Week Links 04-2013

Here’s my week links of stuff I read and so should you!

Animation Insider Interviews Rob Renzetti

Yes, it’s an interview with the creator of my favourite animated TV show! Some great tidbits in there too.

It’s Finally Over: 8 Years Of Mattel vs. Bratz And No One’s Getting Paid But The Lawyers

Techdirt has the details on this final chapter in a showdown over who created what. This is a case that is well worth reading up about because it deals with ideas and concepts and who is legally entitled to own them. All very important concepts in the animation industry.

An Animated Tribute to Moonrise Kingdom

Via The A.V. Club comes this animated tribute by Michael Piazza and Toniko Pantoja to Wes Anderson’s 2012 film, Moonrise Kingdom:

Inside DreamWorks: how animated movies are rendered

Techradar has this look at the technological side of DreamWorks Animation. It comes off as a bit of a pitch piece for Hewlett-Packard, but it’s still very informative.

Clever Merchandising Tie-Ins In Sailor Moon

The Sailor Failures tumblelog takes a look at how the series (specifically Sailor Moon R) featured crafty references to the merchandise in every episode. Hint: there was a reason the outer senshi were given specific shots of their lisptick being applied:

Via: Sailor Failures
Via: Sailor Failures

Tweets of the Week

[blackbirdpie url=”https://twitter.com/aceandson/status/294900683218497538″]

[blackbirdpie url=”https://twitter.com/alikigreeky/status/295967054966714368″]

News that Young Justice and Green Lantern: The Animated Series garner the following tweet from Brianne Drouhard:

[blackbirdpie url=”https://twitter.com/potatofarmgirl/status/296401669862854658″]

A problem in animated content too:

[blackbirdpie url=”https://twitter.com/TiredFairy/status/296717329784516609″]

[blackbirdpie url=”https://twitter.com/davidoreilly/status/297060207874412545″]

What An Analyst Sees In DreamWorks…And What They Missed

DreamWorks_Animation_SKG_logopng

DreamWorks Animation is a public company. Its stocks are sold on the New York Stock Exchange (NYSE) and have been since it was spun off from the original DreamWorks LLC in 2004. Since then, it has existed as an independent entity producing its own films in partnership with a distributor (formerly Paramount, now FOX). As a public company, it is subject to how various ‘analysts‘ think the company is doing. Today I’m going to look at one so that we can all see what Wall Street sees in Dreamworks, and also what they miss.

For the analysis, we’re going to use a recent one by Buffett Junior on Seeking Alpha, a website devoted to analysing stocks in all sorts of ways. It’s a fairly straightforward article with no big surprises but that doesn’t mean its all-inclusive.

What The Article Got Right

DreamWorks Success

During the last fifteen years, DreamWorks has created some of the best and most memorable CG animated films of all time.

You can’t argue with that. The studio certainly has created a string of successful CG films that are bettered only by Pixar. Disney as we all know, struggled to get their CG act together before ultimately buying the Emeryville studio to fix the problem. Other studios have also found success, but on a much more modest scale. DreamWorks specialises in big-budget blockbusters, and has so far done well by US standards.

Its Release Schedule

More recently, the company announced that it will now do three films per year from 2013-2016. I believe that this larger annual release schedule is likely to create more stable financial results for the company.

Despite the increasingly crowded marketplace, DreamWorks does need to get as many films out as quickly as possible for simple reason that as an independent company, it is dependent on its library of works. Tying into this was its recent purchase of Classic Media, which will further enable it to extract revenue without the expense of creating something new.

The Focus On Sequels

Investors might notice that a good portion of the future release schedule is comprised of sequels. The company’s long-term goal is to release at least one sequel film every year. With an entrenched fan base, sequels are inherently less risky and provide the opportunity to generate additional profits through increased home video sales, merchandising, and licensing.

You can’t argue with that logic, its right on the money but we’ll discuss it more further down.

