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Shares of DreamWorks Animation were up as much as 9% in after-hours trading as investors were treated to an impressive second-quarter earnings report, though CEO Jeffrey Katzenberg lamented a poor domestic showing for Kung Fu Panda 2 due to an unfortunate release date.
Katzenberg said he initially thought DWA picked a great release date for Panda up against The Hangover Part II in the U.S. because it represented good counterprogramming, until the R-rated comedy turned into a “phenomenon” that even attracted kids.
Panda has earned only $160 million domestically compared with $440 million internationally, and opening against Hangover II cost Panda $20 million during its opening weekend alone, Katzenberg said.
“We unfortunately completely ran into an unexpected tidal wave,” he told analysts on a conference call Tuesday to discuss quarterly earnings.
Katzenberg said the unexpected appeal of Hangover II among family audiences has caused him to take a look at planned release dates of DWA films for the next two years, which has resulted in a new date for one film, though he didn’t reveal which title, except to say it wasn’t Puss in Boots, which is due in November.
The trailer for Puss in Boots, he added, has been viewed 8 million times on YouTube, a DWA record. (See trailer below).
The company posted net income of $34.1 million compared with $24 million in the same quarter last year. Per-share profit was 40 cents, which was 3 cents better than what analysts polled by Bloomberg had predicted.
Revenue was up 38% to $218.3 million, which was way above the $192 million analysts expected. Generating the most revenue in the quarter, $66.5 million, were library titles, followed by Panda 2, which brought in $55.8 million.
Shares of DWA were down 2% during the regular session to $21.57 but rose as high as $2 in after-hours trading.
Katzenberg didn’t shed much light on negotiations with Paramount, where a distribution agreement could end at the close of 2012. He indicated, though, that the media and Wall Street are overreacting to the situation and that re-upping with Paramount is a good possibility.
“Two parties get to make this decision,” he said, adding that Paramount’s CGI-animated Rango “had zero impact on us and our relationship with them.”
Katzenberg was mum about a potential streaming deal with Netflix, and acknowledged that DWA and the rest of Hollywood must “earn back the trust” of consumers if they are expected to keep paying a premium for 3D.
Such talk from Katzenberg, a 3D evangelist, isn’t entirely new, though. During a presentation a week ago, for example, he said, “For sure the bloom is off the rose for a moment in time, driven by a singular and unique characteristic that only exists in Hollywood, greed.”
DWA does 3D well, of course, Katzenberg said Tuesday, and Michael Bay did an “exceptional, exceptional” job with Transformers: Dark of the Moon, but some other filmmakers have tarnished 3D’s image by taking the cheap and easy route.
For the time being, DWA intends on making 2D and 3D versions of its films, he said, calling 3D expenditures “one of the best returns on investment” in DWA’s history.
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