Conglom to lay off about 350 employees, 4th quarter sees 'Rise of the Guardians' writedown
As it grows its new ventures overseas, DreamWorks Animation is going through some belt-tightening at home, announcing that it will lay off about 350 of its roughly 2,200 employees in the near future.
“One of our primary goals over the coming months will be to meaningfully reduce our overall cost structure so that our business can perform at the best possible margins even when our output levels fluctuate as it is doing in 2013,” CEO Jeffrey Katzenberg told analysts during an earnings call on Tuesday. “This means that many valuable members of the DreamWorks Animation family will be leaving the company within the year.”
The announcement capped off a dreary fourth-quarter announcement, which saw a net loss of $82.7 million and an $87 million write-down for its non franchise starter “Rise of the Guardians.”
The company reported total revenue of $749.8 million and a net loss of $36.4 million for the 12 months ending Dec. 31.
Distribution partner 20th Century Fox’s decision to push “Mr. Peabody and Sherman” to next year and bump “Me and My Shadow” off next year’s calendar temporarily also contributed to DWA’s upcoming layoffs. Stalling “Shadow” cost DWA $54 million, according to Tuesday’s earnings statement, and moving both films impacts the size and scale of DWA’s workforce.
“While ‘Rise of the Guardians’ did not achieve the level of box office success that we have come to expect from a DreamWorks Animation film, we have made several changes to our future slate that we believe will position us well for the next two years,” said DWA CEO Jeffrey Katzenberg in a statement announcing the financial results. “We are now looking ahead to our next release — and our first under our new distribution agreement with Twentieth Century Fox — ‘The Croods’ on March 22.”
Though “Guardians” has crept up to $300 million worldwide, analysts have called it one of the company’s most disappointing releases to date. The film ended DWA’s seven-year distribution pact with Paramount. The studio has already begun its relationship with new distributor Fox, with which it has dated 12 pics through 2016.
DWA also took $20 million in other write-offs on a number of projects in development.
The company pegged $4.6 million on “restructuring activities” related to the expected layoffs. Those jobs will primarily come from DWA’s production side, although support and overhead groups will also be affected. Staffing on animated pics can be compared to hires on projects at visual effects firms — they ramp up and down depending on the amount of work that’s needed to be done on those films.
“Yes, I’m very disappointed that ‘Guardians’ wasn’t a hit,” Katzenberg told Variety. “(But) about 20 minutes before that was a miss, we had a little movie called ‘Madagascar 3,'” which Katzenberg dubbed “highly profitable” with more than $700 million in worldwide grosses. “There’s nothing wrong with the core business other than we stubbed our toe,” he added.
The dismal quarter occurred as DWA announced plans, earlier this month, to build indoor theme parks in three locations in Russia, and comes after the company announced plans for a Chinese theme park, as well as a new joint venture animation studio in China dubbed “Oriental DreamWorks.”
Fox will release DWA’s next pics “The Croods” and “Turbo” on March 22 and July 19, respectively.
The DWA library contributed approximately $63.4 million in revenue to DWA’s fourth quarter. Other content including holiday television specials and live theatrical properties contributed about $53.1 million of revenue. The Classic Media library, which DWA purchased last year, contributed about $31.6 million, and is expected to benefit from Disney’s upcoming “The Lone Ranger,” which Classic owns.
DWA stock was down 2.5% in after-hours trading to $16.20 per share after falling 1.3% during regular trading.
(Marc Graser contributed to this report.)