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Jeffrey Katzenberg on DWA’s Cutbacks: ‘3 Films a Year Was Too Ambitious’

DreamWorks Animation’s goals may have been a little too lofty when it announced plans to start releasing three films a year, admits company chief Jeffrey Katzenberg.

“Making three films a year was too ambitious,” Katzenberg told analysts after announcing a major reorganization of the Glendale, Calif., toon studio that is resulting in layoffs of around 500 people, including its chief marketing officer, Dawn Taubin, and chief operating officer, Mark Zoradi. Chief creative officer Bill Damaschke already had stepped down, while vice chairman and former chief financial officer Lew Coleman is retiring.

After a string of box office misfires that have included “Rise of the Guardians,” “Turbo,” “Mr. Peabody & Sherman” and, more recently, “The Penguins of Madagascar” — forcing the company to write off more than $290 million in losses — DWA was forced to make changes.

That included appointing Bonnie Arnold and Mireille Soria as co-presidents of DWA’s feature division earlier this month.

“I don’t think we ever attained the creative capacity to maintain the highest level of quality while we went for the quantity,” Katzenberg said. “We achieved the production capacity but not the creative capacity to do it. We have fallen short on the creative side of it. That’s why we made the change in the creative leadership.”

At the same time, Katzenberg said the movie marketplace is very different today than it was three or four years ago, when DWA announced plans to increase its output. “It’s much more competitive,” he said, in terms of playability, marketability and the availability of release dates.

Katzenberg said the company is now “in a position to steer the ship to make blockbuster hits, which we did for 15 years. I want us to get back to making two great blockbuster films a year. We want to get back to basics here.”

As a result of the reorg, Katzenberg said he will take a more hands-on role in how DWA’s films are developed and produced.

“Much of my time has been focused on expanding the company (into other businesses like expanding into China, theme parks, live touring shows, licensing). It’s now time for me to turn my attention back to the core businesses and support Mireille and Bonnie. Much more of my time will be in support to them and less on the road. I remain 100% committed to building DreamWorks Animation. My time and my focus needs to be on making blockbuster hit films. We have the people to do it.”

The cost cutting also involves taking a harder look at the budgets of the films.

DWA has long said it wants to reduce their pricetags from around $145 million-$150 million to closer to $120 million. While this year’s “Home” was produced for around that latter figure, its six-month delay raised costs. “Trolls,” set for a 2016 release, will be the first film to be made with the $120 million budget.

“Captain Underpants” is being produced with a far lower pricetag, with its animation work outsourced to Mikros Image’s facility in Montreal, Canada, rather than studios in India or China, sources tell Variety. The film’s look will differ from that of most DWA productions as a result.

A majority of the cuts announced Thursday are being made across DWA’s film biz, with consumer products also impacted.

“What we have done is gone through the rest of the company and right-sized (the company) to reflect the downsizing of the feature animation output,” Katzenberg said.

Its northern California studio, PDI/DreamWorks, also will be shuttered, with staff there offered the chance to move to DWA’s headquarters in Glendale, Calif. PDI, which had operated as a visual effects studio under the Pacific Data Images name before DWA acquired it in 2000 to produce animated films, was behind the “Shrek” films, “Madagascar: Escape 2 Africa,” and that series’ third installment, “Mr. Peabody & Sherman” and “Penguins of Madagascar.”

PDI/DreamWorks did work on the “How to Train Your Dragon” franchise but was not the lead animation studio on the films, whose work was mostly done at DWA’s Glendale campus.

DWA’s new strategy also embraces more release dates that fall in January and February, and steers its titles away from the crowded summer and fall seasons.

“I can only say one thing to you: ‘American Sniper,'” Katzenberg said when asked why he’s more amenable to those dates.

“More and more we’re seeing a 52-week opportunity,” he said. “We’ve tried to be very opportunistic with the dates that we’ve picked” as the company now competes against animation and other four-quadrant blockbuster titles.

“Getting our feature film business back on track is our number one priority,” Katzenberg said.

The company will focus on six specific movies for the next three years: “Kung Fu Panda 3″ (March 18, 2016), “Trolls” (Nov. 4, 2016), “Boss Baby” (Jan. 13, 2017), “The Croods 2″ (Dec. 22, 2017), “Larrikins” (Feb. 16, 2018) and “How to Train Your Dragon 3″ (June 29, 2018).

“B.O.O.: Bureau of Otherworldly Operations” and Bollywood-themed “Mumbai Musical” have been put back into development.

Katzenberg now calls the company’s new release strategy “as strong a schedule as we could possibly have.”

The executive has no plans to look for a new theatrical distribution deal for his films, which 20th Century Fox now handles.

“Our deal with Fox remains unaffected,” Katzenberg said. “It couldn’t have been better, couldn’t be stronger. We have a strong alliance with Fox that allows us to remain an independent company and succeed on the size and scale that the company is.”

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