DreamWorks Animation SKG Inc. will soon release an animated movie with characters old enough to not only predate kids, but many of their parents. And that has some investors feeling sketchy.
Concerns arose after the Glendale animation studio opened the movie “Mr. Peabody & Sherman” in the United Kingdom earlier this month. Although it debuted at No. 1 in that country, its opening-weekend haul of $6.4 million was very close to the U.K. opening for the studio’s recent box-office disappointment, “Turbo,” which made just a little less when it opened there.
Analysts said “Mr. Peabody,” about a hyperintellectual talking dog and his adopted human son, is no slam dunk for U.S. audiences either due to the relative unfamiliarity of its characters, which were part of “The Rocky and Bullwinkle Show” in the 1960s. The company’s top five movies at the global box office were all sequels in its “Shrek,” “Madagascar” and “Kung Fu Panda” franchises.
The concerns caused shares last week to fall 5 percent to $32.01 on Feb. 19, making DreamWorks one of the biggest losers on the LABJ Stock Index. (See page 58.) The stock rebounded slightly the next day.
“People are hesitant thinking about ‘Mr. Peabody & Sherman,’” said Eric Wold, an analyst who covers DreamWorks at B. Riley & Co.’s San Francisco office. “There are people who are in the stock for the short term as well as long term. Short-term investors will trade around the opening of movies.”
DreamWorks is scheduled to announce fourth quarter earnings on Tuesday. Analysts expected the company to report revenue of $237 million and earnings of 33 cents a share. DreamWorks declined to comment for this article ahead of the earnings announcement.
“Mr. Peabody” is DreamWorks’ first of three releases this year. It is also the company’s first big-screen adaptation of the intellectual property it acquired in 2012 when it paid $155 million to buy Classic Media.
That deal gave DreamWorks the rights to produce material based on Casper the Friendly Ghost, Rocky and Bullwinkle and other cartoon characters. DreamWorks is producing the content through a new division, DreamWorks Classics.
Analysts are watching to see how audiences respond to the Classics material. Since the original “Mr. Peabody” is so old, Wold is viewing the release as if it were an original property rather than a sequel or reboot. In general, original material is harder to market to audiences than sequels, though it can be done.
Jody O’Riordan, a box-office analyst at Studio System News in Los Angeles, said she hasn’t seen a huge amount of marketing support and hasn’t noticed very much buzz around the opening of “Mr. Peabody.”
“This doesn’t seem to be on anybody’s radar,” she said. “It does have some challenges. It was artsy and obscure 30 years ago.”
The movie has faced other challenges, too. Last year, DreamWorks’ distribution partner 20th Century Fox decided to delay the movie’s release from Nov. 1 to March 7. DreamWorks’ movie previously slated for a March release was sent back into development.
Under its 2012 distribution deal, DreamWorks pays Fox 8 percent of box-office, TV and DVD revenue and 6 percent of digital revenue.
O’Riordan said moving the release back might have been an attempt to skirt stiff competition around the holiday season, including Walt Disney Co.’s “Frozen,” which opened Nov. 27 and is closing in on $1 billion in global box office.
As a result, “Mr. Peabody” faces little competition for kids’ attention until the March 21 opening of “Muppets Most Wanted,” she added.
Another concern, though, is whether the voice actors in “Mr. Peabody” will appeal to kids, O’Riordan said. The movie is voiced by “Modern Family” actor Ty Burrell, comedian Stephen Colbert, Leslie Mann and others.
Those names might help convince parents. But they don’t have the star power of the “Shrek” movies, for example, which were voiced by Cameron Diaz, Mike Myers and Eddie Murphy.
Given all the challenges, Wold expects “Mr. Peabody” to gross $285 million worldwide. That would put it on par with “Turbo,” which was widely considered a disappointment and made $283 million at the global box office.
Still, there are other opportunities beyond the box office. DreamWorks is dramatically ramping up its efforts to exploit movie properties in other mediums, including theme parks as well as a new kids’ publishing division it announced this month. And “Turbo” – the company’s lowest-performing movie at the box office in seven years – is expected to become profitable for DreamWorks when factoring in TV rights, consumer goods and other ancillary revenue.
Wold said if “Mr. Peabody” opens slowly, it can only hope to follow the path of “Turbo,” DreamWorks’ tale of a racing snail.
“If it does come in at the low end of historical levels, can they make that up through video on demand and consumer products?” he said.
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