DreamWorks Animation SKG Inc. reported a net loss of $3.7 million for its second quarter ended June 30. Revenue totaled just $35.4 million, compared to $300.3 million and a net income of $146.1 million for the same period last year. As expected, quarterly results were negatively affected by the dip in home video sales that also plagued competitor Pixar during the frame.
In a statement, company CEO Jeffrey Katzenberg downplays the problem, commenting, “While we continue to analyze changing trends in the home video market, the performance of our 2004 releases is strong. Shrek 2 remains one of the best selling home video releases of all time, and Shark Tale is the second highest selling DVD of 2005."
DreamWorks is still facing a class action lawsuit filed by shareholders who feel the company misled them with inflated earnings expectations. The action was brought to court after DreamWorks revealed that it had shipped more copies of Shrek 2 than retailers could sell, resulting in a higher-than-expected return rate. It should be interesting to see how Katzenberg and crew revise their marketing strategy when Madagascar is released on home video on Nov. 15.
Though it didn’t do Shrek box office, DreamWorks’ comedy about pampered zoo animals left to survive in the African wilderness turned out to be the toon unit’s saving grace. “Results for the quarter are slightly ahead of where we said they would be on our July 11 conference call, driven by the strength of Madagascar consumer products as well as our library,” Katzenberg adds. “To date, Madagascar has performed very well, achieving more than $432 million in worldwide box office, reaching over $242 million internationally.”
In addition to Madagascar video sales, DreamWorks will be looking to Wallace & Gromit: Curse of the Were-Rabbit to help boost year-end revenue. Katzenberg is particularly optimistic about the international potential for the stop-motion feature, which hits theaters on Oct. 7. “These characters have a strong fan base overseas and the film allows us to deliver a unique and inventive form of animation to audiences this fall," he says. "While it is certainly different from a CG-animated film, we think it is sure to be a special movie-going experience for the entire family.”
Beyond Wallace & Gromit, DreamWorks is focusing on completing two new talking-critter movies for 2006. First up is Flushed Away, about a penthouse-dwelling rat who learns how the other half lives in the sewers, followed by Over the Hedge, an adaptation of Michael Fry’s and T Lewis’ popular comic strip about woodland creatures learning to take advantage of the humans encroaching on their habitat.
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