Non-Film Activites

In recent years, DreamWorks has commenced a number of initiatives aimed at further capitalizing on its franchise film properties, such as Shrek, Madagascar, Kung Fu Panda and others. These business initiatives seek to diversify the company’s revenue streams by exploiting the film properties in other areas of family entertainment…

Slowly but surely, the studio has moved from its traditional base in feature films. the article discusses live-shows, TV shows and the various theme parks the company has either announced or already has in the works. There’s not a lot to say except that the move ensures that as the feature film division starts to play a smaller role in the revenues, it will help insulate the studio from the fluctuations of the film market.

The Managment

Under Mr. Katzenberg’s leadership, DreamWorks became the first studio to produce all of its feature films in 3D and in 2010 became the first company to release three CG feature films in 3D in a single year. It would be difficult to name anyone better suited for this job than Mr. Katzenberg.

My admiration for Jeffrey Katzenberg has been noted before and to say he is the best person suited to the job is a fair assessment of his value to the studio. His experience with Disney during its 90s renaissance has proven very valuable to DreamWorks, especially so since the company was spun off from its parent.

Risks

Because of the company’s limited release schedule, a box-office flop could significantly impair annual earnings and cash flows. It is extremely difficult to forecast a movie’s performance before its release, especially for non-sequel movies.

Animated films typically take longer and are more expensive to produce than live-action films, which increases the uncertainties inherent in their production and distribution. The typical DreamWorks animated film takes three to four years to produce after the initial development stage, as opposed to an average live-action film, which can be produced in less than one year. Additionally, the average budget for a DreamWorks film is $150 million, which is much higher than even that of a big-budget live action film.

A more near-term risk that investors should consider has to do with the company’s most recent theatrical release Rise of the Guardians, which so far has been a huge disappointment. The film cost about $145 million to make, and it has generated $260 million in global box office ticket sales since its debut in late November, well below that of a typical DreamWorks Animation movie. Before DreamWorks can make a profit on the movie, its distributor needs to recoup all its expenses plus pocket 8% for itself. That is the hurdle a DreamWorks movie has to clear before it even reports any revenue. Since the entire undertaking shared by the studio producing the movie and the distributor is approximately $300 million, DreamWorks will most likely be forced to record a large write-down next quarter. In other words, the company will report lower earnings than investors expect and the share price will most likely suffer because of it.

All of these can be evenly applied to any animation studio, although they are again more pronounced because DreamWorks is independent with no corporate parent to pick up the difference if they make a loss. There’s not much to add to these, but other risks are discussed below.

The rest of the article deals with the financials and valuation, neither of which is of interest to me and is unlikely to be of interest to you either, so we’ll ignore them.

What the Article Missed

The article provides a very comprehensive overview of the DreamWorks Animation organisation. The items above are totally worthy of inclusion, but they are not in and of themselves the entire story when it comes to a studio like DreamWorks. Here’s what it missed.

DreamWorks (Relative) Success

Yes, the article does include this, but it does only look at CG films and in although it notes that the studio’s films make up almost half of the top 20 highest grossing CG animated films, it’s not quite as simple as that. Why? Well quite simply, the entire list is made up of films from DreamWorks and, uh, Pixar. In other words the only other CG studio in existence for much of the time.

OK, so the revenues look good, but it’s like being in 1939 and saying Fleischer Brothers is a successful animated feature studio when there’s really only Disney to compare it to, and the market hasn’t fully developed.

The Animated film market is a bit more complicated than that, especially when you realise that DreamWorks began with traditional 2D animation and has faced competition from the same ever since.

The Focus On Sequels

Again, the article makes light of the sequels and notes that they are safer than original material. However, DreamWorks has been known for being extremely sequel-happy. (Remember Jeffrey Katzenberg’s comments about there being five Kung Fu Panda films after the original’s success?)

What the article doesn’t look at is how restricting that outlook can be. Yes, sequels are a financial safe bet but that argument flies out the window when you look at Pixar. They somehow manage to get a good story out [almost] every time and to be fair, their case of sequelitis has more than likely been acquired from Burbank than from within.

Original films do carry more risks, and this is something that animators and those unfamiliar with the way stock markets work can find tough to understand. Yes, it would be great if DreamWorks released original films constantly (and got great revenues for it), but when the odd dud does get through, that regrettably puts a squeeze on the studio’s ability to borrow money (and thus operate); an ability that is sadly regulated by the stock market and its skittish ways.

