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DreamWorks Animation Acquisition will Boost Universal Studio's Genre Portfolio
NBCUniversal, owned by cable giant Comcast, is buying DreamWorks Animation (DWA) for $3.8bn cash (total value of the transaction is $4.1bn including debt). The deal will significantly lift Universal’s capability in animation, which is consistently a key part of the children’s genre offering across all media.
DreamWorks Animation was separated from DreamWorks Studios SKG (now DreamWorks Pictures) in 2004 and is still run By Jeffrey Katzenberg, who co-found DreamWorks in 1994 with Steven Spielberg and David Geffen. The company makes only two major feature films a year on average and is reliant on new releases being hits. Titles which did not meet expectations have resulted in big swings in financial performance over the years and 2014 losses forced the company to close its Northern California studio in 2015, with a loss of 500 jobs. The offer by Universal represents a good premium over market price but reflects a big upturn in revenue in 2015 (see chart).
Major DWA franchises include Shrek, which has spawned four major movies, plus TV specials, spin-offs and a stage show, Madagascar (three movies with a fourth in production) and Kung Fu Panda. In addition to feature films, the company produces a stream of TV series and specials.
Universal already has an animation group, Illumination Entertainment, which produced one of the big CGI hits of 2015, Minions, helping the studio reach #1 at the US box office, with filmed entertainment revenues up 46% to $7.3bn. Universal also produced Despicable Me, which now has a second sequel (3) in production. Assuming the DWA deal goes ahead, it will integrate into Universal Filmed Entertainment under Chris Meledandri, who runs Illumination Entertainment, but will retain the DreamWorks banner which has worldwide brand recognition. 20thC Fox has distribution rights for DWA movies until 2017, but it is likely these will revert to Universal when the agreement lapses.
The DreamWorks Animation acquisition will lift Universal into the top 3 studios and will offer a stronger challenge to children’s content giant Disney, which also owns Pixar. Other studios produce animation, notably Fox Blue Sky Studios (Ice Age, Rio, Robots, The Peanuts Movie) and Sony Pictures Animation (Smurfs, Surf’s Up). Warner Animation traditionally focuses on children’s TV content but had a major recent hit with the Lego Movie, with a sequel in production. Universal will also gain leverage from DreamWorks franchises in its theme parks, resorts and merchandising.
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