DreamWorks Animation Posts Massive Loss

The studio reports a crushing fourth quarter loss.

Story by Matt Cummings

Apparently, not everyone loved DreamWorks Animation's Penguins of Madagascar and Mr. Peabody and Sherman as much as we at SJF did. Although both films made nearly $300 million each, it apparently wasn't enough to offset costs related to their production and distribution, prompting the company to take fairly drastic action to stay afloat. On Tuesday, DWA announced not only a fourth quarter loss of $247 million, but also plans to sell/lease their Glendale, CA office, lay off 500 employees, and make changes to their film release strategy.

The writing seemed to be on the wall early in 2014, when Mr. Peabody and Sherman opened to lackluster numbers and reviews, something that surprised us but ultimately made some sense. With zero connection to younger audiences, Peabody seemed like a gamble that parents weren't willing to take, even though CinemaScore gave it a very favorable A. When a studio has only two releases per year, the emphasis to make back costs becomes even more important; and with Peabody now being labeled a flop, that revenue dried up by Week 4 of its release.

What seems to have sunk DWA in 2014 was the bigger shock behind the flop of The Penguins of Madagascar. Even with brand recognition from the Madagascar film series (which made a combined $589 million) and a successful television series on Nickelodeon, audiences stayed away in droves, resulting in a domestic box office of just over $80m. It made three times that overseas, but even with a CinemaScore of A-, it appears that we won't be seeing a follow up anytime soon.

The news got a lot worse on Sunday when Disney's Big Hero 6 beat out DWA's How to Train Your Dragon 2 for Best Animated Film. Granted, audiences no longer connect with the glad-handing of the Oscars, but it put an exclamation point on a tough year for the studio. And we thought Sony Pictures was the only one who suffered last year.

So where does that leave DWA? With only one release planned this year in the nearly unknown Home, things are going to be dark for the studio until CEO Jeffrey Katzenberg can right the ship. That means potentially fewer films and less risk-taking, but they'll have to do without iconic studio PDI which created Shrek and 1998's Antz. It closed it doors this week, as DWA puts its reorg in place.

While Katzenberg was upbeat in a recent press call, saying morale is still high, it will be a much tougher battle than he's letting on. Perhaps producing more than 2 films per year is too many, but it needs to regain the core audience that made The Croods and Kung Fu Panda such big hits. The good news is that sequels are in development for 2017 and 2016 respectively. But, is that enough time to get them back on track? Only time will tell.

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