Direct-to-video is no longer part of DreamWorks Animation’s plans.
Company said Tuesday that it’s shifting “Puss ‘n Boots,” a planned “Shrek” spinoff that was to be released on DVD in 2008, into a theatrical that won’t likely see release until at least 2010.
CEO Jeffrey Katzenberg attributed the decision to a crowded direct-to-video market and the high cost of making a pic that wouldn’t disappoint “Shrek” fans, as well as confidence that “Puss ‘n Boots” will work on the bigscreen.
“We think ultimately we can get the most from this property by waiting and releasing it theatrically,” he told Daily Variety.
Along with a decision to turn the penguin characters from “Madagascar,” previously set for their own DVD release, into a series for Nickelodeon (Daily Variety, Oct. 24), DWA has now emptied out its direct-to-video development pipeline, though Katzenberg said the company isn’t necessarily abandoning the market.
As recently as last year, DreamWorks Animation was telling investors that its business plan would consist of one direct-to-video and two theatrical releases per year starting in 2008.
Company also confirmed its two theatrical releases for 2009. “Monsters vs. Aliens,” formerly known as “Rex Havoc,” based on the horror comicbook about a monster hunter called upon to battle aliens who disrupt cable TV service, is set for the summer. “How to Train Your Dragon,” based on the Cressida Cowell children’s book in which a Viking chief’s son must capture a dragon in order to be initiated into his tribe, will be released that fall.
Decision comes after a soft performance this summer by “Over the Hedge,” likely killing plans for a sequel that could have been skedded for 2009. Pic grossed $327 million worldwide vs. $533 million last year for “Madagascar.”
Expectations aren’t too high for “Flushed Away,” DWA’s CG collaboration with Aardman, which bows Friday.
News came as DreamWorks Animation reported better than expected earnings Tuesday, swinging to a $10.5 million profit last quarter vs. a $656,000 loss a year earlier.
Revenue was $55.6 million, down 36% from last year, when strong B.O. perf for “Madagascar” was already bringing in earnings. “Over the Hedge” hasn’t yet generated enough coin to pay back Paramount for all of its marketing and distribution expenses, after which DWA starts to get revenue.
Biggest source of revenue for the quarter was $24.1 million from “Madagascar” homevideo sales and a partial reduction of its return reserves, which DWA has been cautious about after overestimating sales for the “Shrek 2” DVD last year. Company made $17.2 million from domestic pay TV sales for “Wallace & Gromit,” $5.8 million from “Shark Tale” and $8.5 million from other library titles. After the “Shrek 2” homevid debacle, it still has $7.1 million in unrecouped revenue on that film.
It also got an unexpected $6.4 million bonus from distributor Paramount due to renegotiation of a vendor contract.
In the current quarter, revenue will be driven largely by DVD sales for “Over the Hedge,” released on homevideo Oct. 17.
Company hasn’t yet skedded a date for the secondary stock offering recently requested by Paul Allen (Daily Variety, Oct. 12). In a carefully worded statement, prexy Lew Coleman said that DreamWorks Animation is obliged to file registration for the offering within 90 days of his request, which came in early October. He added, however, that DWA’s board has “some flexibility to move the timing of the secondary offering around to make sure it makes sense for shareholders.”
DreamWorks Animation stock was up 3% at $26.45 Tuesday before earnings were announced and rose 2% more in after-hours trading.