DreamWorks Animation in trouble

500 positions cut. Marketing chief and COO both leaving.

The company will focus on six specific movies for the next three years: “Kung Fu Panda 3″ (March 18, 2016), “Trolls” (Nov. 4, 2016), “Boss Baby” (Jan. 13, 2017), “The Croods 2″ (Dec. 22, 2017), “Larrikins” (Feb. 16, 2018) and “How to Train Your Dragon 3″ (June 29, 2018).

Budgets on its films will be reduced to $120 million, starting with “Trolls,” out in 2017. Its northern California studio, PDI, also will be shuttered, with staff there offered the chance to move to DWA’s headquarters in Glendale, Calif. PDI had produced the “How to Train Your Dragon” films.

DWA also said “Captain Underpants” will be produced outside of the studio’s pipeline “at a significantly lower cost” with a 2017 release. The company’s only 2015 release is “Home,” which will open domestically on March 27.

Jeffrey Katzenberg told investors he plans on taking a more “hands-on role” with the company.

“Feature animation is the core of our company. Getting our feature film business back on track is our number one priority.”

Katzenberg said that making three films per year was “too ambitious. I want us to get back to making two great blockbuster films a year. We want to get back to basics here.”

Reduced to $120 million? I forget just how expensive animated films are these days.

Maybe there are too many animated films? How much revenue can the 10 and under crowd drive?

Maybe there are too many animated films? How much revenue can the 10 and under crowd drive?

If you add in DVDs and especially merch, lots. Cars made more far more money from toys than from box office.

A hit animated movie will make tons of money, but those are turning out to be the exception. These movies costs so much that if you don’t hit a home run, you’re in trouble. That’s why DWA is in trouble. They’re swinging and getting singles and doubles when they need to be hitting home runs, and whatever hits they are getting aren’t enough to offset the losses. There’s a big reason why they’re going to scale back on releases. They thought more releases = more revenue = happier shareholders. But reality was more releases = less profit = angry shareholders.

I’m looking at their recent release list, and it’s not pretty. How to Train Your Dragon has been a hit, but movies like Penguins of Madagascar, Mr. Peabody & Sherman, Turbo, and Rise of the Guardians are giant sucking sounds after marketing costs and the theaters take their cut of the box office gross. It looks like Peabody & Sherman was a $57 million write-down, Turbo was around a $20 million write-down, and Rise of the Guardians was an $83 million write-down. Then there’s the lost opportunity costs associated with these giant bets.

A hit animated movie will make tons of money, but those are turning out to be the exception. These movies costs so much that if you don’t hit a home run, you’re in trouble. That’s why DWA is in trouble.

Oh, sure, I’m not saying they’re guaranteed money-makers by any stretch of the imagination. Just that they’re actually quite well suited to the modern film-making era of tentpole releases for which domestic box-office is only a small part of revenue. That doesn’t mean you can just put any old crap out there though. And Dreamworks has always had a problem with consistency of quality compared to Pixar, other Disney, etc.

Define ‘consistency of quality’. Pixar and Disney are good at consistently making money with films that follow a very similar aesthetic and demographical sensibility. Good for them, boring for the rest of us. Laika is, to me, the most consistently satisfying animation house… small surprise, they aren’t mandated to pump out three movies a year like DW, or even required to make tons of money, given their umbrella corp., which lets them take bigger chances with more offbeat stuff.

Define ‘consistency of quality’.

Well enough conceived and produced to be reliable box office successes. I’m obviously not making any great artistic claims for Cars 2 or Planes, but they achieved what they set out to do. Dreamworks seems to have a “let’s throw stuff at the wall and see what sticks” attitude, and then if it does, like Shrek, milk the hell out of it.

The crazy thing about those is that none of those IPs had any sort of track record (except How to Train Your Dragon). So, as with any new IP, you really need a phenomenal story to launch the IP and make it successful, along with great animation and the like. Dreamworks’ animation seems fine, but all of those movies were panned for being pretty awful, story-wise. What are they thinking over at Dreamworks? Honest question: is it that hard to find a good script for an animated picture?

I’ve wondered the same thing, Aleck. I assume that behind the scenes when movies are being put together, the choice bits go to better performing animation studios, as they have the capital security to turn away the riskier projects.

Part of the problem is the expense. You can make a good animated movie for less than $40m. Mune was done for €18m. HTTYD2 was expensive, looked expensive, but certainly wasn’t a better movie for the money spent (Full disclosure, I thought it was a bloated, overwrought, borefest). Something smaller in scope and more personal, without a 700-dragon battle on a raging ocean, would have served the story and the shareholders better. Work smarter, not harder.

I hate hearing about Rise of the Guardians bombing… my kids love it and honestly so do I.

Yeah, Rise of the Guardians is legitimately great.

Another thumbs up here, everyone in the house loved it. A rare thing these days.

Rise of the Guardians is sort of our official Christmas movie. Everyone loved it.

For xmas, it goes great with Arthur Christmas, another recent great feels-y animation I feel goes underappreciated (even though it did pretty well in the box office).

And the hits* keep on coming.

*and by hits, I mean body blows and not actual hit movies.

DreamWorks just took a $57 million write-down on Penguins of Madagascar.

They’re also selling their campus in Glendale for about $180 million, but then turning around and leasing it right back.

That’s on top losing out on that animation Oscar to Big Hero 6. Dreamworks lobbied heavily for How to Train Your Dragon 2 if, for no other reason, to salvage some pride.

Really looking forward to more Kung Fu Panda… love that series. The Croods and Dragon are fun too. I wasn’t even tempted with most their recent stuff though.

A shame about the Penguins movie actually. I haven’t seen it, but the Nickelodeon cartoon was hilarious - was hoping the movie would at least be worth a rental. I suspect it failed because they changed Kowalski’s voice.

It was lousy. Somehow they managed to drain all of the fun out of these poor penguins.