(DreamWorks Logo editorial illustration: boy silhouette via Shutterstock.com.) (DreamWorks Logo editorial illustration: boy silhouette via Shutterstock.com.)

DreamWorks Loses $263 Million in Fourth Quarter and Will Sell Glendale Campus

(DreamWorks Logo editorial illustration: boy silhouette via Shutterstock.com.)
(DreamWorks Logo editorial illustration: boy silhouette via Shutterstock.com.)

On Tuesday, DreamWorks Animation announced a fourth-quarter net loss of $263.2 million (or $3.08 per share).

The majority of that loss—$210.1 million—is the pretax charge related to the company’s recent restructuring efforts. The 500-person layoff (18% of its staff) will result in $54.6 million of employee termination costs and other contractual obligations, while the abandonment of work on unreleased films like B.O.O.: Bureau of Otherworldly Operations and Monkeys of Mumbai will cost the studio 155.5 million.

The company also took a $57.1 million writedown on its last film The Penguins of Madagascar, which did not perform as expected, despite having earned $358 million at the box office to date. DreamWorks has taken a writedown on four of its last six films.

“There’s a great morale around the company right now even in the face of what has been, without a question, the hardest, most difficult, most painful eight weeks in our 20-year history,” said DreamWorks CEO Jeffrey Katzenberg.

To shore up its precarious balance sheet, the studio’s chief financial officer Fazal Merchant announced that DreamWorks would sell and concurrently leaseback its Glendale, California campus. The agreement will add $185 million of liquidity to the studio.

The upcoming "Home" will be DreamWorks Animation's sole theatrical release in 2015.
The upcoming “Home” will be DreamWorks Animation’s sole theatrical release in 2015.

Katzenberg said that DreamWorks will break even this year as long as its sole theatrical release, Home, breaks even or earns a profit. The film cost $135 million (excluding incentive-based compensation). The studio’s stated goal is to reduce production costs on its films, and make films in the $120 million range, which is still significantly above the production budgets of films produced by competitors like Blue Sky Studios and Illumination Entertainment.

With just one film release this year, the studio must increase revenue from other divisions. DreamWorks has high hopes for its television unit, where the studio estimates it will earn $200-250 million, largely due to its Netflix deal, as well as a 24-hour DreamWorksTV channel that will launch later this year throughout Southeast Asia with the help of HBO Asia.

Also, much like Disney’s shift from a company that created its own IP to a content manager of other people’s IP (Pixar, Marvel, Lucasfilm), the future of DreamWorks will be rooted in exploiting its library of IP and characters. DreamWorks expects its consumer product business to generate revenue of $130 million in 2015, double its 2014 performance, based on “the launch of what we expect to be large franchises like Trolls, Voltron, VeggieTales, and Dinotrux,” said Katzenberg.

  • Geez, seems like Dreamworks can’t catch a break lately, and while I’m not a very big fan of the studio; it sucks seeing it go through such crap.

    • animatorwannabe

      I agree, I am no fan of what Dreamworks has produced whatsoever but I feel for those getting laid off.

  • George Comerci

    Well, I hate to break it to Dreamworks, but no one’s going to want to watch a movie based on an outdated 90’s toy franchise except whiny, nostalgic young adults. You know what Dreamworks could really use? Time off. Stop spending money on films no one’s going to want to see and take time to re-invent itself. Come up with groundbreaking, original films that people will want to see. Hell, if Disney could come back on top after producing such garbage like Home on the Range and Chicken Little, I’m sure Dreamworks can make a comeback, too. But if they keep doing what they’re doing, the company’s going to go completely bankrupt. It’s already happening, and unless they don’t change something soon, they’re going to be gone.

    • NamelessDrake

      The Trolls are cyclically popular, too. The reason they came back in the ’90s was because they were a piece of ’60s nostalgia, and to DWA’s credit, ’90s nostalgia is hot right now and will continue to be for a while, but I don’t have high hopes for Trolls.

      (Eerily, the Trolls also played a role in the downfall of another animation studio, the infamously awful DIC: http://www.awn.com/news/troll-company-countersues-ongoing-dispute)

      • Speaking of Trolls.

        If DW had any sense at all, they’d shitcan the Trolls movie. Sadly, they’re proving on a daily basis that they are all out of sense.

    • Anonymous

      “Well, I hate to break it to Dreamworks, but no one’s going to want to watch a movie based on an outdated 90’s toy franchise except whiny, nostalgic young adults.”

      You left out effeminate toy collectors.

  • Dt

    I feel for those at dreamworks. I doubt morale is “great “at the studio. When you facing the release of 2 films like home and trolls, I would worry………a lot.

  • sidney

    I think they’re laying off the wrong people. They should start at the top where the most inflated salaries and least useful folks live.