Alas DreamWorks needs sequels, at least for the foreseeable future as it funds its expansion plans. Until then, we can expect to see regularly recurring franchises. Let’s just hope they don’t reach Ice Age levels of ridiculousness.

The Non-Film Activities

The article doesn’t dwell too long on these anyway, but it completely neglects to mention two things, namely the studio’s digital strategy and its gradual shift to a technological focus.

Firstly, DWA has proven to be a bit of a pioneer in the digital media market. Although it remains a very traditional Hollywood studio in its home video dealings (there’s still plenty of money in DVDs), it was the first major studio to give Netflix the early rights to films. In other words, from 2014, their films will be available on Netflix before they are broadcast on television networks. Although it’s a fairly minor detail, it is indicative of the seismic shift that the media market is currently undergoing.

Secondly is the studios not-so-advertised shift to technological development. Besides the Ptch app the studio has developed, on the enterprise side, its tools and systems have become models for others to follow. That is something that many analysts seem to gloss over despite the fact that it his rapidly becoming a critical factor in the companies operations.

‘Piracy’

Piracy and shifting consumer preferences could severely weaken DVD sales, a major source of profits for all movie studios for the last decade.

Although that’s a common argument, there are many, many more factors at play when it comes to DVD sales. Illegitimate downloading is only one factor. DreamWorks appears to be already addressing the issue with the aforementioned Netflix deal, but you can be sure that the studio is well aware of what will happen as DVD sales slide. It’s a risk, but not as substantial a one as it normally made out to be.

Revenue Sources

The company currently derives substantially all of its revenue from a single source, the production of animated family entertainment, and the lack of a diversified business could adversely affect the company.

Such a statement appears to imply that the animation market is a non-diversified one. It’s the classic “animation is a genre” outlook. There is plenty of diversity within animation itself and the studio has done quite well to diversify itself within it. The article even discusses its move into other industries like theme parks and so on.

I don’t think it’s a fair assessment to proclaim DreamWorks content model as a risk. Would it be nice to see some more mature content from the studio? You bet, but the US is regrettably far behind the likes of Japan where animation is almost as much of an adult’s movie-watching experience as a child’s. Until that fact changes, DWA will have to stick with aiming content at younger consumers for the time being.

Conclusion

Apologies for the super long post. If you hung in until now, you’ll know that sometimes a studio’s health is dependent on a wide variety of factors that analysts can sometimes skip because they aren’t as important to the bottom line as they initially appear. Secondly, you’ll have garnered an idea about how a studio can get the cold shoulder from stock markets when an artistically great film does below “expectations”.

What would you add to the above? Is there something that DreamWorks could be doing in your mind to grow its business but isn’t? Let us know in the comments!

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.

Long Term Implications Of The Dreamworks and FOX Deal

So by now you’ve surely read the news that DreamWorks has agreed to a deal with FOX to distribute their theatrical releases for the next 5 years. While that that creates a lot of relief it’s also worth pointing out that the deal is only for 5 years, which as I can safely tell you, isn’t a lot of time at all. So if we think long-term, what will it mean for DreamWorks and what will happen once those 5 years are up? Here’s a few thoughts.

Even 1% Will Benefit DreamWorks

Although Jeffrey Katzenberg didn’t get a cut in the fee he pays to FOX, he did get a concession in the online/streaming department. This concession of 1% will pay dividends over the coming years as more and more content moves online. The studio already has a deal with Netflix and you can expect similar moves onto other platforms to follow suit. Getting a discount will give them the extra space they need to eek out that competitive advantage over Disney and others.

The Terms Aren’t Ideal, But They May Not Matter In 2017

The terms are far from ideal in overall terms, but in reality, DW is simply playing for time. Come 2017 the theatrical distribution landscape will be markedly different; mainly thanks to the likes of Sony passing out free digital projectors to cinemas. With that in mind you can anticipate that the costs and risks associated with distribution will be different too, and it may come to pass that DW can self-distribute or at least be in a good position to bargain hard with FOX if the deal works well in their favour until then.

