DreamWorks slates eight pics through 2012
Firm says it will lower production costs by outsourcing
DreamWorks Animation SKG Inc. will release five feature films every two years, adding an additional film every other year to its existing two picture-a-year release schedule going forward, chief executive Jeffrey Katzenberg told investors on Thursday.
The company's slate through 2012 now includes eight feature films, including five original films and three sequels based on its "Shrek", "Madagascar" and "Kung Fu Panda" franchises. All DreamWorks Animation films are available in 3D.
Katzenberg told the Cowen and Co. Technology Media and Telecom Conference the animation company has "the resources and bandwidth to support the new films" and would see "significant cost savings on a per film basis."
Lazard Capital Markets analyst Barton Crockett saw the expanded slate as "a positive". Shares of DreamWorks were up 4 cents at $27.20 in early afternoon trading on Nasdaq on Thursday.
"By making more movies, we believe that (DreamWorks) has more chances to produce a new franchise, improving long-term earnings prospects, and increasing (its) strategic value to larger studios, such as its distribution partner, where (it) expects to negotiate better terms after the deal expires in 2012," Crockett, who has a "buy" rating on DreamWorks and a $30 price target, wrote in a note to clients.
Because of a scheduling anomaly, DreamWorks Animation already had three films slated for 2010, and Katzenberg said it expected to see a 5% to 10% improvement in its typical production costs of $130 million per film plus the $15 million price tag for 3D conversion.
Katzenberg said the company now believes it can produce each of its 2011 films for $130 million including 3D, lowering its costs by more than 10%, in part through outsourcing some labor to India.
The company believes the number of major animated film releases from competitors will drop over the next few years, leaving room for more "high end" animation, Katzenberg said.
"Demand is greater than what's in the market now," he said.
The company's DVD sales prospects remain "a home run value proposition", despite a stagnation in overall DVD sales, because parents think of those purchases "not at all as a movie purchase (but)... as a toy purchase" justified by kids' repetitive viewing, Katzenberg said.
DreamWorks Animation also could see some "favorable" changes in its film distribution costs in 2012, when its distribution contract with Viacom's Paramount Pictures expires, Katzenberg said.
Under that deal, inked in 2005 when Paramount bought private parent DreamWorks SKG Inc, DreamWorks Animation pays about $50 million per film in fees, Katzenberg said.
"Today that is probably not a competitive deal. I would expect that we will want to approach some kind of new arrangement with Paramount," Katzenberg said.
DreamWorks Animations' revised release slate is:
-- "How to Train Your Dragon" on March 26, 2010
-- "Shrek Forever After" on May 21, 2010
-- "Oobermind" (formerly titled "Master Mind") on November 5, 2010
-- "Kung Fu Panda: The Kaboom of Doom" on June 3, 2011
-- "The Guardians" (working title), on November 4, 2011
-- "Puss In Boots" (working title) on March 30, 2012
-- a "Madagascar" sequel on May 25, 2012
-- and a November 2, 2012 release of one of three original projects currently in preproduction.
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