Talk Of A DreamWorks Animation Tie-up With Paramount

Talk Of A DreamWorks Animation Tie-up With Paramount

$DWA, $VIA

Tuesday, DreamWorks Animation (NASDAQ:DWA) CEO Jeffery Katzenberg floated the idea of merging his company with Paramount Pictures, a unit of Viacom (NYSE:VIA).

Mr. Katzenberg he said he “fantasizes” about such a marriage, he acknowledged that Viacom is merely looking for an equity partner, not to sell the iconic film studio outright.

“I look at Paramount today and, I know they say they’re only interested in selling a minority interest, and that would have no interest for us, but I could imagine that with a good financial partner coming with us, putting together the asset of Paramount and DreamWorks together could be extremely valuable,” he said.

“I am an entrepreneur and I want to be opportunistic in a way that is about value for shareholders as opposed to my ego. I don’t subscribe to bigger is better,” he said. “I don’t want to get distracted by shiny new objects out there.”

Mr. Katzenberg was speaking at the Morgan Stanley Technology, Media &Telecom Conference in San Francisco.

With 19 animated shows in production and some live-action in the works, television has overtaken movies as the most important part of DWA, said Mr. Katzenberg.

The CEO called the company’s classic TV library “a game changer,” since just about every streaming service craves kids and family shows, and he boasted of DWA owning “extremely high margin, very, very valuable” TV content in general.

3 years ago, DWA was just barely in TV, but now, “Television’s actually the most valuable segment of our company,” Mr. Katzenberg said. “It’s our most profitable asset … I think today is the first time I said it, actually.”

The DreamWorks Animation brand is also very valuable, therefore Mr. Katzenberg is plunging into location-based entertainment in a bigger way than previously.

The DreamWorks Experience is on cruise ships and in hotels, and DreamPlay, a mini theme park with mostly interactive attractions, is such a success in Manila that he’s planning more of them in various parts of the globe over the next 10 years or so.

As for film, he noted that DWA had 16 hits in a row before 4 of the next 6 were misses. “We have to get back to that consistency.”

Those money-losing films, including Turbo and Rise of the Guardians, prompted a restructuring that included layoffs, management changes at the top of the film studio, selling real estate and scaling back the number of films DWA will produce annually.

On Tuesday, Mr Katzenberg said the DWA is “halfway through” its turnaround.

He acknowledged Kung Fu Panda 3 “would have been crushed” by Star Wars — The Force Awakens had the former stuck to its original Christmas season release date.

As he has discussed many times before, China represents a massive play for DWA, hence it has created DreamWorks Oriental to co-produce movies there.

He also said that, in the US, $1 generated at the box office represents about another 60 cents to be earned in the aftermarket, but in China, a Buck earned translates to just a penny in the aftermarket, so there’s plenty of room for growth.

“That’s the opportunity. That’s what’s coming,” he said.

Stay tuned…

HeffX-LTN

Paul Ebeling

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