Blue Sky Stands To Benefit Too

There’s been some hubbub about the future of Blue Sky in all of this, but to be honest, they can stand to benefit too. They are wholly owned by FOX so there’s no way they’ll be allowed to wither while an independent party makes off with the big bucks. If anything, it should get renewed interest from FOX and perhaps a bit more leeway to produce riskier movies instead of the latest Ice Age installment. Hopefully, FOX will see that calculated risks often pay off nicely, just as they’ve done for DW. It may just take the odd situation of FOX people actually handling them to realise this.

All-in-all, it’s exciting times ahead for everyone, including Disney.

 

The 7 Reasons Why DreamWorks MUST Remain Independent

With the recent announcement that DreamWorks is making a large investment in China (both as a studio and as an entertainment provider), I thought it would be interesting to repost a post from last year on why the company must remain an independent entity. You’ll recall that this was written while the brouhaha broke out surrounding their distribution deal with Paramount ending this year. Anyway, Steve Hullett over at the TAG Blog seems to concur that an independent DreamWorks is the kind that Jeffrey Katzenberg desires. Here’s 7 reasons why that’s a good thing.

 

 

Via: Wikipedia

Although DreamWorks Animation is already independent, it does distribute it’s films through Paramount, who in return, collect a fee from the gross receipts. Such an arrangement has worked well until now, just one short year away from the end of the current agreement.

There has been a lot of talk about DreamWorks being either acquired or selling itself to a larger corporation as a way to ensure its survival. Of all the big guns, only Warner Bros. seemed likely as they don’t already have a theatrical animation division but the noises from inside that company suggest they are not interested. The question is: Why would DreamWorks feel the need to be part of one of the larger studios anyway? The answer is money, but instead of analysing that reason, I offer you X reasons why the studio must remain independent.

  1. Katzenberg is not a quitter. He built DW up from nothing and I doubt he would like to sacrifice his independence to be under the boot of a board of directors again. He’s taken the company this far, there are few reasons why he can’t take it further.
  2. When you’re number 2, you try harder: Yes, it’s an old Avis slogan, but it rings true. If you’re number 2 in the market, you will try harder than the leader when it comes to your products. DreamWorks isn’t quite there yet, but last year’s How To Train Your Dragon was infinitely superior to Toy Story 3.
  3. It’s been done before: Back in the late 40s, a relatively small animation studio lost their distribution deal with RKO. They managed to haul a distribution team together and form Buena Vista. A distributor I think you all should be familiar with.
  4. An independent keeps everyone on their toes: As an independent, you have to do your best every time.That means others must compete on at least the same level of quality. If one player ups their game, everyone must. Corporations have a habit of getting comfortable in their shows which can lead to a stagnation of quality.
  5. The money is in the long tail: Walt Disney himself knew it was better to create a good film that would be popular for a long than one that would be a flash in the pan. Good films make money for decades after they’ve been paid for. DreamWorks can rely on this for income provided their films are up to scratch (see point 4)
  6. It’s a tougher road , but the ultimate rewards are better: No-one likes to take the hard road, it’s more work for what appears to be less reward. However, that burden of responsibility will ultimately result in a stronger company as everyone shares in the responsibility for success.
  7. It affords more freedom to experiment: Right now, on the cusp of the digital revolution, DreamWorks has the freedom to go in directions that were never possible before. As an independent, it has the freedom to try and experiment with new distribution and sales models to see if they work. DW can has the chance to become the industry leader in the digital age, an opportunity that should not be passed up.

5 Thoughts On The Dreamworks Ptch Announcement

Via: GigaOM

Late last week, DreamWorks announced their latest venture, a mobile computer program app that melds together photos, music, slideshows, mobility and sharing all into one. Christening it “Ptch” and taking a leaf out of just about every startup going these days, it is nonetheless unique to see a movie studio release an actual, honest-to-godness piece of software that apparently has nothing to do with their core business of selling movies and TV shows.

With that rather astonishing aspect to consider, here’s 5 thoughts on DreamWorks Ptch announcement and what it means.

1. DreamWorks must become a technology company

Amid over at Cartoon Brew muses about Ptch being a tool for DW to evolve in “different and unexpected directions” and he’s absolutely right. This is no doubt only the first salvo in DW’s shift from simple animation studio to an animation-centric technology company.

