DreamWorks Animation Seeks Magic Kingdom Beyond Movies

DreamWorks Animation Seeks Magic Kingdom Beyond Films With Deals
Bullwinkle and Rocky the flying squirrel. Photographer: Universal/Everett Collection

Jeffrey Katzenberg, with deals that give him new characters, a theme park and a footprint in China, is signaling DreamWorks Animation SKG Inc. plans to expand beyond 3-D movies and home video.

Katzenberg yesterday announced the acquisition of Classic Media, owner of rights to cartoon characters Casper the friendly ghost, Rocky the flying squirrel and his pal, Bullwinkle the moose. The accord follows a deal to create an indoor theme park at the Meadowlands in New Jersey and one to develop animation, parks and live entertainment in China.

“Five years from now, we will be a much more diversified company,” Katzenberg, the company’s chief executive officer, said yesterday in an interview on Bloomberg Television. “The animated movies will still be our heart and soul but I think we will see revenue from a lot of different areas.”

Katzenberg, 61, is looking to broaden the Glendale, California-based film studio’s revenue base, which has declined with shrinking DVD sales and competition at the box-office for family friendly movies. His plan resembles that of Walt Disney Co., which purchased Pixar Animation and Marvel Entertainment to supply characters for its film business, parks and stores.

“Jeffrey’s a visionary CEO and I would bet that he is building a foundation of growth for his company,” Dick Cook, former chairman of Walt Disney Studios, who worked with Katzenberg, said in an e-mail.

Before leaving Disney in 1994, Katzenberg was credited with rejuvenating the animation business with “The Little Mermaid,” “Beauty and the Beast” and “The Lion King.”

Falling Sales

DreamWorks Animation added 1.4 percent to $19.36 at 2:13 p.m. in New York. The studio, spun off from DreamWorks SKG and taken public by Katzenberg in 2004, had fallen 57 percent from an all-time closing high of $44 a share on March 24, 2010, as the company, like others in Hollywood, has sold fewer DVDs.

Sales at DreamWorks Animation fell 10 percent $706 million in 2011 and are forecast to drop another 4 percent this year, reflecting the declining home-video market and a production schedule that averages 2 1/2 movies a year.

In 2011, DVD sales equaled 22 percent of its global box-office revenue, according to Tony Wible, an analyst at Janney Montgomery Scott LLC in Philadelphia who recommends selling the shares. In 2004, DreamWorks Animation collected 68 cents from DVDs for every $1 in worldwide ticket revenue, he said.

DreamWorks Animation has also faced more competition from studios that have jumped into computer-generated animation. Katzenberg said he expects to announce “in the next couple of weeks” a new arrangement for distribution of the company’s movies after an existing deal with Viacom Inc.’s Paramount Pictures expires this year.

Competition Mounts

This year’s biggest cinematic hit in the genre isn’t from DreamWorks Animation or Disney’s Pixar. It’s “Ice Age: Continental Drift” from News Corp.’s Twentieth Century Fox. The film has collected worldwide ticket revenue of $529.3 million, according to Box Office Mojo.

DreamWorks Animation has been mentioned as a potential takeover target in analysts’ reports. Katzenberg has denied the company is being shopped around. He reiterated that again yesterday and called the Classic Media purchase a “game changer.”

“There have been no considerations of a sale for many years, that rumor is three years old,” Katzenberg, who controls almost 70 percent of the voting power with music mogul David Geffen, said in a separate interview. “It was stale when it was born.”

Mr. Peabody

With Classic Media, acquired for $155 million, DreamWorks Animation gets more than 6,100 episodes of animated and live-action TV shows, along with comic books and some rights to the Golden Books library. Characters include The Lone Ranger, George of the Jungle and Frosty the Snowman.

In addition to film potential, the content also offers the possibility of DreamWorks Animation television channels, Katzenberg said.

“We continue to see a migration to new forms of delivery and new forms of consumption,” said Katzenberg, who bypassed traditional pay cable outlets last year and reached a streaming agreement for his movies with Netflix Inc.

DreamWorks Animation and Classic Media were already collaborating: Katzenberg plans to release “Mr. Peabody & Sherman,” a film based on two characters from Classic Media, in November of next year, one of three planned pictures in 2013.

Katzenberg travels to China next month for meetings regarding Oriental DreamWorks, the Shanghai-based venture announced in February. DreamWorks Animation owns about 45 percent, with the rest held by China Media Capital, Shanghai Media Group and Shanghai Alliance Investment Ltd.

China Announcement

“We will be making some announcements about what our plans are going forward there,” Katzenberg said on Bloomberg TV. “About two weeks from now, we will be able to share some more details.”

The studio is also developing an indoor theme park with property developer Triple Five Group at the American Dream shopping center in East Rutherford, New Jersey, near where the New York Jets and New York Giants share a football stadium.

Katzenberg’s effort at diversification may be the right way to strengthen the company long term, according to Wible.

“I think there’s a long way to go, but this is a step in that direction,” Wible said.

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