Dreamworks Animation (DWA) is best known by families for its movies Shrek,
Kung Fu Panda and Madagascar. DWA has historically released two films a year which on average take three years to five years to produce. This compares to live action/drama content which can be put together in months and not years. Because of the work required DWA does not have the large backlog with recurring revenues like other studios which help pay the rent if one of the two films is a bomb.
All this is beginning to change thanks to an acquisition and a new agreement.
The acquisition of Classic media which owns 3,600 hours of
programming.
The agreement with Netflix to produce 300 hours of
Dreamworks television shows.
What this means is a more steady revenue generating business.
For studios backlog is extremely important as it is high margin revenue, production has already been expensed so any new sales are large
contributors to the bottom line. With the two deals above DWA creates a larger backlog and with the television shows the potential to build its own network like the Disney channel.
Dreamworks greeter at the front door, reception this way!
Classic Media
The acquisition of Classic Media is a game changer for
$155million DWA is now the proud owner of one of the world’s largest
comic book archives in addition to media rights to the golden books library. The
characters include Casper, Richie Rich, Postman Pat, Where’s Waldo, Rocky &
Bullwinkle, Lassie, He-man, Voltron and more. See below.
Netflix deal
TV is a great business for studios as the revenues are more
consistent as shows are multi-year agreements which can be extended further if successful. Owning a backlog of TV shows can also help DWA to build their own children’s television network
channel in the future. Over a four year
period DWA will produce nearly a billion dollars worth of programming. The slate
has been pre-agreed without any performance requirements. In general the deal
has an extensive period of exclusivity after which DWA can sell the content in later distribution deals.
China
The Chinese media market is heavily regulated and restricted. Fortunately DWA has teamed up with Shanghai Media Group to create Oriental Dreamworks a Chinese themed animated and live action film company including theme parks, games and consumer products. The studio's first animated film will be Kung Fu Panda 3. Because of Kung Fu Panda DWA is immensely popular in China with four of China's top five animated films produced by DWA. Oriental Dreamworks has the potential to become the Disney/Pixar of China as the no.1 animated player.
Jason
Disclosure: Decisive has no long position in Dreamworks (DWA) stock
China
The Chinese media market is heavily regulated and restricted. Fortunately DWA has teamed up with Shanghai Media Group to create Oriental Dreamworks a Chinese themed animated and live action film company including theme parks, games and consumer products. The studio's first animated film will be Kung Fu Panda 3. Because of Kung Fu Panda DWA is immensely popular in China with four of China's top five animated films produced by DWA. Oriental Dreamworks has the potential to become the Disney/Pixar of China as the no.1 animated player.
Jason
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