The unstoppable collision of art, entertainment and technology necessitates it. The future of DW as an independent studio is tenuous at best given the rapid shift in how content is created, marketed and sold. The traditional business model of box office grosses and DVD distribution is crumbling and it has clearly behooved Jeffrey Katzenberg to start looking in new directions (we’re told to expect an announcement within the next fortnight regarding distribution). Adapting a focus on technology will undoubtedly help in that regard.

2. The consumer approach is novel, if risky

DW isn’t alone in adapting a focus on technology, Pixar has long had a second revenue-generating division in its Renderman and associated software that are available commercially. The difference is that the Emeryville outfit is focused more so on the enterprise and business-to-business end of things. Sure, a regular consumer could purchase Renderman for their own use, but they aren’t the target customer.

DW, on the other hand, is gunning for the ordinary guy (and teenager) in the street with Ptch. While this can obviously create a large amount of value a la Instagram, it could also backfire as Google knows all to well with its ventures. Having said that, DW does have an experienced hand in Ed Leonard and the idea of Ptch itself does seem different enough from existing offerings that should give it a leg up in the marketplace.

3. There is of course an ulterior motive

While it is nice to think that DW is releasing Ptch as a nice little startup-esque service to gauge interest and provide something cool for consumers, the reality is naturally grounded in business. As Leonard himself explains in The Guardian’s excellent review:

Our DNA is rooted in content owners, so we’re trying to do this in the right way and make sure we respect content owners’ rights,” he says. “We really want this to be an opportunity for the content guys to make new revenue.”

If you read that right, you’ll get a hint that Ptch is more than just a pretty app, it’s a tool to gauge how DW can make the transition into the next generation of film marketing, i.e. directly to consumers. As Lenord himself notes in the Guardian piece, the notion of allowing users to download, remix and share their own creations using DW’s artistic creations is very much on the cards. (Read my post on something eerily similar that DW’s enterprise technology chief Kate Swonborg said a few months ago). Bear in mind that if that is the case, DW can stand to glean a lot (a lot) of really useful data about consumers that they can use to better their output.

4. What about the competition?

Leonard was smart in getting J. Katzenberg to agree to a separate business unit within the company as it gives them the necessary wiggle room that corporate structures don’t normally provide. Where does that leave competitors though?

Disney has long has trouble getting their internet strategy together (and apparently have a long way to go, if my efforts to watch the really cool Gravity Falls on Disney.com are any indication). Sony and Blue Sky haven’t announced anything yet but the former is likely to be hamstrung by the corporate parent’s influence and conflicting divisions (hey kids, remember the Walkman?) while the latter, as a division of FOX, may be too focused on being a studio to get into the technology game.

5. Good move/bad move?

Ultimately, this is an interesting, risky, unnecessary, innovative and potentially defining release for DreamWorks. The success or failure of Ptch will largely determine which direction the company goes in the near future. It’s existence as an independent entity won’t rest on Ptch, not in the slightest, but what DW learns from it will provide plenty of experience to enable them to make decisions with regard to it. If it succeeds beyond their wildest expectations, we may see DW start to emerge as the market leader, potentially overtaking Disney. If it fails, you can be sure they’ll have another crack at getting it right. Either way, its encouraging to see the company innovate with en eye to the future.

Dreamworks Want Us To Be Producers

Over at Daily Disruption is an interesting interview with DreamWorks’ head of enterprise technology, Kate Swanborg, in which she discusses the role of technology within the company and how it affects their relationship with consumers. All in all an interesting read but what is truly worth taking away from it is a quote from right at the very end:

I think that one of the most exciting things that we’re seeing is the idea that, as a consumer, I can actually create. I can go and start creating characters and imagery. Now, of course, at DreamWorks Animation we go and identify the best artists and engineers on the planet, and that talent is still critically important. But mobile technologies are really allowing the consumers to take those wonderful assets that are created and bring them into their whole lives and actually become producers in their own right.

Now that got the cogs in my head turning. Does she mean that the advances in technology mean that consumers will soon be creating content on a par with the studio, or as I believe, she wants us to use their characters in our own creations?

