Tuesday, April 21, 2015


Bram de Haas at Seeking Alpha analyzes DreamWorks Animation in detail.

Dreamworks Animation: Present In Theaters Across The World, But Widely Misunderstood Nonetheless

How much the market misunderstands Dreamworks Animation and its prospects is proven by the way it is traded.

In 2015, already about 50% of revenue will come in from non-feature film sources.

A compound annual return rate of 30% over the next two years is in the cards.

For years I've said that DreamWorks Animation performs a high wire act in a strong wind, relying on one hit feature after another to propel earnings and growth. But Mr. de Haas believes that's wrong:

... Dreamworks makes money from several different segments besides feature movies, although to an extent these sources would dry up if the company discontinued its feature film business. Fazal Merchant (CFO) expects 50% of revenue will come from non-feature film content in 2015. The important sources of income besides feature movies are:

Television content; includes YouTube (NASDAQ:GOOG) (NASDAQ:GOOGL) and Netflix (NASDAQ:NFLX) deals.

Consumer articles; this includes toys based on Dreamworks' characters but also licensing deals to use the characters to sell serial or build DreamPlaces

Library revenue; long tail catalog of 30+ movies that still makes money ...

Katzenberg said on the earnings call:

As of Feb. 20, DreamWorksTV is now the number 1 family entertainment channel on YouTube with monthly viewerships and subscriber growth exceeding the Disney Channel, Nickelodeon ((and)) Cartoon Network." ...

The company owns a number of channels on YouTube but the successful AwesomenessTV has 2.3 million subs and it is probably its largest. Increased choice of how to monetize its YouTube content should help contribute to the value of the segment. ...

So DWA has a lot of component parts, not just movies and merchandising, but TV and budding amusement centers in China and elsewhere. The trick will be to keep successful movie franchises bubbling along. Because like it or not, the theatrical features fuel most everything else in the company.

I'm not convinced Jeffrey's growing enterprise will expand at 30% per annum, but with the success of Home and the expansion of its television footprint, DWA will be around for a while.


Jerry Beck said...

This analysis leaves off Dreamworks revenues from its purchase of Classic Media properties - think Veggie Tales, Casper the Ghost, Richie Rich, Underdog and the rest - they still pull in millions in licensing and pay residuals on past productions, video games, books, toys and related paraphernalia. Dreamworks i in better shape than most realize.

Steve Hulett said...

Good point, Mr. Beck. DWA has made some savvy purchases, and Jeffrey's ideas to diversify are sound ones.

I think the under-performance of recent features has put a crimp in the master plan, but only a crimp.

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