DreamWorks’ Kid Stuff Could Fuel Comcast’s Serious Business

Analysis: DreamWorks' many kid properties could help Comcast gain more traction in efforts to vie with Disney, Viacom, and Time Warner

DreamWorks' Kid Stuff Could Fuel Comcast's
Courtesy of DreamWorks

You wouldn’t think a company that gets the bulk of its revenue from selling broadband services and high-speed Internet would care overmuch for cartoon fare like Shrek, The Croods or Kung Fu Panda. Yet just weeks ago, over at NBCUniversal, executives enlisted both the company that makes Chrysler cars and late-night host Seth Meyers to lend a boost to “The Secret Life of Pets,” an animated film that could mean big things for the media conglomerate’s owner – cable giant Comcast.

The Philadelphia company’s bid for DreamWorks Animation, said to be valued at around $3 billion, is a vote for the growing importance of intellectual property geared at kids. Already, Comcast has been nurturing Sprout, a cable network aimed at pre-schoolers, recently putting it under the supervision of Frances Berwick, a TV executive who also runs adult-skewing outlets like Bravo.

By acquiring DreamWorks Animation, Comcast could become a bigger player in a field that continues to expand. A purchase of the studio that controls rights to everything from Casper the Friendly Ghost to Gerald McBoing Boing would give Comcast more traction in competing with other big media companies that cater to kids, namely Viacom, Walt Disney and Time Warner – and use animated characters and films to feed its TV networks, theme parks and consumer-product operations as well as its movie business.

“Comcast is, no doubt, attracted as much by DreamWorks’ library and intellectual property as by what they might want to do next,” said Craig Moffett, an independent media-industry analyst, in a research note. “Sure, there is optimism about ‘The Secret Life of Pets’ and next year’s ‘Despicable Me 3,’” two projects that NBCU’s own movie company, Universal, is distributing. “But it is likely the content library and characters that appeal.”

Universal already has an exclusive distribution and financing deal with Illumination Entertainment, the Santa Monica animation production studio launched by Chris Meledandri, a one time animation executive at 20th Century Fox who supervised that company’s spate of “Ice Age” films. That pact has brought Comcast its “Despicable Me” franchise and “Minions,” as wll as the coming “Pets.” Tying up DreamWorks would give it more leverage in the kids’-content arena, paramount for a company that needs to lure young viewers who in this era of new technology are ever more prone to leaving traditional forms of entertainment behind in favor of YouTube influencers or short Vine videos.

The bid also illustrates Comcast’s appetite for controlling content. The company has long demonstrated a yen for glitzy video, starting with its audacious but failed $54 billion bid for Walt Disney in 2004. “Comcast seems to avoid the obvious traps of investing in content by always buying counter-cyclically,” said Moffett, the analyst, noting that the company’s purchase of NBCUniversal from General Electric, starting in 2011, occurred toward the bottom of the market, when many media companies grappled with an advertising recession.

Executives declined to tip their hand today when speaking with investors on a conference call to discuss earnings. Brian Roberts, the company’s chief executive, emphasized that Comcast’s strength in current times comes from having leverage in both content and distribution. “If you have more than one kid, you love them equally,” Roberts said. “They’re both great businesses.”

Even so, a DreamWorks buy would lend Comcast some new playthings that could enhance its overall toy-box. In addition to the characters, DreamWorks has a stake in AwesomenessTV, the multi-channel video network founded by former “Smallville” producers Brian Robbins and Joe Davola. The company also developed some real-time animation software that could prove valuable, noted Eric Wold, an entertainment analyst at B. Riley & Co.

Comcast’s top executive may love distribution and content in equal measure, and the company’s cable business brings in most of its revenue, but content has been good for the company. During Wednesday’s investor call, NBCUniversal Chief Executive Steve Burke reminded investors that the company was generating $800 million in retransmission fees from affiliates and TV stations – money that was not existent five or so years ago. And he predicted NBCU would fare well in TV’s coming “upfront” market, during which U.S. TV networks try to sell the bulk of their ad time for the coming program cycle.

Some of that content has helped Comcast expand its ambitions, including recent efforts to gain more dominance over advertising placement and measurement, two areas in which Comcast has been asserting itself. The company last year bought Visible World, an advertising technology concern that helps marketers place ads with more precision. And it has made outreach to other media companies to license viewing data culled from subscribers’ set top boxes.

“It feels like broadcast is getting stronger and stronger in this period” of flux in the media industry caused by digital technology, Burke told investors. “We have to keep putting good shows on and it’s tougher and tougher in a fragmented world, but when you do, you get rewarded for it, significantly.” A DreamWorks buy could bring new prizes.