The reason I’m guessing the latter is because she talks about the narrowing gap between content producers and consumers. The idea is a novel one, but it does completely ignore one aspect of content: copyright! Of course plenty of people simply ignore copyright and gleefully create content independent of DW, but it’s hard to take the effort on their end seriously when studios and networks continually go after fans.

Such collaboration will come about in the end, as studios stand to gain too much from being intricately involved with the fans who provide them with revenue.

Dreamworks Does Disc-To-Digital [sigh]

Yoinked from Engadget

Dreamworks has been all over the media in the last couple of days as a result of their announcement that they have joined Walmart’s new VUDU Disc-To-Digital service. The gist of this is that if you own a DVD or Blu-Ray disc, you can bring it in to Walmart, and, for the low low fee of $2 American, they will convert it into a digital copy to be stored “in the cloud”.

So beyond the hilarity of paying someone $2/disc to rip your movies for you, there’s also the fact that the content itself will be accessible via the Ultraviolet service. If you haven’t used it, you are not alone, but it’s basically Hollywood’s attempt to stop file-sharing by giving people the ability to watch their movies on devices other than a TV [gasp].

So why would Dreamworks agree to be part of something that is quite frankly much inferior to your local Pirate Bay? They aren’t going to gain any new customers; the service is only for those who already own the DVD, and it’s not really applicable to new content either, as those discs already come with an Ultraviolet version included.

My guess is that Dreamworks simply sees it as a zero-sum opportunity where they don’t stand to gain or lose anything significant but may well get a cut or fee from Walmart for participating in return for putting out a press release stating as much. In any case, they can at least extract a bit more value from the typical Walmart customer and curry favour with the old boys in Hollywood.

As far as their overall digital strategy seems to be going, this seems to be more of a sideshow to the main event. If anything, Jeffrey Katzenberg’s comments seem particularly bland:

We are thrilled to make DreamWorks Animation’s current library of films available as part of [Walmart’s] disc-to-digital service, which we view as a positive step forward for the industry and for consumers.

So let’s give Jeffrey a golf clap for the effort and lip-service involved in this particular venture and offer continued quiet encouragement in everything else the studio is doing to move to digital.

 

DreamWorks Really Is Pushing The Envelope

Yes, DreamWorks really is pushing the envelope, the release envelope that is. Here’s what I read this morning over on the Animation Guild Blog that really made me take a minute just to think about it (emphasis mine):

There is a squadron of other features are lined up on the tarmac, but I won’t bother rattling them off, since you can see most of them listed here. (It dawns on me that by 2014, DWA will have thirty animated movies out in the wider world. By contrast, Disney’s fifty-first feature — after 73 years, came out last Spring.)

You could easily argue that DreamWorks isn’t as diversified as Disney, nor has it ever put out even close to the same volume of shorts. However, the fact remains that as far as animated features go, DreamWorks is certainly cranking them out.

Now you can read this any number of ways you like. Be it that the fact that Disney is diversified means they do not need to rely on aniamted films to bring home the bacon, that things were different back in the old days or even that Disney has such a strong brand that they can afford to coast on films for years after release in contrast to DW which must continue the releases to bring in the dough.

I tend to believe that DW does need to continually release films, hence it’s faster production rate. However, the time will come when DreamWorks will have earned a legacy that is strong enough for it to slow down a bit. That day is still a bit far away, but it is drawing ever closer.

Jeffrey Katzenberg and the Folly of Faster Technology

Via: PC Mag

Yesterday, at the Techonomy conference, DreamWorks CEO Jeffrey Katzenberg revealed that through technological developments, the studio would soon be able to animate in “real-time”. This statement has got a decent amount of attention from the relevant media, but just how accurate or true is it?

While Katzenberg is keeping the details close to his chest, it’s safe to assume that he is referring to the rendering part of the process. In other words, the part where the computer has to crunch a lot of numbers to get things to look how they’re suppose to look.

This has been a time-consuming process since day dot. Heck, even in the old days, you had to wait for the ink and pain department to colour your cels before you could even begin to visualise how the characters would look on screen.

However, what Katzenberg is hoping to achieve is the ability to animate and render at the same time. This is not an impossible goal. However his statement does seem to ignore how technology has developed over the last 60 years or so.

That is to say: it never really gets any faster.

