Is DreamWorks in Trouble?

n the summer of 2012, DreamWorks Animation, headed up as it has been from day one by Jeffrey Katzenberg, ended its long-running distribution deal with Paramount Pictures. Instead, it signed up with 20th Century Fox, and announced an ambitious slate of films, that included an increase to three films a year through until 2016. Up until that point, it had been working on one or two.

It put names to the films, too. This wasn't a marking down of a release date for an unannounced project, either. This wasn't hiding movies that were quietly in development. This was a bold statement of intent.

The announced movies back then? They ran thus:

2013:The CroodsTurboMr Peabody & Sherman

2014:Me & My ShadowHow To Train Your Dragon 2Happy Smekday!

2015:The Penguins Of MadagascarTrollsB.O.O. (Bureau Of Otherworldly Operations)Mumbai Musical

2016:Kung Fu Panda 3How To Train Your Dragon 3

It would be fair to say that things have not gone to plan.

Just going through the changes in order, Mr Peabody & Sherman bumped to 2014, leaving DreamWorks Animation with two movies in 2013.

Of the 2014 releases, Me & My Shadow has disappeared from the schedules altogether, with no new release day announced. Happy Smekday!, meanwhile, has since changed its name to Home, and it changed release date with The Penguins Of Madagascar.

Home, though, will be the only film from DreamWorks Animation we get in 2015. Trollshas moved to late 2016, Mumbai Musical is early 2017, and B.O.O. has been taken off the schedules, and not given another release date.

Kung Fu Panda 3 had moved to late 2015, but that's now been delayed to March 2016, to keep it out of the way of Star Wars: The Force Awakens. How To TrainYour Dragon 3, meanwhile, has also been put back a year, to 2017. In short, of that original announced line-up, only three of the films stayed where they were.

Now that in itself isn't a problem. Schedules fluctuate all the time, and DreamWorks Animation was clearly looking to put across a statement of intent when it announced that line-up in the first place. Yet rarely do announced schedules fluctuate so much.

Furthermore, something else happened that it's struggled to arrest since: the audience for its movies started to decline.

DreamWorks Animation hasn't always been given the credit it deserves, not least for having a slate that's lighter on sequels than many of its contemporaries. But the problem it faces is that with a few exceptions - the How To Train Your Dragon films,Rise Of The Guardians - not much of its recent fare has felt that special. Furthermore, from Rise Of The Guardians onwards, only one of its movies has beaten its box office projections (The Croods).

November 2012's Rise Of The Guardians was released at the end of a run that had seen six out of the previous nine DreamWorks films gross over $500m at the worldwide box office (and one of the remaining three, the first How To Train Your Dragon, earned $494m and a sequel). When Guardians'only' took home $306m, it was seen as a blip. Yet DreamWorks has subsequently struggled to find its box office feet since. The Croods did very well - earning $587m - but movies such as Turbo, Mr. Peabody & Sherman, and The Penguins Of Madagascar have fallen below $300m in global takings. Given that the films themselves cost $130m-ish to make before marketing costs, that's a notable amount short of what DreamWorks (and Fox) would have been looking for. Stories of DreamWorks having to take a financial write-down have not been in short supply.

Even when the studio enjoys a big hit, such as last summer's How To Train Your Dragon 2, it's come with a sting in the tail. That movie took $618m worldwide off the back of very good to excellent reviews, and yet that's still $100m off what was expected.

Looking forward, there's no obvious white knight on the slate to turn things around any time soon. DreamWorks' sole 2015 release, Home, was moved from November 2014 because it wasn't deemed commercially strong enough to compete at such a peak time of the year (ironic, given that The Penguins Of Madagascaris now unlikely to break $90m at the US box office). And whilst the film itself looks hugely promising - and is another standalone non-sequel from the firm - it's very unlikely to arrest questions that are being asked of the broader studio.

For DreamWorks Animation is in an interesting position. It's 20 years old, and The Penguins Of Madagascar marked its 30th film, but it's steadfastly resisted a house style. Furthermore, of its next five films, only Kung Fu Panda 3 looks like a sure-fire hit. Across 2017 and 2018, sequels are on the way to How To Train Your Dragon, The Croods, Madagascar, and Puss In Boots. But before that? Captain Underpants, Trolls, and Mumbai Musical are interesting gambles, but sizeable gambles nonetheless.

Which would all be fine, were it not for the feeling that DreamWorks wants to be a bigger player than it actually is.

Recent merger talks with Hasbro certainly would have upped its clout (Hasbro's share price took a hammering when it looked like the deal was close), but they fell apart. The expansion into television, meanwhile, has been successful, and DreamWorks is more aggressively targeting other sources of income aside from the cinema box office (its YouTube content investment looks like it's paid off for a start). It seems to be gradually transforming itself from a maker of animated movies to a broader media company. Or, moving from a competitive market into an even more competitive one. A market where it will look like a small fish in a proverbial big pond.

Yet as things stand, DreamWorks still seems just a little stuck, as a medium-sized producer of animated films, whose audience isn't really growing. Contrast that with the far nimbler Illumination Entertainment, which since 2010 has made four films - Despicable Me, Hop, The Lorax, Despicable Me 2 - for no more than $80m apiece.

It's done the bulk of its animation in France, rather than California (although DreamWorks now outsources key sequences to its Indian office), and in next year's Minionshas a movie that's likely to break $1bn at the global box office. DreamWorks' most successful movie to date is Shrek 2, at $919m, but that proved the peak of that particular franchise, one ultimately diluted by weak sequels.

In short: in spite of the fact that it routinely produces exquisite animation, and that its films are generally better than it gets credit for, DreamWorks Animation is being outthought and outfought. It's at a turning point.

Which inevitably brings things back to the man at the helm, Jeffrey Katzenberg. He told us a month or two back that feature films will remain at the heart of what the firm will do, but admits "it's more competitive... we are competing with live action movies that have become more cartoon." But then maybe John Cleese too had a point, when he told us that "the trouble with DreamWorks is that everybody is trying to read your script and tell you what they think Jeffrey would say is he had time to read it."

However, Katzenberg himself has been busy putting a management team in place at the studio to subdivide the decision making process. There's planning for the long term taking place.

Maybe the big question is how involved Katzenberg himself will remain. Had the Hasbro merger gone ahead, then he would have been locked in for several more years. But it's little secret that he's been looking for a buyer for DreamWorks, and with the collapse of Hasbro talks, he's still presumably on the hunt for one.

Yet DreamWorks Animation's long-term prosperity - and it's still a long way off making a big loss on one of its features - ultimately comes down to the films. And the problem the studio faces is that its output hasn't been distinctive and/or competitive enough to lure in the level of audience it previously enjoyed. That for the past three or four years, it's been chopping its schedule, changing things around, and rarely pushing at a boundary that wasn't technical. Homemay well address that, and Me & My Shadow looked like it might have done. But if the former fails, the studio may retreat back to further spin-offs and sequels.

That in itself isn't a major problem - How To Train Your Dragon 2is ample evidence that DreamWorks can do a strong sequel - but the studio needs ambition, and needs to be picking better stories. Katzenberg and his team had, for many years, a finely tuned antenna to what the market was looking for, but what worked before clearly isn't working now.

To its credit, the studio is backing some interesting storytellers - Dean DeBlois is back for How To Train Your Dragon 3, whilst Tim Michin is guiding 2017's Larrikins- yet now might just be the moment to make one or two bolder story choices too.

As things stand, DreamWorks Animation isn't in trouble, but it is in flux. And it's only going to be better films that dig it out of its currently perceived mini-rut.