Sunday, August 06, 2006

How DreamWorks Got Its Profit Back

DreamWorks Animation is back in the black, per the L.A. Times and several other outlets... As the TIMES noted: DreamWorks Animation SKG Inc. swung to a profit in the second quarter on strong home video and pay-television performance from its recent hit "Madagascar." The Glendale-based film studio reported net income Thursday of $13.7 million, or 13 cents a share, for the quarter, contrasted with a loss of $3.7 million, or 4 cents, in the same period last year. But this sentence points out why it's tough to be an independent animation studio, even one as successful as DreamWorks. Typically, the company does not get any meaningful revenue from its theatrical releases until after its distributor, Paramount Pictures Corp., recoups its marketing and distribution costs. Which is why, eventually, most successful animation studios are swallowed up by hungry conglomerates. They all live from hit to hit.


Anonymous said...

The sales of 'Shrek 2' dvd's were said to be dissapointing about a year or two ago. Well, the pricetag of $35 at Walmart and elsewhere might have something to do with the sagging sales. I waited until the used dvd was being sold at the video rental store. Why pay $30 for a dvd I can get for $9 later on. In fact, most animated dvds are over priced when they first come out.
And then they complain about poor sales and piracy, go figure...

Kevin Koch said...

You're probably right that initial prices are somewhat of an issue, but I think what really caught DreamWorks unprepared (and a little later the same thing happened to Pixar) was that the buying cycle for DVDs has become super compressed. In the same way that the opening weekends for a theatrical opening are more important than ever, the opening quarter of sales for DVDs has evolved so that sales are extremely "front loaded."

"Shrek 2" broke records with its first quarter sales. DW's mistake was assuming previous patterns would prevail, and that the subsequent quarter sales would be stronger than they turned out to be. Companies like DW and Pixar are now much more careful about how they estimate their DVD sales.

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