DreamWorks to cut 500 jobs, movie slate to revive box office fortunes
View(s):REUTERS – DreamWorks Animation SKG Inc will cut about 500 jobs, more than a fifth of its workforce, and produce one fewer movie a year as part of a major restructuring after a string of box-office misses.
The Hollywood studio’s shares rose 6 percent to $22.63 after the bell on Thursday.
DreamWorks, which held unsuccessful buyout talks twice last year, said it plans to produce two feature films per year, down from three, and close its Northern California studio.
“We believe that our efforts to make three films each and every year was just too ambitious and has led to inconsistent performance,” CEO Jeffrey Katzenberg said.
The maker of the “Shrek” and “Kung Fu Panda” franchises has reported losses in two of the last four quarters, as movies such as “Rise of the Guardians” fell shy of expectations.
“Even with a smaller slate, if all goes according to their expectations, we should see significantly higher profitability,” Research Associates LLC analyst Marla Backer said.
DreamWorks has faced increasing competition for family audiences as other studios have turned out hit animated films, such as the “Despicable Me” franchise from Universal Pictures and “The Lego Movie” from Warner Bros.
Three of the six movies DreamWorks plans to release over 2016 to 2018, are sequels, which require less advertisement costs and almost guarantee strong ticket sales.
Restructuring costs
DreamWorks has worked to diversify its business in recent years, making a deal to supply more than 300 hours of programming for Netflix Inc and purchasing YouTube network AwesomenessTV.
The company, which had about 2,200 employees as of 2013, said the 500 job cuts will span all divisions of the studio. Vice-Chairman Lewis Coleman and COO Mark Zoradi will leave, the company said.
The company will take a pre-tax charge of about $290 million, most of which would be accounted for in the quarter ended Dec. 31.