June 19 (Bloomberg) -- DreamWorks Animation SKG Inc., maker of the “Madagascar” movies, will generate $100 million in TV production revenue this year, Chief Executive Officer Jeffrey Katzenberg said, lessening the company’s dependence on films.
That amount will increase to $200 million or more in 2015, Katzenberg said yesterday on a conference call with investors and reporters to discuss contracts the company has secured to produce programs for Netflix Inc., the online video service, and Germany’s Super RTL channel.
By expanding television production, Katzenberg is taking steps to reduce the studio’s reliance on scoring hits with each of its theatrical releases. DreamWorks Animation, which has considered creating its own cartoon cable network, is now focusing on Netflix’s growing subscriber base to deliver cash and brand recognition for its properties.
“We are moving very aggressively into the TV business,” Katzenberg said. “Television is a transformative line of business and we expect going forward it will be a significant source of revenue.”
The company will create a billion-dollar library of 1,200 TV episodes in the next five years, Katzenberg said. TV revenue will result in a gross profit margin -- the percentage of revenue after costs are deducted -- of about 30 percent, similar to the company’s film business, he said.
The revenue projections from TV also exclude business from potential merchandising, such as clothes and toys, said Katzenberg.
In the deal with Netflix announced on June 17, DreamWorks Animation, based in Glendale, California, will provide more than 300 hours of new programming, including shows inspired by characters from its movies and its library of classic shows, which include “The Lone Ranger.”
The agreement deepens ties between the companies. In February, DreamWorks Animation agreed to create “Turbo: F.A.S.T.,” a TV series for Netflix based on the studio’s upcoming film “Turbo.” Netflix also signed an agreement in 2011 with DreamWorks Animation that gave it exclusive distribution rights for first-run feature films.
DreamWorks Animation also announced yesterday that it will sell half-hour children’s TV shows based on its films including “How to Train Your Dragon” to Super RTL. The five-year licensing agreement includes more than 1,100 half-hour episodes for Cologne-based Super RTL, a children’s TV network. DreamWorks Animation will begin delivering programs in September, the company said.
The company’s shares climbed as much as 2 percent to $24.80 in extended trading yesterday, after gaining 2.4 percent to $24.31 at the close in New York. The stock has climbed 47 percent this year.
DreamWorks Animation, which has previously licensed programming to Viacom Inc.’s Nickelodeon and Time Warner Inc.’s Cartoon Network, will focus on delivering animated series more than creating a cable network of its own, which remains a future possibility, Katzenberg said.
“To start a cable channel from scratch today, the barriers to entry are very, very high,” Katzenberg said in a phone interview yesterday following the conference call. “The success of Netflix, the spectacular growth they have had and the strong family audience there created this opportunity. We are more than happy to be on someone else’s platform. There’s nothing wrong with that.”
DreamWorks Animation in May agreed to acquire Awesomeness TV, a popular teen network on Google Inc.’s YouTube, for $33 million in cash and as much as $117 million more through 2015 if earnings targets are met. Last year it agreed to buy Classic Media, owner of characters including “Casper the Friendly Ghost,” and “Lassie,” for $155 million.
Classic Media will provide about $50 million in TV revenue this year, Katzenberg said on the call yesterday. DreamWorks Animation’s revenue last year was $749.8 million.
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