‘Shrek’ powers DreamWorks Animation profits

3D a big draw in company's third quarter

As goes DreamWorks Animation, so goes Hollywood — at least in recent months. Two highlights of the studio’s third-quarter results, reported Tuesday, mirror some of the biz’s biggest trends: the growing importance of international box office and the promise of 3D.

DreamWorks’ highest-grossing international film, “Shrek Forever After,” helped boost the studio’s revenues by 40% to $189 million and its net profits by more than 100% to $40 million in the third quarter. The film has done nearly $500 million in international box office. And about 60% of its total global B.O. — about $735 million — has come from 3D showings.

“This has already been a historic year for the company, and we are still looking forward to the theatrical release of ‘Megamind’ in two weeks,” said CEO Jeffrey Katzenberg, “as well as home-entertainment results from both ‘How to Train Your Dragon’ and ‘Shrek Forever After’ yet to come this year.”

The financials were reported after the market closed. Company’s third-quarter profits of 47¢ per share on a fully diluted basis handily beat the analysts’ consensus prediction of 35¢ a share. In after-hours trading, DreamWorks shares spiked by as much as $1.26 to $35.90.

“Shrek Forever After,” released on May 21, contributed $120 million in revenues to DreamWorks’ coffers in the quarter, while “How to Train Your Dragon,” released on March 26, continued to make a contribution — $800,000 in the quarter. About 60% of “Dragon’s” box office came from 3D as well.

One of the most vocal proponents of 3D technology in Hollywood, Katzenberg said those percentages show that consumers are “embracing this revolutionary format” despite some reports that moviegoers had cooled to high-price 3D movies. Katzenberg also brushed aside complaints from some theater owners increasingly upset with the “sticker shock” exhibited by some movie fans over the gap between 3D and 2D ticket prices. Katzenberg said he’d literally circled the globe twice in the past two months, visiting 18 countries, and not one exhibitor complained to him about price. He said he expects the average gap of $3.50 in price between the tickets to remain in place.

On his travels, Katzenberg said he was particularly encouraged by how many countries are embracing 3D, including China, which now has 2,000 3D screens. He pointed out that six of the 10 top-grossing movies this year have also been released in 3D, including “Shrek Forever” and “Dragon.”

Meanwhile, the format is creating new ancillary revenue streams. For example, Samsung will sell its latest 3D TV sets this holiday season along with 3D offerings of “Shrek Forever.”

Looking ahead for the rest of the year, the company said it expects fourth-quarter results to be bolstered by DVD sales and rentals of “Dragon,” “Shrek Forever” and box office revenue from “Megamind,” due to debut in U.S. theaters on Nov. 5.

Katzenberg was overly cautious when discussing the blockbuster sales since Oct. 15 of the “Dragon” DVD. While the company has not released numbers, reports suggest sales have exceeded 1.8 million units — placing the film at the top of DVD sales list for the past two weeks. “The fourth quarter will be the most competitive DVD (release) market we have ever seen,” Katzenberg said, “and I don’t want Wall Street to get ahead of itself on ‘How to Train Your Dragon.’ This is a marathon, not a sprint.”

Forever the champion of 3D, Katzenberg was leaving directly from the earnings conference call to the airport, where he would fly to New York to participate today in yet another conference on 3D in film.

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