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D’Works will rely on animal instinct

'Madagascar' sequels greenlit

Is “Madagascar” the next “Shrek”?

Jeffrey Katzenberg is hoping so. DreamWorks Animation has selected its most recent release as its second franchise, greenlighting theatrical and direct-to-video sequels.

Stars Ben Stiller, Chris Rock and Jada Pinkett Smith, along with co-directors Eric Darnell and Tim McGrath, have already been signed for a theatrical sequel targeted for release in late 2008.

Supporting player Andy Richter is aboard as well, and the studio confirmed it is working on deals with other voice actors including David Schwimmer, Sacha Baron Cohen and Cedric the Entertainer.

CGI animation company also is working on a direct-to-video title featuring the film’s popular penguin supporting players that would come out in 2009. It will be studio’s second direct-to-video pic after “Shrek” spinoff “Puss in Boots,” which has been pushed back from 2007 to 2008.

“Madagascar” has made nearly $200 million in domestic box office and more than $300 million overseas since its May release.

Katzenberg revealed the news in a presentation at Merrill Lynch’s media conference in Pasadena, where he also addressed investor concerns about problems in the DVD market, which hit DreamWorks Animation particularly hard when it didn’t meet sales projections for “Shrek 2.”

Exec acknowledged that the studio’s first year as a public company has been one of “considerable learning” and that there have been “some bumps in the road.” But he said using high-profile new releases will be key to helping sales of DreamWorks Animation DVDs after they move out of the new-release section and on to crowded catalog shelves.

“Shrek 2” sold 34 million units over the holidays last year, but by early 2005, the studio had so many returns from overstocked retailers that it didn’t recognize any revenue from the pic in the first two quarters of this year.

DreamWorks Animation is facing a Securities and Exchange Commission investigation and shareholder lawsuits over its failure to warn Wall Street ahead of time that sales were off so significantly.

Company hopes to temper the problem by using extra content in new DVDs, as well as theatrical sequels, to draw consumer attention to titles no longer at the front of stores. Katzenberg cited the sale of 9 million discs of the original “Shrek” since the sequel came out as an example of the strategy.

“By creatively utilizing new releases to also market catalog titles, we think we can continue to drive sales,” he explained.

Asked about the cost of studio’s pics, chief financial officer Kris Leslie said they have been on the upper end of the $110 million-$130 million range that the company told investors. But she’s hopeful recent tech improvements at DreamWorks’ Glendale and Northern California offices may help bring costs down.

With attention focused on high-profile CGI toons in the future, Katzenberg made only passing mention of “Wallace and Gromit: Curse of the Were-Rabbit.” DreamWorks is releasing the stop-motion pic from Ardman in October but has lower expectations for the film than for its internally made CGI pics.

Shares in DreamWorks Animation closed down slightly at $27.37 on Wednesday.

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