DreamWorks Animation 3Q profit doubles; 3-D strong

AP News
Posted: Oct 26, 2010 7:29 PM
DreamWorks Animation 3Q profit doubles; 3-D strong

DreamWorks Animation SKG Inc. said Tuesday that its third-quarter earnings doubled thanks to international movie ticket sales for "Shrek Forever After," a sign that global audiences are still hooked on 3-D movies.

Net income for July through September hit $39.8 million, or 47 cents per share. A year earlier, it was $19.6 million, or 23 cents per share.

Revenue rose 39 percent to $188.9 million, from $135.4 million a year ago. Most of the revenue, about $120.4 million, came from the overseas theatrical run of "Shrek," which debuted in May in the U.S.

Chief executive Jeffrey Katzenberg quashed concerns that 3-D movies might be a short-lived fad, or that tickets would prove too expensive. Katzenberg said 60 percent of the box office revenues from "Shrek" came from 3-D showings. He said the extra charge for 3-D tickets has stabilized around $3.25 to $3.50 per ticket in the U.S. and 3 euros in other countries.

"The fact that six out of the top 10 domestic films in 2010 are 3-D releases shows that consumers continue to embrace this exciting and revolutionary new format," Katzenberg told analysts on a conference call.

Analysts surveyed by Thomson Reuters forecast a profit of 35 cents per share on revenue of $163 million. Analysts typically exclude one-time items from their estimates; in this case, comparing analyst estimates to DreamWorks' unadjusted numbers works because Chief Financial Officer Lew Coleman said there were no exceptional items in the quarter.

DreamWorks has said 2010 will be its best year ever. After "Shrek" and "How to Train Your Dragon," DreamWorks is gearing up for its third movie of the year, "Megamind," which will be widely released in the U.S. on Nov. 5. The company, which releases all its movies in 3-D, aims to release five movies every two years.

With the company's revenue so strongly tied to sales of theater tickets, DVDs and Blu-ray discs, Katzenberg told the Associated Press that DreamWorks did not see a huge opportunity in trying to offer a high-priced video-on-demand offering within a month or two of a movie's theatrical release. Other studios are preparing to test such a product, called "premium VOD," early next year. The idea is to allow people to order a one-time showing of a movie in their homes through a set-top box for $20 to $30 far earlier than they could buy a disc.

DreamWorks' customers tend to be parents whose children watch movies up to 100 times, he said.

"They want to own our titles because they're more analogous to a toy than a movie," he said. "We will probably see the highest amount of demand is on an ownership model, as opposed to a pay-per-view model."

Shares of the company, based in Glendale, Calif., rose 75 cents, or 2.2 percent, to $35.11 in after-hours trading Tuesday, after closing up $1.14, or 3.4 percent, at $34.36.