UPDATED: Dramatic changes at the independent studio today following a string of feature film misses, and failed attempts to find a merger partner. DreamWorks Animation says it will reduce its output to two films a year from three as it seeks to “maximize its creative talent and resources, reduce costs, and drive profitability.” It will eliminate about 500 jobs “across all locations and all division of the studio” as it consolidates its northern California studio on to the Glendale campus. Word of the layoffs began to spread this week.
DWA will take a pre-tax charge of $290 million from the restructuring, most of it to be recorded in Q4 but with $110 million in cash payments, mostly this year. It expects to end up saving $30 million this year, growing to $60 million in 2017. The news lifted DWA shares about 3.2% in post-market trading.
The company leadership also will be overhauled. Vice Chairman Lew Coleman will retire, and COO Mark Zoradi and marketing chief Dawn Taubin will leave the company during this quarter. CEO Jeffrey Katzenberg told analysts in a conference call that DWA is “top heavy” adding that “we have too much corporate staff here.”
DWA shares have lost about 38.3% of their value over the last 52 weeks with the underperformance of features including Turbo, Rise Of The Guardians, Mr. Peabody & Sherman, and Penguins Of Madagascar. Early this month Chief Creative Officer Bill Damaschke left and veteran producers Bonnie Arnold and Mireille Soria were named Co-Presidents of Feature Animation. “We have fallen short of the creative side which is why we made this change in terms of the creative leadership,” Katzenberg says.
Indeed. the company says that — in addition to the restructuring charge — it will take an $80 million write-down for Q4 which includes $55 million mostly for Penguins but also including weak results for Mr. Peabody & Sherman. DWA added that B.O.O.: Bureau of Otherworldly Operations — which had been scheduled for a June release before it was removed from the schedule in November — is going back into development.
“The No. 1 priority for DreamWorks Animation’s core film business is to deliver consistent creative and financial success,” Katzenberg says. “I am confident that this strategic plan will deliver great films, better box office results, and growing profitability across our complementary businesses.”
One of the two films it will release each year will be an original and the other a sequel. In addition to Home (March 27), the slate now includes Kung Fu Panda 3 (March 18, 2016), Trolls (Nov. 4, 2016), Boss Baby (Jan. 13, 2017), The Croods 2 (Dec. 22, 2017), Larrikins (Feb. 16, 2018) and How To Train Your Dragon 3 (June 29, 2018). Another film, Captain Underpants, will be “produced outside of the studio’s pipeline at a significantly lower cost” for release in 2017. Beginning with Trolls, the average production cost for each film will drop to $120 million from $145 million.
The CEO says that he is “1,000% committed to building DreamWorks Animation. I am frankly focusing much more of my time on the core business which is the one that needs the time and attention right now. With the new initiatives that we’ve launched, each and every one of them are staffed with leading executives and entrepreneurs who can take better run of them now.”