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EARNINGS

DreamWorks Animation posts 7% lower profit

The studio attributed the poor second-quarter results to weak ticket sells overseas for 'Monsters vs. Aliens.' On the bright side, its TV shows performed well.

July 29, 2009|Ben Fritz

Television shows were up and international box office was down for DreamWorks Animation in the second quarter, as the studio reported a 7% drop in both revenue and net income driven by poor overseas ticket sales for its latest film, "Monsters vs. Aliens."

The March release has grossed $198 million at the box office in the U.S. and Canada, a figure that Chief Executive Jeffrey Katzenberg said qualifies it as a "blockbuster." But international ticket sales for "Monsters" have totaled $177 million, making it the first DreamWorks Animation picture to earn less overseas than domestically. Attendance was particularly weak in Germany, France and Italy.

Katzenberg, a veteran Hollywood executive rarely at a loss for an explanation, said he wasn't sure why.

"I'm going on a 25-country tour in September and October to sit with managers face to face and delve into it in a meaningful way," he said in an interview. The CEO added that he would wait until finishing the evaluation of foreign markets before deciding whether to produce a sequel to "Monsters vs. Aliens."

There was, however, a new bright spot in DreamWorks Animation's business last quarter: the small screen. Nickelodeon's animated series "The Penguins of Madagascar," based on the "Madagascar" movies, has proved a big hit since debuting in March.

DreamWorks doesn't receive any licensing revenue from Nickelodeon for the TV run but will get half of all the money from DVDs and licensed products. Katzenberg said an extensive licensing program for "Penguins" will start in January.

"This is a property that has the potential of a 10-year life span to it," Katzenberg said. "We want to make sure we take advantage of it in a measured way."

The company is already looking to capitalize on its TV success. It has four holiday-themed specials in the works, two for this fall and two for fall of 2010, that will air on NBC. It also has two new TV series, one based on "Kung Fu Panda" and the other on "Monsters vs. Aliens," in development at Nickelodeon.

Total revenue was $132 million and net income was $25.6 million in the quarter ended June 30. Box office revenue for "Monsters vs. Aliens" was not enough to cover the distribution fee and marketing expenditures of the film's distributor, Paramount Pictures. As a result, DreamWorks won't start making any money from the film until its Sept. 29 launch on DVD.

Most of the company's revenue last quarter came from older films on DVD, pay-per-view, and other post-theatrical distribution platforms.

Because of a scheduling shake-up, DreamWorks Animation is releasing only one movie this year, meaning its performance in late 2009 and early 2010 will be relatively slow. Next year it will release three movies, however, starting a recently announced acceleration from two movies each year to five every two years.

DreamWorks received a $24-million boost last quarter from an amendment to its video game licensing deal with Activision that allows it to recognize revenue from the games as they are released. Previously, it had to defer some revenue as far in the future as 2016. Going forward, DreamWorks will get money for each tie-in video game around the same time the film is released.

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ben.fritz@latimes.com

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