'How to Train Your Dragon' boosts studio earnings

DreamWorks Animation is coming off its biggest year ever at the box office after releasing three films in 2010. But the toon studio isn’t rushing to get more films out in theaters as it looks to launch more franchises.

“No movie before its time is our mantra,” said Jeffrey Katzenberg during a call with investors while discussing strong full year and fourth quarter results. “We want to make sure each of our movies has the opportunity to be an event for our customers.”

What that essentially means is not rolling out a new title until the studio can launch a toy line, videogames, animated TV show or special, stage shows, or the prospect of direct-to-DVD and future sequels for the megaplex.

In 2010, DWA became the first studio to release three CG-animated films in a year, with “How to Train Your Dragon,” “Shrek Forever After” and “Megamind” grossing $1.6 billion worldwide at the B.O.

The earnings helped DWA report higher profits of $85 million during the fourth quarter, compared to nearly $44 million during the three-month period a year ago, from revenue of nearly $275 million, up from $194 million. Quarter wrapped Dec. 31.

For the year, profits rose to $171 million, compared to $151 million, on higher revs of $785 million, up from $752 million.

Biggest earners during the quarter were “How to Train Your Dragon,” which generated $80 million, mostly from homevideo sales, followed by “Shrek Forever After” ($72 million also from homevid), “Megamind” (nearly $27 million from the sale of consumer products), “Kung Fu Panda” ($23 million from domestic and international TV), and “Monsters vs. Aliens” ($6 million from homevid).

“Megamind” hits homevid today but isn’t expected to contribute much to DWA’s first quarter sales, given that results will be reported during the second quarter.

In the past, the performance of DVD sales could be tracked back to a film’s B.O., but that’s no longer the case, DWA said.

For example, while the fourth and final “Shrek” may have earned $750 million worldwide, it sold 7.2 million units of its DVD and Blu-ray discs. That’s fewer than the 7.5 million units sold for “Dragon,” which collected $500 million at the global B.O.

In addition to a decline in DVD sales overall, “sequels tend not to hold up as well on homevideo as prior chapters,” Katzenberg said.

And while Hollywood may be seeing significant B.O. growth overseas, it’s in territories that don’t boast strong homevideo markets.

DWA execs emphasized the company’s franchise strategy on Thursday as close rival Disney has ramped up efforts to launch properties that can boost the bottomline of all of its divisions.

“We’re the ones that started that storyline,” focusing on franchises since the company was started nearly seven years ago, said DWA’s chief financial officer Lew Coleman, adding that besides Disney, DWA has more successful ongoing franchises than any other company in Hollywood, including Time Warner. “It’s been the foundation of this company. Does Disney have more levers to pull? They do, but they also have an 80-year head start on us.”

The “Shrek” franchise has already proved itself as a major moneymaker outside theaters since 2001. In fact, studio said the “Shrek” franchise generated two-thirds of the company’s total bottomline last year.

But “Shrek” has showed signs of slowing down; in addition to its slowing DVD sales, its touring musical lost $10 million during the fourth quarter.

New franchises include “Dragon,” which has a sequel planned for 2013, an animated series for Cartoon Network and live show in the works. “Puss in Boots,” a spinoff from “Shrek,” stomps into theaters in November. “Kung Fu Panda” also has an animated series set to roll out on Nickelodeon this fall, months after its sequel hits theaters May 26, followed by its homevideo releases. Property’s virtual world, however, lost $15 million during the recent quarter.

“Megamind” gave DWA’s execs a reason to rethink its release strategy.

Film has earned $319 million to date, since its Nov. 5 bow, and has few spinoffs, if any, planned. Katzenberg expects the film to turn a profit after its homevideo bow.

“We’ve learned a lot” from the results, Katzenberg said. “More than ever we’re determined to allow each film to have the adequate time to realize its potential. If that results in two moves in a year instead of three we’re fine with that.”

Moving forward Katzenberg said DWA has managed to rein in production costs for its pics. Whereas each film has typically cost around $140 million to $150 million to produce, that pricetag is showing signs of declining to around $130 million starting this year. P&A costs are also being kept at around $150 million to $175 million per pic.

“We’re headed in the right direction even though our movies are getting more ambitious,” Katzenberg said.

DWA also isn’t turning away from 3D, which generated two-thirds of the studio’s box office last year and has given the company “a meaningful way to differentiate the DreamWorks Animation brand,” Katzenberg said.

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