The stock closed down 12.2%, to $17.26, after analysts piled on the production company for its soft year-end results, a warning that costs in 2012 will be higher than expected, and broad concerns about the market for animated films. ”Although the studio can control the quality and genre of its movies, it cannot prevent competition in the crowded animation space, or combat 3D fatigue and lofty ticket prices,” says Wedbush Securities analyst Michael Pachter. Janney Capital Markets’ Tony Wible says that DreamWorks Animation’s prospects “look more challenging” in 2012 because it will release just two films instead of three and it’s ”seeing weaker performance on the 2011 carry-over films” — Puss In Boots and Kung Fu Panda 2. Wible lowered his 2012 earnings per share forecast 11.2% to 95 cents, and says the stock is only worth about $13. Susquehanna Financial Group’s Vasily Karasyov is more optimistic — he has a target stock price of $18. But he was jarred by the company’s spending plans to upgrade its production infrastructure, and the talent costs for the upcoming Madagascar 3, which the company says will be $20M higher than they were for the original film. “These largely offset potential benefits of a proven property,” he says. What about DWA’s new joint venture to release films in China? Since the first picture in that deal isn’t due to be released until 2016, “we believe the JV is unlikely to have a material impact on DreamWorks’ earnings near …
UPDATE, 2:22 PM: I can’t recall when I’ve heard CEO Jeff Katzenberg sound so cheerless on one of his quarterly calls with analysts. But with results that sent DreamWorks Animation shares down about 8% in after-market trading, a more gleeful tone might have made him sound delusional. Still, he gamely pointed to potential catalysts for the company, whose market value is down 28.5% over the last 12 months. He told analysts that in late spring or early summer DreamWorks will begin to “actively pursue” a new distribution deal to replace the one with Paramount that expires this year. The company will make a decision “no later than this fall.” Although it’s still early, Katzenberg says that “we have a number of very good options.” But he added that he probably won’t provide the Street with play-by-play updates. “We don’t think that doing it under the day-to-day microscope of people trying to second guess us is necessarily good for the company.”
Cari Lynn is an AwardsLine contributor
Puss in Boots has not yet acquired his ogre-killing ways (nor his hairballs) in his eponymous feature film debut — a “prequel” to Puss’ supporting role in 2004’s Shrek 2. Still, director Chris Miller’s affection for the swashbuckling feline, to say nothing of the vigorous marketing and awards-savvy support of DreamWorks Animation, has helped propel Puss In Boots to a Best Feature Animation Oscar nomination.
“I loved the character of Puss in Boots as soon as he appeared,” says Miller, who was head of story on Shrek 2 and went on to direct Shrek The Third. “I can’t take credit for its origin [in Shrek 2], but once the character appeared, everyone wanted to write for him. I’ve always loved his devilish sense of adventure — and Antonio Banderas’ persona coming out of this tiny, adorable package.”
CEO Jeffrey Katzenberg will have to deliver a world class sales pitch soon if he wants to overcome investors’ growing sense that 2012 will be an ogre of a year for the producers of Shrek. The animation studio’s stock hit an all time low in late December when it fell to $16.50. Even so, 22.9% of the shares were controlled by short sellers — people who were betting that the price would continue to drop — according to SNL Kagan. That hasn’t happened yet; DreamWorks Animation closed today at $17.58, which is still -39% over the last 12 months. But analysts don’t see a buying opportunity: This week Goldman Sachs analyst Drew Borst downgraded DreamWorks to “sell.” He’s disappointed by the estimated $150M domestic box office for last year’s Puss In Boots – which he figures attracted 30% fewer ticket buyers than the average for the previous 13 DreamWorks releases. That probably wasn’t a fluke, he says: The company faces “increased competition at the box office in the kid/family genre” as well as from home entertainment options on cable and online streaming services such as Netflix. Barclays Capital’s Anthony DiClemente also cited weakening trends for home video sales last week when he lowered his 2012 profit estimate by 24.3% to $1.03 a share. He figures Kung Fu Panda 2 sold about 43% fewer DVD and Blu-ray discs than he had forecast. The growing amount of time that kids spend with video games and tablets, “may be impacting demand for DVDs more acutely than previously thought.”
The nominations are out for the 39th annual Annie Awards, which will be awarded February 4 at UCLA’s Royce Hall. Here are the contenders for Best Animated Feature: A Cat In Paris, Arrugas (Wrinkles), Arthur Christmas, Cars 2, Chico & Rita, Kung Fu Panda 2, Puss In Boots, Rango, Rio, and The Adventures Of Tintin. The Annies are put on by the international animated-film society ASIFA-Hollywood and span 28 categories (for the complete list of nominees, click here). “We are really excited about the expanded list of nominations this year,” said Frank Gladstone, president, ASIFA-Hollywood. “All of the major animation studios are represented, as are some of the independent productions from Europe and South America. This certainly is a testament to the wide reach and appeal of animation and the people who create it.” The group also will bestow the Winsor McCay Award to Walt Peregoy, Borge Ring and Robert Searle for career contributions; the June Foray Award to Art Leonardi for significant and benevolent or charitable impact on the art and industry of animation; and a Special Achievement Award to tech company Depth Analysis.
