DreamWorks Animation Takes $57 Million Writedown on ‘Mr. Peabody’

Mr Peabody and Sherman

DreamWorks Animation has taken a $57 million impairment charge against earnings due to the disappointing box office results for “Mr. Peabody and Sherman.”

The company reported on Tuesday a first-quarter loss of $42.9 million, or 51 cents a share, on revenues of $147.2 million. DreamWorks Animation posted earnings of $5.6 million, or 7 cents a share, on revenues of $134.6 million during the 2013 first quarter.

“The box office shortfall of ‘Mr. Peabody and Sherman’ is evidence of the current challenges we face within our feature film segment, and restoring the strength in our core business is my number one priority today,” said CEO Jeffrey Katzenberg.

“Our next film is ‘How to Train Your Dragon 2’ on June 13, 2014, and I am confident that its performance will put us back on track to once again reach the levels of box office success that we’ve achieved historically,” he added.

DreamWorks announced the charge and earnings after the market closed. The loss was not a major surprise to analysts, and the stock slid 37 cents to $26 in after-hours trading.

The company’s feature-film segment lost $25.4 million on revenue of $110.1 million during the quarter.

“Mr. Peabody” opened on March 7 through Fox and has grossed $261 million worldwide. Its production cost was $145 million.

Katzenberg told analysts during a conference call after the report that DreamWorks movies need to be “must-see” entertainment, adding that the company needs to be more selective about release dates. He also told analysts that DreamWorks Animation is shifting its strategic thinking to put more emphasis on marketability due to the increasingly competitive marketplace.

“Playability is just not enough today,” Katzenberg added.

The CEO blamed the poor results on three of the last four films on “inconsistent execution.” He also said that DreamWorks will continue to focus on sequels, with at least one per year through 2017.

“The Penguins of Madagascar” opens next March, and “Kung Fu Panda 3” is set for release in December 2015. “How to Train Your Dragon 3” will open in June, 2016, and “The Croods 2” is set for June, 2017.

Chief operating officer Ann Daily told analysts that the average production cost of upcoming DreamWorks Animation titles will be $125 million or less.

DreamWorks Animation scored with “The Croods” last year, drawing $587 million worldwide, but fell short with “Turbo,” taking a $13.5 million charge against earnings. It also took an $87 million writedown last year for “Rise of the Guardians.”

The company signed a five-year distribution deal with Fox in 2012.

DreamWorks said “Mr. Peabody” contributed feature film revenue of $3 million to the first quarter; “Turbo” contributed $22.3 million, primarily from domestic pay TV; “The Croods” contributed $41.7 million, primarily from domestic pay TV and home entertainment; and library titles contributed $37.9 million.

The TV operations posted a profit of $5.8 million on revenues of $17.9 million and DWA’s consumer products generated a $6 million profit from $12.1 million in revenue.

The earnings report came a day after Katzenberg told the Milken Institute conference that DreamWorks Animation is hedging its bets and diversifying its interests.

“Movies are not a growth business,” Katzenberg said Monday, explaining why he aggressively lobbied for DreamWorks’ new interests, primarily shortform, digital and television content.

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  1. No Name says:

    I don’t get how something like The Croods, a caveman movie makes more money than a talking dog and his ginger son travelling through time. Mr Peabody & Sherman was a great movie in my opinion, but $145 million does seem like a lot for a animated film.

  2. Daniel Bulan says:

    The problem is DreamWorks needs to reel in their production budgets and have more realistic expectations of their movies’ performance at the box office. Seriously…..when you have something like The Lego Movie with a production budget of $60 million compared to Mr. Peabody with a production budget of $145 million…..someone over at DW has a way too liberal hand in signing off on checks. And what was DW expecting with a movie that has characters based off a 1960’s cartoon? DW simply needs to moderate their budgets and have expectations grounded in reality….not fantasy.

  3. Mark Rimmell says:

    How can a production grossing 261 million in 8 weeks and costing 145 million…make a loss and incur a ‘write down’ of 57 million…? It does not make sense..

    • OU812 says:

      That’s the problem with studio films, they have to make at least 2.5X the negative cost to turn a profit. Budgets are always understated and P and A can add millions. So even at 145 it would have to make 362.5 to be profitable. A lot of departments and lawyers to pay! The movie was pretty bad, I fell asleep but my kids liked it.

    • cadavra says:

      Because theatrical grosses are split with the theatres, so DW only gets about 130 of that. Plus they spent tens of millions on marketing. Throw in the numerous costs for overseas distribution–dubbing into the local languages, new trailers and one-sheets, et al–and the costs really mount up.

    • i thought the same thing

  4. speediejoe says:

    I didn’t see it, but, I was under the impression it got good reviews and did moderately well. And looking at the 261 mil worldwide, it did do moderately well. If they made if for only $75 mil, it would have made a profit. They just spent too much money on it.

  5. R.l. Procter says:

    When is the sequel?

  6. Brockelman says:

    Reblogged this on BrockelPress and commented:
    It was a dog—a very expensive dog.

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