The Misguided Deadline Hollywood Article on DreamWorks Big Moves

So part of me wonders why I should even be writing a response to this misguided Deadline Hollywood article on DreamWorks because as Jack Warner once said “today’s newspaper is tomorrow’s toilet paper.” Obsolescence aside, the saying holds true so by Saturday it will all be forgotten. However, it’s so poorly thought out, one can’t help but wonder whether the writer has any clue at all. So I thought it might be a fun (read: mind cleansing) idea to demolish her claims in much the same fashion as Steve Hullett did on the Animation Guild Blog but from a bit further distance away.

“it also seems like a desperation move for this public company”

The quote above refers to the studio’s recent announcement of it’s slate for the foreseeable future that includes 12 feature-length films in addition to numerous TV series’ and spin-offs. Analysts are mentioned in the DH article but the great thing about them (/sarcasm) is that they are sometimes wrong (believe it or not). They may say to hold or sell, but that is simply their opinion. Analysts like to pretend they are presenting facts but even a cursory glance of sites like The Street turn up more biased “assessments” than you can shake a stick at. Hardly worth the effort.

Then there’s this fun line:

The stock is up 5.8% so far this year but that’s lousy since NASDAQ where DWA trades is up 20.4%. And over the last 12 months DreamWorks Animation is down 5.4% while NASDAQ is up 27.1%.

So if you have any knowledge of the stock market, you’ll know that it is comprised of hundreds upon hundreds of stocks spread across the entire economy and coming in all shapes and sizes. However “beating the market” is always held aloft by the spoofers on CNBC as the ultimate goal of any company. WRONG! A company’s successes are measured in relative terms and a look at the the details reveals that the company is down, but hardly out.

“The basic problem for DreamWorks is that its business model appears to be crumbling.”

Well no shit sherlock, but at least DWA is actually doing something to replace it. Consider the deal with Netlfix, the decision to open a theme park in China, or perhaps most clearly of all, bargaining for a greater percentage of digital distribution. See, I have a hard time believing that Jeffrey Katzenberg is an idiot. As Steve Hullett notes, he got tossed out of Disney and considering he started from scratch, has actually done quite well for himself considering.

If you read the article, you would be inclined to believe that the sky was falling. Yes, competition from the likes of Illumination and Blue Sky is something to consider, but DWA is streets ahead in terms of quality (Despicable Me was good but The Lorax was a bit of a misfire) and that’s where it counts for the long tail. Just look at Shrek, it’s still something more than a decade after it first came out!

Another thing to keep in mind is that while the DVD market is being eroded, it won’t fall as quickly as the music industry. The reason is actually quite simple: not enough people have a fast enough connection yet (see where the US is, and then who’s above it!) So we’ll see a much more gradual decline that should give studios the breathing space they need to come up with a viable solution.

“In truth, those moguls didn’t want Katzenberg in the fold.”

I have no idea what this paragraph is about besides claiming Katzenberg is a bit of a jerk and no-one in Hollywood likes him. A personal opinion at best and hardly suitable to be considered fact. There’s also no evidence to back up the claim that Disney was a potential buyer for DWA either so I’m taking this one with more than a pinch of salt.

“Even Katzenberg’s efforts to build ‘Dream Center’ Park in Shanghai with China partners are dismissed by those who know that film landscape as unrealistic and unlikely.”

Ah yes, well Roy certainly thought Walt’s idea to build a park was a completely nutty idea and look what the end result was. Something may look like a bad idea at the time, but until it’s finished, no-one can know for sure.

While I would say that China is a risky bet, with many noting that the Chinese government is apt to break the rules on occasion, the fact is that such behaviour will be forced out of existence if China is to become a world player. A nice little recession along the way won’t do them any harm either.

My theory is that the Chinese venture is the prototype. If the proposed theme park in New Jersey takes off, you can be sure the Shanghai model will be imported to the US.

Conclusion

Don’t write off DreamWorks until the sheriff is at the door or the warning signs come thick and fast, like at Digital Domain.

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