Studio Deal Talks Play Down Films -- WSJ
April 28 2016 - 3:03AM
Dow Jones News
By Ben Fritz and Erich Schwartzel
Comcast Corp.'s talks to purchase DreamWorks Animation SKG Inc.,
the studio behind "Shrek" and "Kung Fu Panda," are about everything
except the movies, people familiar with the deal discussions
said.
The potential $3 billion-plus acquisition is meant to accelerate
consumer products and theme-park businesses and expand synergies
between film and television at NBCUniversal, the Comcast-owned
entertainment conglomerate, those people said.
In perhaps the clearest sign that the company wouldn't continue
in its current form, DreamWorks Animation Chief Executive Jeffrey
Katzenberg is expected to exit as part of a deal. The veteran
Hollywood mogul, who previously ran Walt Disney Co.'s movie
business, is the "K" in "SKG" and has been part of DreamWorks since
its founding in 1994. Ten years later, he became CEO of DreamWorks
Animation when it spun out as a public company.
It isn't clear what the 65 year old, who has been one of the
Democratic Party's most active fundraisers, would do following a
sale of the company. Mr. Katzenberg declined to comment
Wednesday.
Negotiations for Comcast to purchase DreamWorks could be
completed in the next few weeks but also may still fall apart, said
the knowledgeable people. The Wall Street Journal first reported on
the deal talks late Tuesday. A Universal spokeswoman declined to
comment.
Rather than continuing as an independently run subsidiary,
DreamWorks Animation would be mined for intellectual property
ranging from "Madagascar" to Lassie that could be used in toys,
T-shirts and theme-park attractions, the people said. In addition,
the studio has in the past few years built a small but potent
television business that NBCUniversal hopes could make it more
competitive in children's programming and help it to adapt other
movie properties, from "Fast and Furious" to "Pitch Perfect," for
the small screen.
When it comes to DreamWorks' movie-production assets, Comcast
executives haven't yet determined what to do with them going
forward. They plan to leave that decision to Chris Meledandri, the
producer who oversees Universal's animation business Illumination
Entertainment.
Since releasing its first movie in 2010, Illumination has become
one of the industry's top players with the hit "Despicable Me"
series and its "Minions" spinoff.
It has also gained notice for producing its movies outside the
U.S. at significantly lower budgets than competitors such as
DreamWorks.
Mr. Meledandri, the knowledgeable people said, would be tasked
with looking under the hood of DreamWorks Animation and determining
what movies it should produce as part of Universal. Illumination,
which is releasing two films this year and in 2017, and DreamWorks
would remain separate consumer brands.
Layoffs, including cuts in production and administrative
overhead, at DreamWorks are likely following a sale, the
knowledgeable people said.
In potentially spending billions to acquire a repository of
intellectual property it can exploit through its numerous
businesses, Comcast is pursuing a strategy similar to one followed
over the past decade by Walt Disney Co. with acquisitions such as
Marvel Entertainment Inc. and Lucasfilm LLC.
NBCUniversal, whose top ranks include several former Disney
executives such as Chief Executive Steve Burke, has more than
doubled investment in its theme parks, spending $2 billion between
2013 and 2015, and expanded its consumer-products business to more
than $100 million in annual revenue last year, from $30 million
before the cable company took over in 2011.
While still small compared with Disney, those businesses are
growing fast and could accelerate with the infusion of new
intellectual property. NBCUniversal has also lagged behind
competitors such as Disney to date in using its movie franchises on
its suite of television channels.
"The whole strategy of how they think about merchandising their
movies across the theme parks, and even in consumer product and in
their cable products, borrows a page from Disney's," said Craig
Moffett, analyst at MoffettNathanson.
DreamWorks' best-known movie franchises, which also include "How
to Train Your Dragon" and "The Croods," aren't its only brands
attractive to Comcast. The deal could validate one of Mr.
Katzenberg's little-noticed moves of the past few years: His 2012
purchase of Classic Media, which has a portfolio of well-known
characters including Casper the Friendly Ghost, Fat Albert and
Lassie, for $155 million. Those characters would become a
significant part of the NBCUniversal merchandising machine.
DreamWorks is already producing a TV series based on Classic's
"Voltron" for Netflix. In November, it will release a movie based
on the Troll dolls, which it acquired the rights to in 2013.
Shalini Ramachandran contributed to this article.
Write to Ben Fritz at ben.fritz@wsj.com and Erich Schwartzel at
erich.schwartzel@wsj.com
(END) Dow Jones Newswires
April 28, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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