SUNDAY AM, 3RD UPDATE: Latest Top 10 grosses show better North American box office than previously thought thanks to the Veterans Day holiday weekend when school is out in 60% of the country. The good news is a break from slumping attendance with a $137M total moviegoing weekend, up +18% from last year. But the bad news is that these movies are still way underperforming what they should have done on a holiday weekend. That’s because these major studio pics were definitely not crowd-pleasers. Just check out their Rotten Tomatoes scores. But the real question is why Hollywood released two young male-skewing movies the weekend right after two major video games were released. Anecdotal evidence is that the guys were otherwise engaged. Full analysis coming:
1. Immortals 3D (Relativity) NEW [3,112 Theaters]
Friday $14M, Saturday $10M, Weekend $32M
Richard Branson didn’t waste any time blogging to his peeps today: “Congratulations to Jason and the whole team at Virgin Produced for Immortals, their follow up film to Limitless, going straight to number one at the box office this weekend. Jammy bastards!!” He’s as good at spinning underwhelming box office as Relativity’s Ryan Kavanaugh. Truth is Immortals started out slow: it did an unexciting $1.4M in Thursday midnight gross from approximately 900 locations then expanded runs and grosses for Friday but lost -30% Saturday. Pic eked out a $30+M weekend bow, which is a rarity these days. But you also must realize that Immortals is a 300-clone yet didn’t make even 45% of the $70.8M opening amount that the original 2D movie did back in 2006. Even with the higher 3D ticket prices. Immortals should have made $50+M, folks, given the genre and promotion. “300 was absolutely a big success, but we are in a different economy, marketplace, and time of year,” a Relativity exec told me Friday night. “Young males have been hard to get over the past year. It’s a significant accomplishment that we got them. We are well positioned to be the 3rd highest R-rated film this year and the highest R-rated action film this year. This is a win for us.” Needless to say, Relativity is known for its bluster. But it also claims reduced risk from foreign pre-sales on the supposedly $75M-budgeted film. Then explain to me why, for 2 years, Relativity was telling everybody and their mother that the budget of Immortals was $120M. (Don’t believe me? Go back and do a Google search). It sold the film internationally to foreign buyers with a budget of $120M. Now, all of a sudden, the budget is $75 million because of what Relativity says are tax rebates for shooting and doing post production in Montreal? Puh-leeze.
Audiences gave Immortals a ‘B’ CinemaScore but Rotten Tomatoes recorded just 37% positive reviews. That’s lousy considering the pic is from the producers of 300 (Mark Canton and Gianni Nunnari). Yet now Relativity tries to claim this new epic adventure is “completely original — it’s not derived from a comic book; is not based on a novel; and is not a sequel.” Tarsem Singh (The Cell, The Fall) directed and Charles Parlapanides & Vlas Parlapanides are the credited screenwriters. Marketing was aggressive and therefore expensive. It kicked off at Wondercon in April, followed by Comic-Con in July, and what even the studios says was a “barrage” of publicity media appearances, in-theater marketing, outdoor advertising, and radio/TV spots. Partnerships/alliances included Best Buy. Relativity owns worldwide rights to Immortals; Lionsgate handled foreign sales. Alliance Films is releasing in Canada. About 70% of locations played the film in 3D.
Pic opened in over 35 international territories including China, UK, Germany, Italy, Japan, South Korea and Russia. Current estimated weekend box office is approximately $36M with a number of territories (including Indonesia and India) still to report. Relativity says this was the first title releasing through Sky Land, its joint venture with IDG and Saif Partners in China. The list of foreign output partners and additional territories is as long as my arm, including Austria/Constantin, Bulgaria/MGN, China/Sky Land, Finland/Nordisk, Germany/Constantin, Greece/Village, India/Soundspace, Israel/Forum, Italy/RAI, Japan/Universal, Netherlands/A-Film, Russia/CIS/MGN, Romania/MGN, South Africa/Nu Metro, South Korea/Next, Sweden/Nordisk, Turkey/Aqua, UK/Universal, United Arab Emirates/Gulf, Malaysia/PT Parkit, Taiwan/SSG.
