DreamWorks has feet of clay

'Wallace' follows soft B.O. with slow DVD sales

“Madagascar” was no “Shrek 2” on DVD, and “Wallace & Gromit” wasn’t even close to “Shark Tale” in theaters, causing DreamWorks Animation profits to plunge 67% in the fourth quarter.

Meanwhile, Paramount will screen DreamWorks Animation’s summer tentpole “Over the Hedge” next Thursday at ShoWest.

With a weak performance on homevideo matching disappointing domestic grosses, DWA took its second writedown for “Wallace,” which was critically acclaimed and won the Oscar for animated feature but failed to capture American auds’ interest, grossing just $56.1 million. DVD was released this quarter and sales figures aren’t yet available, but company took a writedown of $25.1 million in the fourth quarter on weak sales.

In the third quarter, DWA took a $3.9 million charge due to the weak domestic theatrical perf, which impacted other ancillaries, such as TV rights.

Pic did much better overseas, grossing $130.3 million.

“Madagascar” did well in homevideo, selling 14.2 million units worldwide in its first seven weeks of release. It was the second best-selling DVD of 2005 but still nowhere close to the 34 million units “Shrek 2” sold in 2004.

However, DWA is undoubtedly hoping for better library performance from the newer pic after heavier than expected returns on “Shrek 2” in the first quarter last year led to a crisis of confidence among investors that rocked the company.

With revenue from the $500 million-plus worldwide theatrical release last May flowing in from distributor DreamWorks, as well as homevideo revs, “Madagascar” contributed $152.3 million worth of revenue for the quarter.

That’s 88% of the company’s total $172.9 million in revenue, which also included $5.7 million from “Shark Tale” and $14.9 million from other library titles.

For the full year, DreamWorks Animation earned $104.6 million on revenue of $462.3 million, down 69% and 57%, respectively, from 2004.

Company didn’t provide guidance for 2006, but noted that it doesn’t expect significant earnings or revenue until the fourth quarter, when revenue from May release “Over the Hedge” should start flowing. DreamWorks Animation doesn’t get revenue from theatrical releases until its distributor — previously DreamWorks, now Paramount — recoups costs, which can take several months.

Other 2006 release is November’s “Flushed Away,” which won’t generate much revenue until next year.

DreamWorks Animation is taking on some costs related to payroll and technology previously handled by DreamWorks live action, but Paramount will reimburse it for those costs with a cash payment of $11 million for 2006.

CEO Jeffrey Katzenberg, who was criticized last year for overhyping DWA releases, was remarkably modest about the upcoming slate. Asked on a conference call with analysts about “Over the Hedge” and “Flushed Away,” he simply said: “They’re fine.”

DreamWorks Animation shares were up 1% at $26.86 before earnings were announced, but were down 3% in after-hours trading.