DreamWorks 3Q falls as 'Panda' sales below 'Shrek'

AP News
Posted: Oct 25, 2011 6:58 PM
DreamWorks 3Q falls as 'Panda' sales below 'Shrek'

DreamWorks Animation SKG Inc. said Tuesday that its net income fell by half in the third quarter as its early summer release, "Kung Fu Panda 2," did not haul in as much at the box office as last year's "Shrek Forever After."

The company also said it had hired former Disney movie distribution head Chuck Viane to give DreamWorks advice on possibly distributing its own films. DreamWorks' deal with Viacom Inc.'s Paramount Pictures expires at the end of 2012 but the two sides haven't agreed to renew it.

CEO Jeffrey Katzenberg said Viane will help DreamWorks determine the best course of action, adding that DreamWorks will have paid out $700 million in distribution fees from 2006 through next year on films that have already generated $10 billion in revenue.

"We have a very sizable and valuable piece of business whether it's for a third party or whether we do it for ourselves," he said.

Katzenberg also said DreamWorks would immediately begin to see small benefits from the deal with movie-streaming giant Netflix Inc. that it announced last month, although most revenue will roll in when new films are offered online starting in 2013.

DreamWorks movie have been reserved for Time Warner Inc.'s HBO pay TV channel, but the high price paid by Netflix makes DreamWorks movies "the most highly valued in all of Hollywood today" in the domestic pay TV market, he said.

Katzenberg offered his support for Netflix CEO Reed Hastings, whose recent decisions to hike prices and restructure the business caused 800,000 subscribers to cancel service from June to September. Netflix still has 23.8 million U.S. subscribers, although the moves have sliced more than two-thirds off the stock price since the summer.

"They've done a brilliant job of overnight building one of the most valuable and interesting new platforms and made almost every single decision right," Katzenberg said. "They got one or two wrong, but they took a misstep and quickly fixed it, which is the sign of a good CEO in my opinion."

For the quarter that ended Sept. 30, DreamWorks posted net income of $19.7 million, or 23 cents per share, down from $39.8 million, or 47 cents per share, a year ago.

Analysts polled by FactSet were looking for adjusted earnings of 20 cents per share.

Revenue dropped 15 percent to $160.8 million from $188.9 million a year ago. That was slightly better than the $159 million expected by analysts.

"Kung Fu Panda" added $39.4 million in revenue to the quarter, while "Shrek" added $120.4 million in the same quarter a year ago.

DreamWorks shares were down 31 cents, or 1.7 percent, at $18 in after-hours trading Tuesday after falling 57 cents, or 3 percent, to close at $18.31 in the regular session.