2. Jack And Jill (Sony Pictures) NEW [3,438 Theaters]
Friday $9.8M, Saturday $9.6M, Weekend $26M
Sony Pictures’ Jack And Jill starring Adam Sandler was hard-pressed to equal his usual $30+M opening comedies. (Maybe moviegoers aren’t as moronic as Hollywood thinks they are.) Rotten Tomatoes gave this turkey only a 3% positive score. Pic received a ‘B’ CinemaScore but also an ‘A-” from audiences under age 18. After releasing a trailer that was as viciously derided as I’ve ever seen on Deadline, Sony is relieved this Christmas-themed PG movie at least opened. So Adam is off the hook. “It’s a family film so it will play to a better multiple through the season than his normal movies,” one rival studio exec tells me. But you’ve gotta wonder if Sandler is developing a Jim Carrey problem and the public will stop supporting him if he’s in too many stinkers like this. Sony is somewhat alarmed that Adam keeps working with the same cronies in almost every film, but the studio also can’t tell its long-time golden goose Happy Madison to stop laying eggs. Sony sources claim the film was made for $80M and, unlike many comedians, Adam’s films do healthy business overseas because he’s worked at becoming a foreign draw. “So we will be in good shape when all is said and done,” the studio assures me. Unless moviegoers keep remembering what a suckfest this was and can’t get that bad taste out of their mouths when they think of paying for another film. Folks, it’s releases like this that are killing the biz.
That said, Sony did its usual stellar job building awareness for this turkey directed by Dennis Dugan and produced by Sandler, Jack Giarraputo, and Todd Garner. The screenplay os credited to Steve Koren & Adam Sandler with story by Ben Zook. The marketing campaign targeted Sandler’s core fans, and the concept was easy to grasp. (Uh, that was the problem…) Adam did his usual plethora of appearances and promotions to support the pic. In addition to the stuff you’d expect (Leno, Kimmel, Conan, Letterman, Today Show, Regis and Kelly, ad nauseum), he also taped an intro for Game 1 of the American League Championship Series, and did a recent episode of Dr. Phil featuring the real life twins from the movie. There were integrations with The X Factor and Survivor: South Pacific, interstitials on Nickelodeon, tie-ins on Comedy Central as well as promotions on TBS, ABC Family, and Univision, among others. Online Sony held an awkward sibling photo contest (awkwardfamilyphotos.com) and networked on social media with Sandler’s extensive fanbase, including his 25 million friends on Facebook.
Wall Street clawed 7.8% from the company’s stock price, which ended the day at $18.55, following Puss In Boots’ lower-than-expected $34M opening weekend. Analysts acknowledged that the film suffered from the blizzard that hit the Northeast as well as an exciting World Series that included a seventh game on Friday. Still, several say they’re frustrated with DreamWorks Animation, which has lost 47.5% of its value over the last 12 months. The weekend performance is “yet another argument supporting our thesis that it is time for the company to revise its film costs structure,” says Susquehanna Financial Group’s Vasily Karasyov — who now believes Puss will gross a maximum of $136M domestically, down from his pre-opening forecast of $201M. “Average attendance per original film has declined by around 20% since 2008,” he adds, even though ”the studio still spends $135M to make a film and $170M to release it.” Janney Capital Markets Tony Wible dropped his domestic box office estimate to $153M from $195M, saying that the weekend shows “the (Shrek) franchise is completely out of momentum.” Barclays Capital’s Anthony DiClemente says he now believes Puss will gross $145M domestically, down from $165M, although ”the film could exceed our moderated estimates” if there’s positive word of mouth. But Lazard Capital Markets’ Barton Crockett says that the anemic tracking results for the film before it opened shows ”either that the marketing did not click, that the decision to open Halloween weekend …
SATURDAY PM, 5TH UPDATE: Jeez, Jeffrey Katzenberg must have enemies in higher places than anyone thought possible. Because studios are telling me this weekend’s freakishly early East Coast snowstorm will definitely take a bite out of box office. (On the other hand, maybe JK has friends in higher places because now no one will know what his movie would have done on its own.) There’s no doubt that DreamWorks Animation’s 3D Puss In Boots distributed by Paramount is finishing the weekend #1 with anywhere from $32.2M to $35M. That’s the range among my sources. So it remains to be seen when the actuals come in on Monday if the cat broke the Halloween weekend record of $33.6M set by Saw III in 2006. The Shrek spinoff’s opening was looking in line with 2011′s other non-summer animated 3D hits like Rio ($39M, also 3D) and Rango ($39M but only 2D) before the snow. But one rival studio exec snarked to me Friday night, “What will DWA think about an opening in the $30sM? Dunno, but it could be more like Puss In Cement Boots.”
