DreamWorks Q2 Down, Kung Fu Panda Kicking Off BD Releases

[Lee Stewart]

DreamWorks Q2 Down, Kung Fu Panda Kicking Off BD Releases

Author: CHRIS TRIBBEY
ctribbey@questex.com
Posted: July 29, 2008
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DreamWorks Animation SKG will begin releasing its titles on Blu-ray Disc during the fourth quarter, starting with its summer theatrical hit Kung Fu Panda, CEO Jeffrey Katzenberg said July 29 while reporting the company’s second quarter 2008 earnings.

However, few other Blu-ray details were divulged by the company, due to the HD DVD agreement DreamWorks Animation struck with Toshiba before the end of the format war.

“We’re trying to walk a reasonable line of giving you the information, sort of broadly speaking in our releases … and trying to honor the confidentiality agreement we have with Toshiba,” said company CFO Lew Coleman. “There’s not much else to say.”

Katzenberg added, “We will be releasing Kung Fu Panda on Blu-ray in the fourth quarter. We are making our product available and will aggressively promote and market our product on the Blu-ray format.”

For the second quarter 2008, DreamWorks Animation didn’t have a “Shrek” movie to boost its profits, with the company reporting net income of $27.5 million, down sharply from $61.8 million during the same period last year. Revenue during the same period was down to $140.8 million from $222.5 million.

Accounting for high marketing costs for Kung Fu Panda, the company isn’t expecting a huge boost in profits for the third quarter either. However after grossing $500 million worldwide, Katzenberg said DreamWorks Animation expects Kung Fu Panda to be a bestseller for home video in the fourth quarter.

In general, Katzenberg offered a positive outlook for DVD in general, despite total releases being sharply down this year,

“The flood of product that really clogged the retail channel started to sort itself out last year,” he said. “The movie marketplace as a whole, both theatrical and home entertainment, will be a strong performer in a difficult [economy]. … I believe it’s going to match or beat 2007.”

http://www.homemediamagazine.com/new...ticle_ID=13226

[zombieflanders]

However, few other Blu-ray details were divulged by the company, due to the HD DVD agreement DreamWorks Animation struck with Toshiba before the end of the format war.

“We’re trying to walk a reasonable line of giving you the information, sort of broadly speaking in our releases … and trying to honor the confidentiality agreement we have with Toshiba,” said company CFO Lew Coleman. “There’s not much else to say.”

I wish I could say I was surprised, either at the above or the $23m payoff from Toshiba explicitly for HD DVD that they apparently divulged to the press this morning.

Now we wait and see what happens with their split from Paramount.

[crazzeto]

Everybody was Kung Foo Panda Fighting!!! They were fast as lightning!!

[Dave J]

Last Call: Dreamworks shares fall sharply after 2Q

Associated Press 07.30.08, 4:15 PM ET

NEW YORK - Shares of DreamWorks Animation SKG Inc. fell sharply Wednesday after the company reported second-quarter earnings that several analysts criticized for an accounting move that boosted results.

Two analysts lowered their estimates for Dreamworks annual profit and one downgraded the stock, saying the company boosted its second-quarter earnings through a one-time payment they expected it would record in the fourth quarter.

Shares fell $2.72, or 8.7 percent, to close at $28.57, after dropping as much as 13 percent during the session.

The analysts said second-quarter earnings outpaced Wall Street expectations entirely because of a one-time payment from Toshiba in connection with the company's previous arrangement to produce its films in HD DVD instead of Blu-ray.

Jefferies & Co. analyst Brian Shipman said he thought Dreamworks' profit would have come in at about 19 cents per share, below his estimate of 22 cents, without the one-time payment.

The movie "Kung Fu Panda" contributed $46.4 million in revenue to the quarter, but about $20 million of that was from completion of the company's strategic relationship with Toshiba, reported Analyst Michael Pachter of Wedbush Morgan.

Pachter downgraded the stock to "Hold" from "Buy."

Pachter said the stock nearly reached his target price of $33 and he believes it will remain in a range from $31 to $36 until investors have a greater visibility into where future profit will come from.

Even though it insisted that "Bee Movie" would be profitable, the company guided investors not to expect any further revenue contribution from the film, he noted. Pachter believes the company may have sold future revenue rights for a lump sum.

The company earned $21 million in library revenue, much lower than Wedbush analysts expected. Though that figure is expected to grow later this year, it was well below the Wedbush estimate of $40 million.

Pachter raised his earnings estimate for the year to $1.70 from $1.67 based on second-quarter results, but reduced his 2009 forecast to $1.71 from $1.78 from increased capital investments.

Cowen and Co. analyst Doug Creutz reduced his 2008 earnings per share estimate to $1.75 from $1.96, owing to higher spending on "Kung Fu Panda" and a reduced estimate for "Bee Movie." He also shifted some of international box office revenue recognition from this fall's "Madagascar" from the fourth quarter of this year to the first quarter of next year.

Jefferies' Shipman maintained his $1.70 earnings per share outlook.

Am I reading that bolded sentence correctly? Toshiba paid $20 million for exclusive HD DVD rights to Kung Fu Panda? Seems to have been a rather intricate agreement between Toshiba and Dreamworks. Katzenberg is still unable to say much about the agreement to this day oddly enough. Sounds like Toshiba wasn't completely let off the hook.

[Beta-guy]

http://www.forbes.com/feeds/ap/2008/...ap5271924.html

Two analysts lowered their estimates for Dreamworks annual profit and one downgraded the stock, saying the company boosted its second-quarter earnings through a one-time payment they expected it would record in the fourth quarter.

Shares fell $2.72, or 8.7 percent, to close at $28.57, after dropping as much as 13 percent during the session.

