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David Poland

By David Poland

DreamWorks Animation

Blog commenter Foamy Squirrel brought up some stats from the DreamWorks Animation annual report, which got me to look it up. And besides the immediate response, it occurred to me that DWA is one of the very rare companies these days that is in film, public, and small enough that their annual report has actual facts and figures in detail, not just the best and worst noted so shareholders can giggle or gasp.
Here is a chart covering their last 5 years (a pop-up)

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4 Responses to “DreamWorks Animation”

  1. DVertino says:

    Too bad it’s all crap.

  2. Foamy Squirrel says:

    Where’s Direwolf? He handles the shareholder side of media much more than I do…

  3. Direwolf says:

    Out and busy last night so just getting to this.
    I am long DWA in my long/short equity hedge fund which invests solely in media, entertainment and communications stocks. I am losing money on my DWA investment which I bought on the Tuesday after Dragon opened. Looked good for awhile but then Tribeca and bad reviews started a downward trend that accelerated with an earnings report that was only in online, accelerated further when the tracking numbers on Shrek 4 were leaked, and bottomed (hopefully) yesterday. A better than expected Memorial Day weekend would help but mid-week grosses have not been good enough to suggest that is likely (I am watching day-to-day declines as compared to prior Shreks).
    I think DP gets the bull case on DWA. The company has become much more adept at developing revenue streams outside of theatrical and DVD. TV, Broadway, merchandising, and promotions related to theatrical releases are examples. In fact, I suspect that when we see initial financial results that include Shrek 4, we will be surprised that profitability is still close to estimates because of the sponsorship deals deals surrounding the film.
    The goal of DWA management has been to build its base earnings levels and expand to two films original + sequel) each year to make the company’s financial results more predictable. I think they are doing a good job which is why I own the stock. Management has always doen a good job of mining revenue from its library, even on films that are deemed disappointments. Bee Moive woul dbe a good recent example. The moves to TV, Broadway, merchandising, video games, virtual worlds are all ways to expand the potential revenue.
    I’d also add that I think DWA would be an excellent acqusition candidate though only Warners seems like a logical buyer and I doubt Bewkes wants to a deal of this size and even if he did he probably would not want JK in his nest.
    DWA stock is interesting in that it really does trade off box office, both expectations and reality. It is a good example of how what matters in the short run on Wall Street is how things shape relative to expectations. The bull case long-term about broadening and stabilizing the revenue stream eventually gets noticed but can be overwhelmed in the short run.

  4. Foamy Squirrel says:

    Independent virtual worlds are a bit of a dog – the primary reason being that there’s no middleware, so every attempt has to be pretty much built from the ground up including the network (as opposed to, say, shooter games which tend to license the engines for 4-5 years after development and Blizzard who has established and are actively routing all their games through it).
    It’s no surprise then that the big leap has been to integrate with established platforms like Facebook. Zynga, in particular, have been so effective in exploiting the platform that when they threatened to move away Facebook cut them in for a percentage of Facebook Dollars because they didn’t want to lose the users.
    The only saving grace for DWA is they’re “only” spending ~$2mil in development – which is peanuts really (the granddaddy Everquest spent $8mil in development, and from statements by Bioware’s execs the new Star Wars one is costing in the region of $150mil). However, contrast with Farmville, which got up and running for less than $1mil and is projected to pull in a staggering $600mil this year.
    I think for their other “other” ventures (broadway, theme park etc.) it’s primarily license-based, so DWA doesn’t really incur any costs beyond lawyers fees. Which is exactly what Marvel did to turn the company around following their near-bankruptcy until they decided to create their own movie studio (and inspired Hasbro to do the same).

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