Tinseltown Draws Closer

Sometimes all it takes is a lowly chameleon to change your dissed position.

Viacom's (NYSE: VIA) Paramount Pictures announced yesterday that it will be launching an animation unit, targeting 2014 for its first release.

This move would have never happened if it wasn't for the success of Gore Verbinski's Rango. It was Paramount's first in-house animated feature, faring surprisingly well at the box office earlier this year. Rango took in $123.2 million in domestic ticket sales and rang up nearly that much through overseas exhibitors.

The showing stacks up well to this year's other animated hits. News Corp.'s (Nasdaq: NWS) Rio came through with $140.7 million at the box office, and DreamWorks Animation's (Nasdaq: DWA) Kung Fu Panda 2 -- an established franchise -- checked in at $157.6 million. Disney (NYSE: DIS) bombed earlier this year with Mars Needs Moms, failing to crack $25 million in North America.

Disney and DreamWorks Animation can't be too happy that Paramount is serious about competing for release dates with family-friendly fare. Shares of DreamWorks Animation even took a 3% hit on the news, since Paramount is under contract to be DreamWorks Animation's distribution through 2012.

It will be easy for DreamWorks Animation to find a new distributor, but it will no longer have the leverage to negotiate an extension on kind terms.

Theatrical animation has always been big business, but now the market is opening up beyond Disney and DreamWorks Animation. Paramount realized this during Rango's cinematic run, and now the popular feature will be out on DVD for a second run at audiences next week.

A chameleon's color may change, but Paramount's seeing only green right now.

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