Will toon IPO be a draw?

House of 'Shrek' looks to mint more green as a solo act

HOLLYWOOD — Now that DreamWorks has made an official move toward an IPO for its animation unit — last week the studio filed a registration statement with the SEC — Jeffrey Katzenberg and Co. are hoping investors’ heads are dancing with visions not just of “Shrek” but of Pixar.

That latter studio has emerged as the model of computer-animation success. A lean operation that consistently boasts profit margins of 70%, Pixar also consistently churns out hits.

The DreamWorks IPO is an opportunity to cash out big-ticket investor Paul Allen, and the new company may indeed reach Pixar-like profit levels.

But there are some noteworthy challenges:

The IPO comes at a time when other studios are ramping up their own animation efforts, among them Sony, Fox and Lucasfilm. Even Disney is now working exclusively in computer-generated, rather than traditional, animation.

Furthermore, DreamWorks’ strategy is far more ambitious, and costly, than Pixar’s.

While Pixar is on a steady diet of one pic every 18 months, DreamWorks plans on releasing two a year. It also has its finger in the TV pie, producing “Father of the Pride” for NBC this fall.

As for bonafide hits, DreamWorks has struck green with “Shrek” — the franchise’s first two films together minted $693 million and counting at the U.S. box office — but its other animation offerings pale, some of them quite severely, in comparison. Think “Sinbad: Legend of the Seven Seas” and “The Road to El Dorado.”

Finally, there is the matter of costs.

According to the SEC filing, the only profitable year for DreamWorks’ animation unit was 2001, the year of “Shrek.” Net income that year was $3.7 million. Yet total costs for 2001 topped $509 million, due presumably in part to DreamWorks’ high overhead and hefty load of employees.

In 2003, “Finding Nemo” led Pixar (and distribution partner Disney) to total revenue of close to $300 million. It rang up just $38 million in costs.

Thus, in size and mission Pixar and DreamWorks, like their trademark creatures — fish and ogres — are not the same animal.

But over the next few months DreamWorks is hoping investors won’t see it exactly that way.

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