Why DreamWorks Should Steer Clear of the Comic Book Business

Two reasons Dreamworks shouldn't cash in on the comic book business.

Feb 19, 2014 at 7:15PM

DreamWorks Animation's (NASDAQ:DWA) new publishing division might want to avoid creating and selling comic books, Fool contributor Tim Beyers says in the following video.

Sound crazy? It might, especially when you consider the vibrancy of the comic book business and consumers' appetites for pop-culture fare. And yet, there are at least two reasons for the company not to cash in directly: IDW and APE Entertainment. DreamWorks has licenses with both publishers.

IDW is publishing books based on DreamWorks' adaptations of the various Jay Ward characters (i.e., Rocky and Bullwinkle, Mr. Peabody and Sherman, etc.), while APE has licenses for Kung-Fu Panda and Penguins of Madagascar, and has published a four-issue Megamind miniseries. Trade magazine ICv2 has confirmed that DreamWorks intends to keep honoring both agreements.

Smart move, Tim says. Comics publishing is getting riskier; as more titles flood the market, readers may cut back in response. ICv2 reports that in December, only three of the top 300 books sold 100,000 or more copies to stores. Only one eclipsed that threshold in January.

In licensing to IDW and APE, DreamWorks mitigates the risk of entering the comic book business at the wrong time while still cashing in on some of the brand equity of its intellectual property. A prudent mix investors should appreciate, Tim says.

Now it's your turn to weigh in. Have you read any of DreamWorks' licensed titles? Or would you rather see DreamWorks cashing in directly, as Time Warner and Walt Disney have? Please watch the video to get Tim's full take on the state of the comic book business, and then leave a comment to let us know where you stand.

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Time Warner and Walt Disney at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends DreamWorks Animation and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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