Fox’s sci-fi thriller In Time with Justin Timberlake and Amanda Seyfried is soft considering the wide release. It’s clear now that Justin, while talented on SNL, is no movie star. FilmDistrict’s The Rum Diary with Johnny Depp also is performing …
UPDATE, 2:25 PM: DreamWorks Animation shares jumped all over the place in after-hours trading when the company reported its earnings — but settled at -2% as CEO Jeff Katzenberg discussed his expectations and plans. He talked up Puss In Boots, predicting that it will set a record this weekend by generating more than $33.6M at box offices — that’s the previous high for a pre-Halloween release. “Anything beyond that goes into the ‘win’ column,” he says. Much of the revenue will come from sales of high-priced tickets for the 3D version. “Almost every review (of the movie) singled out the quality of the 3D experience,” Katzenberg says. “It’s meaningful.” He provided few details about his recent agreement to offer his films to Netflix instead of HBO in the premium TV window but calls the new arrangement “historic” for DreamWorks as well as “the industry as a whole.” Katzenberg was equally vague about the company’s thoughts about negotiating a new distribution deal to replace the one with Paramount that expires at the end of next year. “We will be considering all our distribution options starting in spring of 2012,” he says adding that he expects to have something in place next summer. Katzenberg says that DreamWorks has paid about $700M in distribution fees for 11 movies that generated $5.5B at worldwide box offices, and $10B from sales in all venues.
Asked about the changes in his employment contract, Lew Coleman …
TiVo’s been looking for patterns among DVR viewers who speed through certain ads — and Alex Petrilli Jr, Senior Manager of Audience Research, says that when it comes to box office sales, “the fast forward rate seems to tell a story.” In the more than 40% of all households with a DVR, viewers tend to zap ads for films they don’t plan to go out to see. That could indicate trouble ahead for Summit Entertainment’s The Three Musketeers, which opens October 21. About 20% of DVR users sped through ads for Musketeers during the week that ended September 25, TiVo says. That made the action film the week’s second-most-zapped campaign after FilmDistrict’s Drive, where 24.6% fast-forwarded through the ads. But the data should encourage executives behind DreamWorks Animation’s Puss In Boots, which opens October 28: Only 11.7% sped through its ads, making it the second-least-zapped campaign among the 15 most advertised films — behind Sony’s Courageous, which a mere 9.9% decided to ignore. Just 13.7% used the remote to avoid the ads for Paramount’s Footloose, which opens October 14, making it the week’s third-least-avoided campaign. As a result, Puss and Footloose are “trending to open pretty well” Petrilli says. The data comes from TiVo’s StopWatch ratings service, which is an anonymous daily sample of 375,000 TiVo subscribers.
It’s been a busy week for Hollywood studios settling on release dates. Here’s what’s happened:
Unauthorized, Sundance Now, Oct. 7**
Puss In Boots, DreamWorks Animation, Oct. 28 (Nov. 4)
Mission: Impossible — Ghost Protocol, Paramount, Dec. 16 sneak previews (Dec. 21*)
The Adventures of Tintin, Paramount, Dec. 21 (Dec. 23)
War Horse, DreamWorks/Touchstone/Disney, Dec. 25 (Dec. 28)
The Lucky One, Warner Bros, April 20, 2012 (Aug. 12, 2012)
Argo, Warner Bros, Sept. 14, 2012 (–)
Gangster Squad, Warner Bros, Oct. 19, 2012 (–)
DreamWorks Animation is hoping the Shrek spinoff Puss In Boots fares better than Kung Fu Panda 2, which didn’t take off as expected domestically last month (though it is rallying internationally). DWA is in the middle of the current Wall Street discussion about the future of 3D , so a hit here would help soothe some fears on that front. Antonio Banderas reprises his role as the suave kitty; the movie is due out Nov. 4 via Paramount.
Sony Pictures will make the announcement tomorrow. Former Miramax and Paramount exec Michelle Raimo (Kouyate) has been recently producing the animated feature film Puss In Boots off the DreamWorks Animation Shrek franchise, with Chris Miller directing. Raimo began her career in the film business 13 years ago when she joined Miramax Films. From 1995 to 2005, she rose through the development and production ranks from an assistant to a SVP of Development and Production. During her tenure at the studio, Michelle was responsible for exec producing and overseeing numerous projects including the Academy Award-nominated Chocolat, as well as The Shipping News, Ella Enchanted, The Great Raid and An Unfinished Life. While at Miramax, Raimos helped start its book- and Talk magazine-based development.
In 2005, she relocated from New York to Los Angeles to serve as SVP of Production at Paramount Pictures where she was responsible for overseeing producer accounts including Nickelodeon, MTV Films, Lynda Obst Productions, and Foxxhole (Jamie Foxx’s production company). During her time at the studio, she worked on DreamWorks’ Dreamgirls, Nickelodeon’s The Spiderwicke Chronicles and Angus, Thongs and Full-Frontal Snogging. In early 2006, she moved over to Nickelodeon Movies in the same capacity until the end of 2006.