Thursday, January 22, 2015

The Analysts (Critics?) Weigh In

... regarding DreamWorks Animation.

... “They have a very risky business model,” said Philip Schuman of financial consultant firm FTI. “They don’t put out a lot of product. What they do put out has to work.” ...

“You have some very smart people making the calls there, but they are executives who have had the greatest success in old business models,” [valuation analyst Seth Willenson] said. “The question is, can they change their approach to make it work in the new models?” ...

“They’re making tentpoles, and those are expensive,” Schuman said. “Concentrating efforts from three to two films a year is a smart business move.” ...

One studio B.O. analyst says, “I don’t think the movie [Penguins of Madagascar] was compelling enough to make people want to go see it in a theater when they can stay home and watch the TV show for free.” ...

Since opinions are as numerous as eyeballs, here's mine:

When you run a stand-alone cartoon company that's not a monster entertainment conglomerate, it's good to avoid big administrative staffs, a plethora of executives, free lunches, and luxurious digs. Those things add to the overhead but are only marginally useful in getting your movie made. DreamWorks Animation is dependent on its products making a profit, so it's wise to make those products for less than $145 million a pop.

(Shrek, a wacky, off-beat animated feature, cost $60 million in 2001. The final installment Shrek Forever After, released nine years later, cost $160 million. Costs went up a $100 million in those nine years? Really?)

Give key creative staff more say in what creative decisions get made, and executives/administrators less. ("Brain trusts" anyone?)

Do make movies at different price points. Disney produced Dumbo for a fraction of Pinocchio's cost. Dumbo made a profit in its first release; the wooden puppet stayed in the red.

Diversification is a good thing, so do as much of it as possible. Not just amusement centers, merchandising and television, but also hybrid live-action/animated movies. And (if circumstances are right) live-action movies.

A lot of these things DreamWorks is now doing, but it has a hard, uphill slog ahead of it. Depending on every animated feature being a hit is an unsustainable business model.


Nathan said...

Unfortunately, meeting the lower budget number meant making difficult choices and sticking to them, which I saw less and less willingness to do as the years went on.

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