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DWA pursues cable prospect with Fox

Global B.O. for 'Madagascar 3' drives 24% spike in Q3 net income

Jeffrey Katzenberg calls the launch of a DreamWorks Animation-branded channel “more than just a dream,” citing the “enthusiasm” behind the conversations taking place with Fox to bring the concept to fruition.

Discussion of a possible cable venture with Fox, where DWA just signed a long-term distribution pact for its feature toons, followed strong third-quarter earnings from DWA that bested Wall Street expectations as profits rose 24%, powered by the worldwide B.O. of “Madagascar 3: Europe’s Most Wanted.”

Toon studio reported net income of $24.4 million for the quarter ended Sept. 30 vs. $19.7 million a year ago. Revenue rose 16% to $186.3 million, exceeding projections of $136 million.

The third “Madagascar” has earned $717 million worldwide since June, with the toon generating revenue of $47 million this quarter. Pic will continue to contribute coin to DWA’s coffers during the fourth quarter with the film still rolling out in major overseas territories. DWA next releases “Rise of the Guardians” on Nov. 21. Pic’s $145 million budget is higher than that of many previous DWA pics, although moving forward, company wants its budgets to hover around $130 million.

During the third quarter, “Puss in Boots” earned another $44.8 million for the company from domestic and overseas pay TV revenue, while “Kung Fu Panda 2” collected $9 million from international pay TV deals. August’s $155 million purchase of Classic Media and its more than 450 properties, including Lassie, the Lone Ranger and Casper the Friendly Ghost, contributed $4 million from homevid sales.

DWA’s library pumped out nearly $51 million.

In addition to the potential cable channel, Katzenberg said he would like to see DWA’s characters on primetime on Fox. DreamWorks last took a stab at a primetime network skein with the short-lived “Father of the Pride” on NBC in 2004. For now, however, Katzenberg emphasized that he has no plans to end DWA’s current relationship with Nickelodeon, which airs “The Penguins of Madagascar” and has a series based on “Kung Fu Panda” forthcoming.

In a call with analysts, Katzenberg touted plans to bolster DWA’s consumer products division, which he sees as a major source of revenue for the company for DWA and Classic Media properties.

Merchandise will become “a bigger part of DreamWorks Animation going forward than it has been,” he said, adding that at least one of the three films it will start to release each year, beginning in 2013, will have “a clear, forward-leaning consumer products opportunity.”

Fox will begin distributing DWA’s toons through a five-year pact inked with the studio in August. DWA recently secured a new $400 million credit line, Katzenberg said. Overseas, the company is moving forward with plans to build Oriental DreamWorks as a new Shanghai-based studio by buying Chinese animation studio 37 Entertainment at an undisclosed price. Company has 175 staffers.

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