Days after the leadership change at DreamWorks Animation (DWA), the company is going to implement a new strategic plan to restructure its core feature animation business. This is to ensure the consistency and profitable delivery of its films.
DWA will only be producing two films a year, as opposed to three and maximise its creative talent and resources, reduce costs and drive profitability.
The newly appointed co-presidents of feature animation Bonnie Arnold and Mireille Soria have decided to focus on six movies in the next three years. Each year will have one original and one sequel. 2016 will see Kung Fu Panda 3 (18 March) and Trolls (4 November), 2017 will see Boss Baby (13 January) and The Croods 2 (22 December) and 2018 will see Larrikins (16 February) and How to Train Your Dragon 3 (29 June). Captain Underpants, which will be outsourced overseas at a significantly lower cost, will be released in 2017.
Its 2015 release Home will premiere in the US on 27 March. B.O.O.: Bureau of Otherwordly Operations and Mumbai Musical have been shelved for the time being.
“The number one priority for DreamWorks Animation’s core film business is to deliver consistent, creative and financial success. I am confident that this strategic plan will deliver great films, better box office results, and growing profitability across our complementary businesses,” said DWA CEO Jeffrey Katzenberg.
The restructuring will result in the loss of 500 jobs across all locations and all divisions of the studio and will be completed by the end of the year. Operations in northern California will shut completely and some of its employees will be offered spots at the studio’s LA headquarters. The job cuts represent approximately 20 per cent of its workforce.
DWA expects to incur a pre-tax charge of approximately $290 million in connection with the restructuring and related items. These costs are expected to be incurred primarily in the quarter ended 31 December 2014, with the remainder in 2015 and 2016.
The plan will result in total cash payments of approximately $110 million incurred primarily in 2015. The restructuring plan is expected to be substantially complete by the end of 2015 and expected to result in annualised pre- tax cost savings of approximately $30 million in 2015, growing to roughly $60 million by 2017.
The company will also be seeing top executives depart from DWA. Vice chairman Lewis Coleman will be retiring; COO Mark Zoradi and marketing chief Dawn Taubin will be leaving in a few months. Jeffrey said that DWA had become too ‘top heavy’ and that making three films a year was ‘too ambitious’. He told analysts that while the studio had achieved the production capacity, it had fallen back on its creative capacity which it hopes to revive with the top level leadership change.
DWA has seen a string of box office failures in the last two years including Turbo and Rise of the Guardians. The studio told investors that it expects a write-down of about $ 55 million when its fourth quarter earnings are released, due to the poor performance of Penguins of Madagascar.