After years of on-and-off flirtations, Comcast is in talks to buy DreamWorks Animation, the boutique studio run by Jeffrey Katzenberg that has struggled to move past a boom-and-bust cycle driven by its sporadic film releases.
The possible deal would value DreamWorks Animation at about US$3 billion, or about 30 percent more than its current market value, according to two people with knowledge of the talks, who spoke on the condition of anonymity because they were not authorized to discuss them. The negotiations were first reported by the Wall Street Journal.
If a deal goes through — still an if, especially given DreamWorks Animation’s checkered history with potential sales and mergers — Comcast would combine the company with its own animation division, Illumination Entertainment, the people said.
Christopher Meledandri, the chief executive of Illumination, which has found success in low-cost smash hits like Despicable Me, would most likely run the operation.
That would almost certainly mean the departure of Katzenberg and layoffs at DreamWorks Animation, which is based in Glendale, California.
A spokesman for DreamWorks Animation, home to the Shrek, Kung Fu Panda and Madagascar movie series, declined to comment. Representatives for Comcast, which owns NBCUniversal, could not immediately be reached. A spokeswoman for Universal Pictures declined to comment.
DreamWorks Animation, which was spun off from Steven Spielberg’s privately held DreamWorks Studios in 2004, probably drew Comcast’s interest as an owner of intellectual property.
Along with its signature movie franchises, some of which are dormant (like Shrek), DreamWorks Animation owns a library of older cartoon characters like Casper the Friendly Ghost through its DreamWorks Classics division.
DreamWorks Animation also supplies television cartoons to buyers like Netflix and is part owner of AwesomenessTV, a booming online producer and distributor of programming aimed primarily at teenage girls.
In recent years, as the film business has become more franchise-oriented and as more nimble competitors, notably Illumination, have emerged in the animation field, Katzenberg has pursued various strategies to put his studio on stronger footing.
In 2014, there was a failed acquisition offer from Softbank, the telecommunications and Internet giant. A couple of months later, Hasbro and DreamWorks Animation explored a merger, but that effort collapsed after Hasbro’s stock price plummeted and a big Hasbro client, Walt Disney Co, privately expressed displeasure.
Katzenberg, who had over the years explored similar arrangements with various entertainment companies, including with Comcast, then decided to go it alone.
In January last year, he laid off about 500 employees, or 19 percent of his staff, and renewed a personal focus on moviemaking.
So far the results have been mixed.
Kung Fu Panda 3 received positive reviews and took in US$504.4 million worldwide. However, analysts expected stronger ticket sales; Kung Fu Panda 2 took in US$665.7 million in 2011. (DreamWorks Animation pays 20th Century Fox a fee to release its films.)
Last week, Cowen and Co analyst Doug Creutz wrote in a research note that he was concerned about forthcoming DreamWorks Animation movies, including The Boss Baby, which is scheduled for next year.
“We think that being the fourth or fifth or sixth-best animated studio [behind Disney Feature Animation, Pixar, Illumination, and arguably Blue Sky and/or Warner Bros] is not a good place to be,” Creutz wrote.
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