Getting Animated About Summer
By Ronald Grover
Call it the CG dance -- CG as in "computer generated." A day after Pixar (PIXR ) and Disney (DIS ) announced they would delay for seven months the release of their next animated feature, Cars, DreamWorks SKG Animation (DWA ) said it will do the same with Shrek 3, the sequel to blockbusters Shrek and Shrek 2. Shrek 3 is being moved to summer 2007 from its initial release date of late 2006 (see BW Online, 12/9/04, "Steve Jobs's Sharp Turn with Cars").
The reason? Summer audiences are hot for computer-generated animated flicks, says DreamWorks CEO Jeffrey Katzenberg -– an important consideration for a film that's likely to cost as much as $120 million.
The Shrek 3 shuffle dominated the animation studio's first public earnings release on Dec. 8. DreamWorks SKG Animation said it earned $20.3 million on sales of $582.5 million in the third quarter. The outfit, which split from parent DreamWorks SKG and raised $812 million in an October IPO, lost $35.9 million in the year-earlier period, on $47.8 million in revenues. For the first nine months of this year, DreamWorks' animation unit earned $141 million, vs. a loss of $150.6 million for the year-ago period.
The difference between the two years' results? Two huge box-office successes in 2004 -- this summer's Shrek 2 and Shark Tale, which was released in October. Shrek 2 earned $436.7 million in the U.S., surpassing last year's Finding Nemo (from Pixar) as the highest-grossing computer-generated film to date.
DreamWorks officials predict that Shrek 2 will sell more than 37 million video units by yearend, with that tally ultimately reaching 55 million. They expect Shark Tale, which has grossed more than $160 million domestically, to generate in excess of $315 million worldwide. DreamWorks Animation's stock rose 1.52%, to $40.20, in anticipation of the announcement, but declined 39 cents in after-hours trading.
The results are clearly a home run for DreamWorks' three amigos -- Hollywood luminaries Steven Spielberg, Jeffrey Katzenberg, and David Geffen. The trio launched the studio in 1994, but it needed several years before it found its footing. The first animated films were lackluster, the TV shows bombed, and the music and video units were sold off. Indeed, even now, Katzenberg sheepishly admits that its groundbreaking computer-generated TV show Father of the Pride isn't likely to get a renewal order from General Electric's (GE ) NBC.
Still, with seven films in various stages of production, it looks like DreamWorks will be going great guns for the next three years. As things stand now, the studio expects to release Madagascar, a film about Central Park Zoo animals stranded on a desert island, on May 27. Later in 2005, DreamWorks will release Wallace & Gromit: Tale of the Were Rabbit, a stop-action claymation-style film. -- three weeks before Disney releases its own computer-animated film, Chicken Little, on Nov. 4.
And when Pixar releases Cars in the summer of 2006, DreamWorks will have released Over the Hedge three weeks earlier. The DreamWorks film is based on a popular newspaper comic, with Bruce Willis doing the voice of a raccoon named RJ. (Recurring Hollywood rumors say Pixar moved back its film so that it could delay negotiating a continuation of its 13-year production deal with Disney, which expires when Cars is delivered, after a successor to Disney CEO Michael Eisner has been found. That search is expected to be completed by June, 2005.)
The summer 2007 third installment of the Shrek franchise will no doubt put the green ogre in direct competition with the 800-pound gorilla, so to speak, since Pixar has decided to release all of its films in the summer. Early indications are that Pixar will release a film called Ratatouille in the summer of 2007.
That prospect didn't seem to bother Katzenberg. "We learned with Shark Tale [released three weeks before Pixar's The Incredibles] that three weeks is just fine for this market." Indeed, the close quarters didn't seem to hurt either film. And no one loves a fight more than the folks who turn out to see those animated characters kick the stuffing out of one another.
Grover is BusinessWeek's Los Angeles bureau chief