The analysts said second-quarter earnings outpaced Wall Street expectations entirely because of a one-time payment from Toshiba in connection with the company's previous arrangement to produce its films in HD DVD instead of Blu-ray.

darn Dave J beat me to it

[Dave J]

Originally Posted by Beta-guy

http://www.forbes.com/feeds/ap/2008/...ap5271924.html



darn Dave J beat me to it

not by much...we'll rule it a tie!

[bt12483]

cash /=/ disc subsidies, etc. cash = bribe IMO. how is this not payola? cash for certain titles = cash for certain songs = payola.

[bt12483]

so...viacom=$29M, DW=$20M. Toshiba has paid in full $49M of the $150M.

[Dave J]

If Dreamworks is being allowed to release Kung Fu Panda on Blu-ray while still receiving a $20 million payment for "exclusivity" after their agreement with Toshiba was negotiated to a conclusion, is it reasonable to presume the original payment was higher than the final $20 million figure received? I believe the reports were $100 million for Dreamworks and $50 million for Paramount.

DreamWorks waiting for cue from Toshiba on Blu-ray

"We have a partnership with Toshiba and have an obligation to see this through," DreamWorks Chief Executive Jeffrey Katzenberg said on Tuesday.

"As you know, we have been well-compensated for our support. It really is in their court at this point to really declare what the next step will be. We're poised either way to jump into the marketplace when the conditions are right to do so," he said.

Toshiba, which began selling HD DVD players in March 2006, has sold 1 million players and recorders. But this month it declared it would quit the technology after a bitter battle against Sony Corp's rival Blu-ray, which won more studio and retail support.

In August, Viacom Inc's Paramount Pictures and DreamWorks signed exclusivity deals to distribute next-generation films on HD DVD for the next 18 months.

Shortly afterwards, the New York Times reported Viacom executives with knowledge of the deals said Paramount and DreamWorks would get a combined $150 million in financial incentives for their commitment to HD DVD.

DreamWorks plans to release the DVD version of "Bee Movie" next month and is waiting to hear back from Toshiba on how to proceed.

"We said, we have a release coming up on 'Bee Movie.' What would you like us to do?," Katzenberg told Reuters in an interview.

JP Morgan analyst Barton Crockett said the Blu-ray market was still small although he expected DreamWorks would like to have the issue settled by the 2008 holiday season.

"It might mean they'll lose the opportunity to sell 'Bee Movie' on Blu-ray, although the market for Blu-ray is still pretty small and the offset is that they'd get money from Toshiba, which may in fact be more," Crockett said. "But I'm sure they'll like to have this settled by Christmas."

The three movies strongly rumoured to be tied to this exclusivity agreement were Shrek The Third, Bee Movie and Kung Fu Panda. If Dreamworks received a payment for Kung Fu Panda would there not have been one for Bee Movie as well? Katzenberg appears to hint at it during his interview from the above article.

[Rich86]

I guess I don't see the point of having a movie studio tied up in some sort of exclusivity agreement, if there is no requirement to actually release something in the format it is supposed to be exclusive to? Or maybe Toshiba and Dreamworks subsequently struck some sort of escape clause deal?

[cyberlaz]

Originally Posted by bt12483

so...viacom=$29M, DW=$20M. Toshiba has paid in full $49M of the $150M.

This is nothing compared to the $500 million Sony paid for Warner.

[Beta-guy]

Originally Posted by Rich86

I guess I don't see the point of having a movie studio tied up in some sort of exclusivity agreement, if there is no requirement to actually release something in the format it is supposed to be exclusive to? Or maybe Toshiba and Dreamworks subsequently struck some sort of escape clause deal?

http://www.engadget.com/2008/01/07/p...e-hd-dvd-door/
http://gizmodo.com/341983/hd-dvd-rea...ray+only-party

but I find it funny Paramount/dreamworks has to go ask Toshiba what they can do... they sold their soul for $150 million, and all they got was $49 million and a remaster job of TOS Season 1... nice...

[bt12483]

Originally Posted by cyberlaz

This is nothing compared to the $500 million Sony paid for Warner.

Link???

Oh...that's right....there isn't one!

[Beta-guy]

Originally Posted by cyberlaz

This is nothing compared to the $500 million Sony paid for Warner.

prove it, hd dvd fanboys and been saying this crap for ages but

"The packaged media business is a $42 billion dollar business worldwide at the retail level, and we [Warner] have the largest market share of anybody," said Tsujihara. "From our perspective, the most important piece of this whole puzzle is, "How do we get growth back into this category?" That far outweighed anything else."

This [decision] was one hundred percent around what makes the most sense for the consumer, the retailer and the industry. This was not a bidding war. This was all about what was best, strategically, for us."

http://bluray.highdefdigest.com/news...o_Blu-ray/1327

[Rich86]

Originally Posted by Beta-guy

http://www.engadget.com/2008/01/07/p...e-hd-dvd-door/
http://gizmodo.com/341983/hd-dvd-rea...ray+only-party

but I find it funny Paramount/dreamworks has to go ask Toshiba what they can do... they sold their soul for $150 million, and all they got was $49 million and a remaster job of TOS Season 1... nice...

I looked at your links, but I don't see anything new or particularly informative there. It sounded like Dreamworks was still restricted from releasing on blu-ray at this point hence the 4th quarter release discussions in vague terms due to agreements with Toshiba. I got the impression the agreement was still in place and the Kung Fu Panda film was impacted. But Dreamworks stopped releasing in hd-dvd at the same time as everyone else (much earlier than Warner who swung the final movie studio blow at HD-DVD) - which seems to suggest the agreement prevented releases in blu-ray - but did not require releases in hd-dvd even for specific films covered? Seems like a silly agreement to me (except for all that money changing hands naturally).