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Surprise! DreamWorks Animation (NASDAQ: DWA ) actually does know what it's doing, Wall Street!
By the way the digital animation studio has traded over the past couple of years, you'd be under the assumption that either Disney's (NYSE: DIS ) Pixar was mopping the floor with DreamWorks, or that DreamWorks' successes were few and far between. In actuality, of the now 26 animated films that DreamWorks has produced, very few have failed to find the mark.
Out with the old and in with the prehistoric
Yes, Rise of the Guardians was a phenomenal, but rare, flop that caused DreamWorks to write down $87 million and was the primary cause of 350 layoffs within the company. However, early results from the release of DreamWorks' The Croods show that this animator has once again stepped out of its cave and back into the limelight.
For the weekend, The Croods was the No. 1 box office hit -- pushing Disney's The Great and Powerful Oz down to third overall -- bringing in $44.7 million in the U.S. and Canada, and an additional $63.3 million in international markets, according to DreamWorks. The combined $108 million is a fantastic start for a movie that cost $135 million to produce and could draw what I'd guess is an additional $30 million to $40 million in marketing costs. As noted by The New York Times, The Croods opening weekend figures are extremely similar to that of How to Train Your Dragon, which grossed approximately $500 million in total. However, How to Train Your Dragon received considerably better views from movie critics.
A definite improvement from a caveman's tools
Still, this is an important step for DreamWorks in showing moviegoers and investors that it has the technology, partnerships, and the ability to connect with the viewer that made it great in the past.
It's the company's introduction of newer animation technology and its partnership with Hewlett-Packard (NYSE: HPQ ) , both in a personal desktop setting as well as in the cloud, that's allowed the company to stand out. More seamless animation techniques, which can provide instant feedback, as well as the ability to retrieve data from the cloud in multiple locations, have drastically improved efficiency from a hardware and software perspective.
It also doesn't hurt that DreamWorks has multiple successful sequel opportunities (Shrek and Madagascar worked beautifully, for instance), as well as content partnerships lined up to aid with marketing. DreamWorks has expanded on existing content deals with Netflix and even recently announced a streaming-based children's series, Turbo: F.A.S.T. which will act as the perfect marketing ploy to CG animated movie Turbo due out later in 2013.
By the numbers
Taking into account the so-so reviews by movie critics for The Croods, it is quite possible that it may not hit $500 million in sales like How to Train Your Dragon. However, the Street seems to forget that a relatively early Easter will have children out of school next weekend, and ticket sales have a shot at soaring well beyond its initial first-weekend total. There’s no coincidence in the timing of the release of this movie -- CEO Jeffrey Katzenberg knew exactly what he was doing.
As of now, I'd place my best guestimate at total sales of The Croods slightly topping $400 million. While that may be seen as only a modest victory for DreamWorks, it will still net the studio in excess of $200 million in profit over the life of the film (via ticket sales, video, and merchandising) and could necessitate a sequel.
I've said it before, and I'll say it again, "Job well done, DreamWorks!"
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