DreamWorks beats 2nd quarter estimates; expects marketing, production costs to fall

DreamWorks beats 2Q expectations; costs seen down

LOS ANGELES — DreamWorks Animation SKG Inc. reported Tuesday second-quarter earnings that blew past Wall Street forecasts and said cheaper advertising and its bigger film lineup will mean cost savings ahead.

The animated movie house said producing more movies — five every two years instead of four previously — with roughly same number of employees will help it save, by 2011, up to 10 percent per film, which generally cost $150 million or more to produce.

Because the weak economy has also led TV networks to drop prices on advertisements, the company also expects to save money marketing its films.

“We are obviously going to be a very big advertiser with three releases next year,” Chief Executive Jeffrey Katzenberg said during a conference call. “We’re trying to capitalize on it and do see pressure on our costs going down.”

DreamWorks beat earnings expectations for the three months through June largely because of an accounting benefit on its video game licenses.

The company said it received a one-time $24 million windfall after renegotiating a video game agreement with Activision Blizzard Inc., allowing it to recognize game revenues earlier. The deal added 10 cents per share of profit in the quarter, although the company expects to benefit from the deal going forward.

DreamWorks earned $26 million, or 30 cents per share, in the second quarter, down slightly from $27 million, or 30 cents per share, a year ago.

Revenue fell 7 percent to $132 million.

Analysts polled by Thomson Reuters expected DreamWorks Animation to see revenue of $117 million, with earnings of 16 cents per share.

The company said the quarter was largely driven by domestic pay TV revenues for “Kung Fu Panda” and international DVD sales of “Madagascar: Escape 2 Africa.” Both films were released last year.

“Monsters vs. Aliens,” the company’s sole release this year, has grossed $377 million worldwide, but contributed just $10 million in the quarter, mainly as a result of the video game deal. Other money from distributors had not rolled in yet.

Katzenberg said the company had not yet committed to a “Monsters” sequel because of its lackluster performance in theaters in some markets overseas.

DreamWorks said its third-quarter results would be driven mainly by the DVD and Blu-ray sales of “Monsters” and revenue from “Madagascar 2″ on domestic pay TV.

It also expects $40 million to $60 million in revenue from two TV specials, “Monsters vs. Aliens: Mutant Pumpkins from Outer Space,” around Halloween, and “Merry Madagascar” around Christmas, both on NBC.

DreamWorks Animation was spun off from the privately held live-action studio headed by Steven Spielberg, DreamWorks SKG Inc., in a public stock offering in 2004.

Its shares rose 82 cents, or 2.9 percent, to $29.50 in extended trading after the results were released. Earlier, shares rose 18 cents to close at $28.68 Tuesday.