Movies Aren't Main Motive in Comcast's Pursuit of DreamWorks Animation
April 27 2016 - 5:20PM
Dow Jones News
Comcast Corp.'s talks to purchase DreamWorks Animation SKG Inc.,
the studio behind "Shrek" and "Kung Fu Panda," are about everything
except the movies, people familiar with the deal discussions
said.
Rather, the potential $3 billion-plus acquisition is meant to
accelerate consumer products and theme park businesses and grow
synergies between film and television at NBCUniversal, the
Comcast-owned entertainment conglomerate, those people said.
Negotiations for Comcast to purchase DreamWorks could be
completed in the next few weeks but also may still fall apart, said
the knowledgeable people. The Wall Street Journal first reported on
the deal talks late Tuesday.
A Universal spokeswoman declined to comment.
Rather than continuing as an independently run subsidiary,
DreamWorks Animation would be mined for intellectual property
ranging from "Madagascar" to Lassie that could be used in toys,
T-shirts and theme park attractions, these people said. In
addition, the studio has in the past few years built a small but
potent television business which NBCUniversal hopes could make it
more competitive in children's programming and help it to adapt
other movie properties, from "Fast and Furious" to "Pitch Perfect,"
for the small screen.
In perhaps the clearest sign that the company won't continue in
its current form following a sale, DreamWorks Animation Chief
Executive Jeffrey Katzenberg is expected to exit as part of a deal.
The veteran Hollywood mogul, who previously ran Walt Disney Co.'s
movie business, is the "K" in "SKG" and has been part of DreamWorks
since its founding in 1994. Ten years later, he became CEO of
DreamWorks Animation when it spun out as a public company.
It isn't clear what the 65-year-old, who has been one of the
Democratic Party's most active fundraisers, would do following a
sale of the company. Mr. Katzenberg declined to comment when
reached Wednesday.
When it comes to DreamWorks' movie production assets, Comcast
executives haven't yet determined what to do with them going
forward. They plan to leave that decision to Chris Meledandri, the
producer who oversees Universal's animation business Illumination
Entertainment. Since releasing its first movie in 2010,
Illumination has become one of the industry's top players with the
hit "Despicable Me" series and its "Minions" spinoff.
It has also gained notice for producing its movies outside the
U.S. at significantly lower budgets than competitors such as
DreamWorks .
Mr. Meledandri, the knowledgeable people said, would be tasked
with looking under the hood of DreamWorks Animation and determining
what movies it should produce as part of Universal. Illumination,
which is releasing two films this year and in 2017, and DreamWorks
would remain separate consumer brands.
Cutbacks in production and overhead at DreamWorks are likely
following a sale, the knowledgeable people said.
In potentially spending billions to acquire a repository of
intellectual property it can exploit through its numerous business,
Comcast is pursuing a strategy similar to one followed over the
past decade by Walt Disney Co. with acquisitions such as Marvel
Entertainment Inc. and Lucasfilm LLC.
NBCUniversal, whose top ranks include several former Disney
executives such as Chief Executive Steve Burke, has more than
doubled investment in its theme parks, spending $2 billion between
2013 and 2015, and grown its consumer products business to more
than $100 million in annual revenue last year from $30 million
before the cable company took over in 2011.
While still small compared with Disney, those businesses are
growing fast and could accelerate with the infusion of new
intellectual property. NBCUniversal has also lagged behind
competitors such as Disney to date in using its movie franchises on
its suite of television channels.
"The whole strategy of how they think about merchandising their
movies across the theme parks, and even in consumer product and in
their cable products, borrows a page from Disney's," says Craig
Moffett, analyst at MoffettNathanson.
DreamWorks' best-known movie franchises, which also include "How
to Train Your Dragon" and "The Croods," aren't its only brands
attractive to Comcast. The purchase could validate one of Mr.
Katzenberg's little noticed moves of the past few years: His 2012
purchase of Classic Media, which has a portfolio of well-known
characters including Casper the Friendly Ghost, Fat Albert, and
Lassie, for $155 million. Those characters would become a
significant part of the NBCUniversal merchandising machine.
DreamWorks is already producing a television series based on
Classic's "Voltron" for Netflix. In November, it will release a
movie based on the Troll dolls, which it acquired the rights to in
2013.
Shalini Ramachandran contributed to this article.
Write to Ben Fritz at ben.fritz@wsj.com and Erich Schwartzel at
erich.schwartzel@wsj.com
(END) Dow Jones Newswires
April 27, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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