Thursday, January 22, 2015

Restructuring

Now with Add On!!

The DWA Press Release:

/PRNewswire/ -- DreamWorks Animation (NASDAQ: DWA) is implementing a new strategic plan to restructure its core feature animation business to ensure the consistent and profitable delivery of the high quality films that audiences have come to expect from the studio. Following a full review of the business, the company will focus its feature production from three films per year down to two, maximize its creative talent and resources, reduce costs, and drive profitability.

Under the leadership of newly appointed Co-Presidents of Feature Animation Bonnie Arnold and Mireille Soria, the studio's core feature animation production will now focus on six specific movies for the next three years - one original film and one sequel each year - including Kung Fu Panda 3 (March 18, 2016), Trolls (Nov. 4, 2016), Boss Baby (Jan. 13, 2017), The Croods 2 (Dec. 22, 2017), Larrikins (Feb. 16, 2018) and How to Train Your Dragon 3 (June 29, 2018). Captain Underpants, which will be produced outside of the studio's pipeline at a significantly lower cost, is scheduled for release in 2017. The company's 2015 release, Home, will premiere domestically on March 27.

"The number one priority for DreamWorks Animation's core film business is to deliver consistent creative and financial success," said DreamWorks Animation Chief Executive Officer Jeffrey Katzenberg. "I am confident that this strategic plan will deliver great films, better box office results, and growing profitability across our complementary businesses."

The overall reduction of DreamWorks Animation's feature production output will result in a loss of approximately 500 jobs across all locations and all divisions of the studio. DreamWorks expects to incur a pre-tax charge of approximately $290 million in connection with the restructuring and related items. These costs are expected to be incurred primarily in the quarter ended December 31, 2014, with the remainder in 2015 and 2016. The plan will result in total cash payments of approximately $110 million incurred primarily in 2015. The restructuring plan is expected to be substantially complete by the end of 2015 and expected to result in annualized pre-tax cost savings of approximately $30 million in 2015, growing to roughly $60 million by 2017.

Conference Call Information
DreamWorks Animation will host a conference call to discuss today's announcement at 1:45 p.m. (PT) / 4:45 p.m. (ET) on Thursday, Jan. 22, 2015. The call will be available via live webcast at www.dreamworksanimation.com. To join the conference call by phone, please dial (800) 230-1766 in the U.S. and (612) 332-0430 internationally and identify "DreamWorks Animation Restructures Core Feature Film Business" to the operator. A replay of the conference call will be available shortly after the call ends on Thursday, January 22, 2015. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 351097 as the conference ID number. Both the press release and archived webcast will be available on the Company's website at www.dreamworksanimation.com.

About DreamWorks Animation
DreamWorks Animation (Nasdaq: DWA) creates high-quality entertainment, including CG animated feature films, television specials and series and live entertainment properties, meant for audiences around the world. The company has world-class creative talent, a strong and experienced management team and advanced filmmaking technology and techniques. DreamWorks Animation has been named one of the "100 Best Companies to Work For" by FORTUNE® Magazine for five consecutive years. In 2013, DreamWorks Animation ranked #12 on the list. All of DreamWorks Animation's feature films are produced in 3D. The Company has theatrically released a total of 30 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda, How to Train Your Dragon, Puss In Boots, and The Croods.

Additional Information
The Company is concurrently filing a Current Report on Form 8-K with the U.S. Securities and Exchange Commission describing the restructuring, as well as certain other charges that the Company expects to record during the quarter ended December 31, 2014. A copy of this Form 8-K filing is available on the Company's website at www.dreamworksanimation.com. ...

This explains why DreamWorks hasn't returned our calls.

The reductions referenced above are devastating for a lot of artists and technicians who've worked long and hard to make DreamWorks Animation a success. Even though PDI doesn't fall under a guild or IATSE contract, we're sorry to see the company's doors close. Pacific Data Images has been a northern California institution for years, and its absence will create yet another hole in California's digital effects/animation industry.

As for the rest of the restructure, we anticipate more down-sizing at DreamWorks Animation's Glendale campus, and a shift toward the Disney/ Visual Effects model: hire people for a project when needed, lay off people when they're no longer needed. Naturally, there will be core staff that gets retained, but from all reports, the days of guaranteed long-term employment are over.

(Re guaranteed employment: Three-year Personal Service Contracts were instituted at Disney Feature Animation by Katzenberg during the early '90s, and Jeffrey kept doing them after launching DreamWorks. Ed Catmull eliminated Personal Service Contracts altogether at Walt Disney Animation Studios years ago; our best guess is DWA contracts that guarantee a defined length of employment will also be gone.)

Every once in a while I get asked what working in the animation business is like. I always, "Well, it's a roller coaster. Up and up during the good times, then head-snapping drops during the bad." For DreamWorks Animation right now, one of the queasy drops is now in progress.

Add On: DreamWorks Animation has now called and told me the following:

1) There will be equal force reductions at PDI and Glendale (500 employees total; PDI is closing, and a number of employees will be offered positions at the Glendale campus. There will likely not be exactly equal numbers laid off from each campus.)

2) Employees being separated from DreamWorks Animation and Pacific Data Images will be paid an additional sixty calendar days of wages after layoff.

3) The company will be talking to DWA employees about the restructuring in the days ahead.

This is a rough time for company employees; if anybody needs information and/or assistance from TAG, please let us know.

Add On Too: In after hours trading, DreamWorks Animation stock is up 3.2%. Nothing succeeds like staff cuts.

4 comments:

Jeremy Darensbourg said...

The sequels to Panda, Croods & Dragons are guaranteed international hits "smart move moving Dragons 3 out of June 2017 were Toy Story 4 & Despicable Me 3 would have ate it alive", but Trolls, Larrikins & Boss Baby? Good Luck!

Steve Hulett said...

Part of the challenge is getting costs under control. And it's not a "union wage" issue but make the films in a more streamlined way. Blue Sky Studios, paying competitive wages, brings films in for $95-100 million Chris Meledandri makes animated feature for $75-$85 million.

The secret? Don't endlessly twiddle and tweak your movie. Even Imageworks, before it fled north, created animated features for under $100 million, and they did that paying higher wages to the non-union crew and competitive wages to the Sony Pictures Animation unionized staff.

It CAN be done.

vfxsoldier said...

Well also the other secrety is the BlueSky films are heavily subsidized by the state of Connecticut and Illumination films are subsidized by France. So is SPA (canada) and Warner Bros Animationg (lego movie in Australia).

In my view (as ADAPT warned), Animation will be going toward the VFX subsidy model.

https://vfxsoldier.wordpress.com/2015/01/22/the-irony-as-dreamworks-closes-pdi-sheds-500-jobs/#comments

Steve Hulett said...

Yes, the subsidy thing. I get such a warm, tingly feeling when people prattle on about the glories of "free enterprise," never mentioning farm subsidies, oil subsidies, NFL subsidies,, bank subsidies, and entertainment conglomerate subsidies (step right up and choose your country! The one with the most FREE money wins!)

But we MUST get rid of those awful moochers on food stamps! And we MUST reform (meaning cut and privatize) Social Security and Medicare. Where do old people get the idea they deserve some kind of pension?

The next five years should be an interesting roller coaster ride.

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