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 term,” says Barclays Capital’s Anthony DiClemente.
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.”
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 …
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 …
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 …