DreamWorks Animation Hits Hard Times

How Bad Are The Financial Troubles?

Story by David Clark

Ever since movies like Toy Story invaded theaters around the nation animation films have been a staple of the entertainment industry. They are the type of films that an entire family can sit down and enjoy together. They are often funny, clever, well written, and offer a little something for everybody. Names like Pixar, DreamWorks Animation, and Illumination Entertainment have been at the forefront of the animated style. This past week it has become apparent that one of the staple studios named Dreamworks Animation has fallen on difficult financial times.

Do not tell the children, but the studio that brought the world Shrek and How to Train Your Dragon might be a distant memory in the next few years. Due to a series of box office disappointments DreamWorks Animation announced a downsizing operation that will see at least 500 employees laid off from all levels of the company. It was also announced that the company is scaling back movie production. DreamWorks Animation (DWA) has averaged 3 movies per year but under the restructuring of the company a new goal has been set at 2 movies per year.

"The number one priority for DreamWorks Animation's core film business is to deliver consistent creative and financial success, I am confident that this strategic plan will deliver great films, better box-office results and growing profitability across our complementary businesses" said DreamWorks Animation Chief Executive Jeffrey Katzenberg.

If recent history is an indication, box office success is no guarantee. The studio has been spending over $145 million per movie, a chief concern of investors. The company has taken a write-down (reduction in the projected value of an asset) on Turbo, Rise Of The Guardians, Mr. Peabody & Sherman, and Penguins Of Madagascar. Despite Katzenberg’s restructuring plan company shares have dropped 14.7%, investors are growing concerned about whether DWA has the cash to keep the doors open if another movie comes up short.

With Home being the only movie scheduled for 2015, the company showing a debt of $500 million, and DWA only showing liquid assets of $50 million, some financial analysts have started advising DWA as a high risk company.

DreamWorks Animation has brought laughter into the homes of millions, but only time will tell whether the company’s restructuring will translate into better box office sales.

Sources: Deadline; LA Times