DreamWorks Animation Stock Tanks, Analysts Raise Liquidity Concerns

23 Jan 2015 | Author: | No comments yet »

DreamWorks to cut 500 jobs and number of films made.

DreamWorks will cut about 500 jobs, more than a fifth of its workforce, and produce one fewer movie a year as part of a major restructuring after a string of box-office misses.The 10-year-old studio, which had been turning out three animated films a year, will reduce its slate to two, DWA CEO Jeffrey Katzenberg said Thursday during a hastily scheduled conference call. The sequels to which DWA remains committed are “Kung Fu Panda 3” (March 2016), “The Croods 2” (December 2017) and “How to Train Your Dragon 3” (June 2018). “It’s back to basics,” Katzenberg, 64, said of a studio that produced an impressive 17 consecutive hits after launching in 1997 — until about 2012. “Three films in each and every year is just too ambitious,” Katzenberg conceded during the conference call. “We have fallen short on the creative side.” Among the casualties is DWA’s Redwood City facility, overlooking the San Francisco Bay, which was home to more than 700 employees a couple of years ago. The maker of the Shrek and Kung Fu Panda franchises has reported losses in two of the last four quarters, as movies such as Rise of the Guardians fell shy of expectations.

It will also require cash outlays of $110 million for severance and relocation expenses before generating pre-tax cost savings projected to grow to $60 million a year by 2017. DreamWorks has faced increasing competition for family audiences as other studios have turned out hit animated films, such as the Despicable Me franchise from Universal Pictures and The Lego Movie from Warner Bros. The restructuring comes after months of turmoil in which the studio became the target of an SEC investigation, took several write-offs of films that failed to deliver on expectations and engaged in so many merger discussions that they struck Hollywood insiders as a sign of desperation.

Three of the six movies DreamWorks plans to release over 2016 to 2018, are sequels, which require less advertisement costs and almost guarantee strong ticket sales. DreamWorks has worked to diversify its business in recent years, making a deal to supply more than 300 hours of programming for Netflix and purchasing YouTube network AwesomenessTV. The company, which had about 2,200 employees as of 2013, said the 500 job cuts will span all divisions of the studio. vice-chairman Lewis Coleman and COO Mark Zoradi will leave, the company said. DreamWorks expects to complete most of the restructuring by the end of 2015, helping it save $30 million in pre-tax costs this year and about $60 million by 2017.

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