Earlier today, DreamWorks Animation announced a move into live-action television and the appointment of former Gaumont International TV CEO Katie O’Connell Marsh as the exec charged with expanding the business. In an afternoon session at the UBS Global Media and Communications Conference, DreamWorks Animation president Ann Daly further detailed the TV strategy and also touched on the company’s upcoming release of feature Kung Fu Panda 3, and what the first true U.S.-China co-production might mean to the bottom line.
“The best is yet to come,” said Daly of the overall outlook for DWA, which unveiled strong Q3 earnings in November thanks to better TV and home entertainment results especially with its previous theatrical release, Home. The company is also looking forward to the January 29 day-and-date release of Kung Fu Panda 3 which will allow it a nearly 40% revenue share with the Middle Kingdom under the co-pro status as opposed to the 25% that comes with a film released in China under the quota system.
The TV business, Daly said, is a “result of a strategic decision to capitalize on 20 years in the feature film business” which includes “amazing IP and a deep library of characters.” Live-action will be the “basis for us to be able to exploit in a new content arena.” Some of that IP is being developed from DWA’s own stable like a Croods series based on the hit feature (which coincidentally had a huge China run). Some comes from the Classic Media library acqusition like Voltron which is being developed as a series.
The upfront investment, she said, will be “in the single millions for the next year.” Stepping into live action “increases the amount of content we can sell to existing customers.” The focus will be on kids and family co-viewing which is the company’s “sweet spot.”
Noting there are 10 more episodes of Dinotrux coming in March next year and that The Croods TV series kicks off on Christmas Eve on Netflix, Daly added there is a “slew of titles for next year, but I’ll let Netflix announce those for us.”
The focus will be “the demo we feel most expert in” which is children and co-viewing. This is an age where animation “taps out and broadcasters or platforms want to hold onto those kids… We want to grow with the customer.” However, with all of this original IP, Daly said the idea of launching its own SVOD platform is “not a path we are choosing right now… The partnerships we have with Netlfix or linear broadcasters in international territories are bringing the most immediate value compared to starting our own service.”
DWA benefits, Daly said, from not being vertically integrated. In a “wildly changing landcape we are uniquely capable to capitalize on all things that are going on. We can sell to broadcasters and SVODs which allows us to deploy” all over the market. “Those services want to get into children’s content.”
Turning back to the film side of the business, Daly talked about KFP3. “We think the co-production is a strategic benefit.” As a partnership between DWA in the U.S. and Oriental DreamWorks in China, the “incremental value comes through Oriental DreamWorks, so DreamWorks benefits as part of its equity position where we have 45% of that company.”
Because it’s a co-production, she noted, “we have favorable treamtent” releasing January 29 “inside a blackout period.” The February frame annually sees the Lunar New Year period sideline Hollywood movies. The take from China could reflect even higher box office. “To the extent that China box office is high, it might change the mix of our overall international box office,” Daly said. “We should be in good shape.”
Of the upcoming film slate, which will include two films a year — an original and a sequel — and perhaps a third, Daly added, “It embodies the best of what a DreamWorks film should be.” On deck is a Captain Underpants movie based on the kids book on which DWA is doing the front end and outsourcing a third party for physical production.
“We’re on track to hit lower projected film costs of about $120M by the time Trolls gets released this next November,” she said. Part of controlling costs is about “fortitude.”