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Business

Struggling Dreamworks to cut employees — and movies

By
Richard Morgan
Published Jan. 23, 2015, 2:23 a.m. ET

The dream at DreamWorks Animation just got smaller — as in fewer movies produced each year and a reduced workforce.

The 20-year-old studio, which had been turning out three animated films a year, will reduce its slate to two, DWA CEO Jeffrey Katzenberg said Thursday during a hastily scheduled conference call.

The small Hollywood studio had come under fire for its underperforming ways, and its shares had fallen about 40 percent over the past year.

Wall Street reacted positively to the announcement — pushing DWA shares up 2.1 percent in after-hours trading, to $21.75.

For 2015, however, the March 27 premiere of “Home” will be DWA’s only release.

The six films being readied for 2016 to 2018 include one sequel and one original film each year.

The sequels to which DWA remains committed are “Kung Fu Panda 3” (March 2016), “The Croods 2” (December 2017) and “How to Train Your Dragon 3” (June 2018).

“It’s back to basics,” Katzenberg, 64, said of a studio that produced 17 consecutive hits after its first animated film, “Antz,” in 1998.

At that time, DWA got ambitious and upped its annual output above its then two-a-year limit.

“Three films in each and every year is just too ambitious,” Katzenberg conceded during the conference call. “We have fallen short on the creative side.”

The smaller slate also means a smaller staff. DWA also said Thursday that it would trim its payroll by 18 percent — or by about 500 jobs.

Most of the cuts will be in movie production, although Katzenberg said ancillary services such as marketing will be affected as well.

Among the casualties is DWA’s Redwood City facility, overlooking the San Francisco Bay, which was home to more than 700 employees a couple of years ago.

There were also cuts at the top — most notably COO Mark Zoradi, a well-respected veteran of Walt Disney who jumped to DWA only last July.

“He volunteered himself,” Katzenberg said of the departure, described as necessary to right-sizing the operation.

Vice Chairman Lewis Coleman, who for a decade served as DWA’s president, is leaving as well.

The studio said it expects the cuts to result in a pre-tax charge of nearly $300 million.

It will also require cash outlays of $110 million for severance and relocation expenses before generating pre-tax cost savings projected to grow to $60 million a year by 2017.

The restructuring comes after months of turmoil in which the studio became the target of an SEC investigation, took several write-offs of films that failed to deliver on expectations and engaged in so many merger discussions that they struck Hollywood insiders as a sign of desperation.

Katzenberg said during the conference call that, as DWA works to recapture its mojo, he planned on being less “distracted” and “spending less time on the road.”