DreamWorks Animation SKG announced its first quarter financial results during an investor conference call on Tuesday, noting that DVD and VHS sales of its CG feature, Shrek 2, failed to meet expectations. The studio says its $121 million increase in revenue over the same period last year is largely due to the success of Shark Tale, which did better-than-expected box office and sold 12 million units on home video during the quarter.
Shrek 2 sold 35 million home video units by end of the first quarter. Despite that success, DreamWorks says it overestimated in projecting earnings for the blockbuster. "As a result, revenue earned by our distributor from Shrek 2 was less than costs incurred by our distributor, resulting in DreamWorks Animation recording no revenue from Shrek 2 other than licensing and merchandising in the first quarter," said DreamWorks CFO Chris Leslie.
Leslie noted that the studio doesnt expect to record meaningful revenue from Shrek 2 until the fourth quarter of this year, when holiday sales kick in. However, she said the title is expected to continue generating retail sales, especially when Shrek 3 hits theaters an the direct-to-video spinoff, Puss In Boots, arrives in stores. The first Shrek film sold roughly 50 million copies on video and DreamWorks expects Shrek 2 to eventually surpass its predecessor on that front.
At present, DreamWorks Animation is focused on Madagascar, which hits 3,700 domestic theaters on May 27. The studio expects the film to benefit greatly from the historically box office-friendly Memorial Day weekend and a lack of family film competition during the following weeks.
DreamWorks Animation CEO Jeffrey Katzenberg commented, "With Madagascar, I think youll see that weve raised the bar for CG animation. Our team has made some remarkable breakthroughs by creating a world full of life-like animals with a level of detail not previously possible." He went on to boast, "For me, personally, I feel this might be the most visually complex and stunning animated movie made to date." The title is scheduled to arrive on home video in November.
Also getting released this year is the DreamWorks/Aardman collaboration, Wallace and Gromit and the Curse of the Wererabbit, which comes out in October. However, the studio doesnt expect to record any revenue from the film in 2005 since its distributor will not have fully recouped theatrical marketing costs by years end."
Ann Daly, DreamWorks Animations chief operating officer, said Wallace and Gromit is two-thirds of the way finished and anticipates completion by July. She also mentioned that the studio will be showcasing portions of the film this week at the Cannes Film Festival.