Why? Because new more impressive software is always coming out that pushes hardware to its limits, just like its supposed to.

Take for example Toy Story. We all know it took a year to render or something like that, but just imagine, I could theoretically render Toy Story on my home computer right now, and there’s a good chance it wouldn’t take me a whole year to do so. So why don’t studios take advantage of technological developments and create films that take advantage of shorter render times?

The answer is simple, who wants to see a movie that looks like it came from the mid-1990s?

Which is precisely the problem. As long as studios continue to push the boundaries of what they can produce, there will always be the same constraints of time.

The only way this will change is when someone comes out with a new way of creating CGI animation that does away with the rendering altogether.

Until then, we’ll have to continue waiting.

Puss In Boots is No. 1. So Why is DW Stock Down?

First of all, no need to worry, this isn’t going to be a lecture on economics. I hate those too. What it will though, is discuss how a studio’s stock can move relative to its releases. It’s not something that animators need to be too aware of as it doesn’t have a direct effect on their work, but it can affect how the studio operates on a higher level or indeed how decisions made in light of it can filter down to the lower ranks.

Firstly though, what does a stock’s price represent? If you said how much a company is worth, then congratulations! You’re correct! However, how do you determine how much a company is ‘worth’? Do you simply add up how many buildings it owns or how much cash it has on hand? No. It’s a bit more complex than that.

The price of stock is a complex thing that takes into account how much the company owns, but also how well (or poorly) its expected to perform in the future. If a company is expected to perform well, its stock price is high or is rising. If a stock price drops, it’s an indication that the company is either expected to do worse than it was or it’s simply failing to live up to its potential. Either way, the stock price is always correcting itself as investors either bid or sell at a price they feel is the right value.

In the case of DreeamWorks, the share price is just about half of what it was a year ago. Does this mean the company is only half as good now than it was then? No, of course it doesn’t. It simply means that the outlook for the studio is a bit hazier.

A studio’s stock price is a mixture of the company’s assets, it’s revenue steams (DVDs, etc.), it potential release slate (ever wonder why studios like to announce new projects years in advance?) and its current release slate. DW’s recent slide is the result of the current release slate in the form of Puss in Boots.

Y’see, there are analysts, hundreds if not thousands of them, whose job it is to analyse a company in the finest detail. They pour over company reports, sector reports, market reports, weather data (yes, those winter storms on the East coast can have a real impact), consumer spending, you name it. Their goal is to try and predict how well a company will perform based on the data available to them. They’re the ones who compile it all and sell it to other firms or investors who will make their decisions based on the data within.

Naturally, they paid close attention to the opening weekend of Puss in Boots, and unfortunately for DreamWorks, it came up short. From the LA Times:

With a production budget of about $130 million, “Puss in Boots” generated $34.1 million at the box office over the weekend. Although it was No. 1 movie, ticket sales were well below the $40 million to $45 million that most Wall Street analysts had forecast.

The resulting compendium that Wall Street ‘forecast’ is that with a lower box office, the DVD sales will be lower as will any and all merchandise, TV rights and potential sequels. As a group of pessimists, analysts are about as big as they come.

“But so what?” I hear you say. “Stock prices only have a bearing on investors, not on the studio itself”. This is true, but, a company’s ability to borrow is heavily dependent on their future prospects, and since investors have signalled that they’re not good, DreamWorks will now have to pay more for financing.

All of this goes to the bottom line of a film, where belts might get tightened. This is where the actions of this week will be felt by the rank and file. If upper management decide to scale back budgets, then there will be very real changes made on the ground level. People may be let go, or (more likely) schedules will be shortened and films brought forward to boost takings.

What does all of this teach us? Well, it should say not to pay much attention to analysts. They’ve got it wrong before (UP, anyone?) and they’re likely to get it wrong again. They also tend to focus on the very short term. It’s rapidly becoming the case that the box office opening is unconnected to a film’s subsequent performance in the DVD market and beyond.

DreamWorks (and every other studio) is in the middle of some choppy seas at the moment, and its simply dealing with them as best it can. Having the stock price go down is not the end of the world, not even close. Besides, any real investor is looking at the long term view, and in that regards DW is doing pretty fine considering its still independent.