd wager that this film needs to make around $700m - $800m to satisfy everyone's expectations.""

Your numbers are a little off by several hundred million.

Anonymous said...

"I'd wager that this film needs to make around $700m - $800m to satisfy everyone's expectations."

this made me laugh. your number crunching skills aren't quite on (pardon my pun) the money.

Anonymous said...

Don't "Wall Street Analysts" have anything better to do than worry animated features?

Don't Wall Street reporters have any more originality than to write someone was "stunned"?

Anonymous said...

laff jeffrey laff

Anonymous said...

Actually, the film would need to make at least $700. million to satisfy concerns. It would need to make at least $400 million to cover prints and advertising alone. Read a book on Hollywood Economics and it all makes ridiculous sense.

Jeffery knows this; that's why he's not laughing.

Anonymous said...

I love how people blabber on and on as if they know how much things cost.

You have no idea how much prints and advertising cost for this film, and neither does anyone else posting here. Please shut up.

Steve Hulett said...

One of the constants of Hollywood Studios, from the 1910s until today, is that books are always cooked.

It's been this way since the dawn of the industry.

Mel said...

""One of the constants of Hollywood Studios, from the 1910s until today, is that books are always cooked.

It's been this way since the dawn of the industry.""


Thanks for saying this so I didn't have to. It's true though.

Anonymous said...

ahh yes, the mighty industry insider books. they always tell it like it is.

/sarcasm

Steve Hulett said...

The undiluted essence of Hollywood thinking, century in and century out:

Anonymous said...

(The anon who first posted the numbers)

If anyone thinks I am wrong, then please enlighten me.

First of all, prints are around $2,000 each. Shrek appeared on 9,500 screens. Now, subtract away a bunch for digital and we come out with roughly $15m for prints.

Second of all, marketing on a film averages around the $34m. As Shrek is a larger release, one can easily surmise that it would have had more spent on it than average. Some films have been known to have had $100m in marketing spent on them, so given all of the information a $50m price tag for marketing sounds about right.

The extra $20m for creative accountancy is pure speculation though, but the past has shown similar results (see Hollywood accounting).

So if we are now at $250m, and a film generally receives a return of 50% of the BO, how is it a stretch of the imagination to assume that it needs to make $500m to break even with a few hundred million more for investors to see the return they are looking for?

But this is the internet, and it's so easy to say "Haha, you are wrong".

Anonymous said...

OK. Haha, you are wrong.

Anonymous said...

Very few films break even at the box office. It's the DVD's, stupid.

Anonymous said...

...and licensing, and merchandising, and TV sales, and re runs, and pay per view... Dreamworks would habe shut down many years ago if it was only about the theater run...

Anonymous said...

Of course there is revenue from DVD sales and merchandising. If you read my comment closely you will see that didn't mention that it needs all of $700m from the BO.

But the facts are that BO make up the lion's share of a films revenue, and that as far as a Dreamworks film goes, the BO is usually a good indicator of how much it will make in ancillary revenues.

Bob and Rob Professional American Writers said...

So, what do you guys think the magic number will be this upcoming weekend...? The number that will determine if it's gonna have legs or not. I really enjoyed the film, by the way.

Anonymous said...

"But the facts are that BO make up the lion's share of a films revenue,"

Not true. The LIONS share of a films revenue come from individual TV market sales (cable, network, foreign, pay per view). The studios don't care to talk about these monies too much, but it is, indeed, a fact.

Justin said...

I think anything higher than a 45% drop after the first, and especially the second weekend would be disastrous for the movie. A 40-45% drop would not be bad, and better than 40% would be a very good sign. Here are some comparable second weekend drops:

Note: All 4 Shrek movies released the weekend before Memorial Day Weekend...

Shrek 1: +0.3%
Shrek 2: 33.2%
Shrek 3: 56.4%
How to Train Your Dragon: %33.7
Monster Vs. Aliens: 45%
Kung Fu Panda: 44.2%

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