Analysts Split Over 'Rango's' Impact on Paramount-DWA Distribution Deal

Rango
Rango
 

Despite the likelihood that Rango will be fairly profitable, DreamWorks Animation is poised to strike a better arrangement from Paramount when their current distribution deal expires in 2012.

That's what Cowen and Co. analyst Doug Creutz was telling his clients on Tuesday, a day after Lazard Capital Markets analyst Barton Crockett told his clients something different.

Rango, which Crockett figures will hit $159 million domestically, might "bite" DWA because Paramount could use it as leverage to prove it can make its own CG-animated films so it doesn't need to settle for less than the 8% distribution fee it now gets from DWA. Naturally, DWA is looking to negotiate that fee down before re-upping with Paramount.

Creutz, though, notes that its far too expensive and risky for Paramount to make family-friendly animated films on its own, so ultimately it will see things DWA's way and settle for a smaller fee.

Paramount, the analyst notes, already has to contend with losing the distribution of Marvel films at the end of this year, so it's in no position to also dismiss DWA's output too quickly.

He also maintains that animated films are in decline in both quality and popularity, making it all the more risky for Paramount to go it alone, or even to partner with Industrial Light & Magic, as it did with Rango.

"We believe the film is likely to be only slightly more profitable to Paramount than the average DWA film, with higher associated risk," Creutz said Tuesday. "We continue to believe that a renegotiation and extension of the distribution deal at terms slightly more favorable to DWA is the most likely outcome."

Just so there's no confusion as to the films Paramount will distribute if it remains DWA's partner, DWA revealed Tuesday its slate through 2014. Movies set for after the current deal with Paramount expires are The Croods, a caveman story starring Nicolas Cage and Emma Stone; Turbo, about a snail whose goal is to be the world's fastest; Me and My Shadow, about a shadow who yearns for more power over his human counterpart; Mr. Peabody & Sherman, based on the classic cartoon and starring Robert Downey Jr.; and How to Train Your Dragon 2.

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