    • AnimationGuy

      Truer words have never been spoken!

  • starss

    Awww they dropped Mumbai Musical??

  • Pedro Nakama

    That Glendale Studio is nothing but ego.
    Historically the best cartoons were the Warner Brothers shorts produced in the Schlesinger years. And they were made at a horrible studio the animators dubbed “Termite Terrace.” Makes me think the worst work environments bolster creativity.

    • ommose

      No, creative license, ambition and opportunity bolster creativity. A lousy workplace environment is fun for nobody. While ego may have been a factor in planning the Dreamworks campus, it isn’t only the executives there who get to enjoy having offices, free breakfasts and lunches, trees, grass and water features-it was originally designed to attract and appeal to animation artists, and it did. It was built while Dreamworks was still working on Prince of Egypt as a sign of their commitment to maintaining a real animation studio. They could much more easily have rented a bank building as most other places did.

    • Neil

      The ‘worst work environments’ don’t necessarily bolster creativity but the absence of overbearing corporate bosses, creative execs and focus groups do.

  • Johnny

    “Trolls, Voltron, VeggieTales, and Dinotrux,”
    With a lineup like that I don’t see them being around much longer.

  • A Guest

    [jaw drop]

  • Gordon

    How does a studio scrap a movie that is almost finished? That’s like insane to me. You discover that movies story isn’t working when it’s almost finished and you already recorded the actors? Even though Home looks good I still think it’s gonna flop.

    • Mumbai

      Don’t know but imagine that it was better to leave incomplete than release and get another underperforming title, which would, at this point, do even more damage to the weakened DW brand. Even with its lowered expectations, “Home” had better break even when it gets a release.

  • Toonio

    I’m calling dibs on the fountain.

    They say that the golden retriever, in his quest to become the next Walt, wanted his own Hyperion, hence Glendale.

    Now seriously, I hope they document every cram an nook of their campus on a book. I knew some awesome animators that worked there just for the campus and the convenient parking.

  • Floyd Norman

    Let artists and true creative people run the studio, Jeffrey. The way things stand now they can’t do any worse.

    • Fried

      While the people at the top aren’t great, let us not forget Don Bluth Studios as evidence that even top tier talent taking the lead is not a guarantee successful for a profitable studio.

      • Speaking of Trolls

        And that whole John Lassiter-Pixar thing is probably just a fluke.
        Yeah, Katzenberg should go on running things. No sense in risking change.

  • vva

    I feel bad. I’d like them to succeed but Home looks so awful. I can’t see it making more than any of the other disappointments. Hopefully it’s just the marketing.

  • Al

    Uhm…. no. The most successful creative work is KFP and Dragons, and both of those franchises were made in Glendale.

    • Barrett

      Shrek was strong, at first. That franchise originated and was continued at PDI. Madagascar 1 and 3 are solidly entertaining and profitable movies – PDI again. Megamind, a badly under-appreciated gem in the morass of recent DWA films, another PDI joint.

      Meanwhile, for every KFP or HTTYD, Glendale produced dreck like Bee Movie, Shark Tale, Flushed Away, and Turbo. Croods and Monsters vs. Aliens are the only other solid successes done down there, but boy, were there a lot of dogs outta that pound.

  • clumsy

    Oooh that’s a great money loss

  • NamelessDrake

    They did VeggieTales In The House for Netflix, which seems decent…

    VeggieTales, while not exactly Marvel, is one of the VERY few Classic Media franchises that is still viable. I have a feeling that DreamWorks is counting on the burgeoning market for Christian entertainment (it’s not just “Moral Majority” types – from Hollywood’s point of view, this is one of the things that’s hot right now), but it still won’t save them…

  • Doug

    I’m afraid you vastly underestimate the lasting demo of those seeking high quality family entertainment. The Veggie Tales were successful less for their animation (which got better and better as they went along) than for their sharp and astute writing. The Veggie Tales were inexpensive to produce, by big studio standards, and should still be. I think if DreamWorks embraced properties that they could produce relatively cheaply but keep their eye on the prize, they could be successful.
    They will also have to produce more films that people want to see. Nothing in the recent past with the exception of HTTYD even mildly piqued my interest.

  • gambantein

    They’re selling the building, likely to a property management company. They are following that sale with a contractual rental agreement for a set term (probably a year or two). Usually, a lease agreement differs from rental in that the owner of the property is also responsible for general maintenance and/or some utilities, while the renter is responsible for any damages and some smaller maintenance issues. The expected difference in this cost is included in the rent (sort of like insurance).

    • Speaking of Trolls

      Maybe the new landlord will have ground rules like, “Don’t make stupid Movies anymore. Enough Turbo, Sherman and Peebody, and Don’t even think about Trolls”

  • Strong Enough

    disney should buy dreamsworks. yeah i said it