A few weeks ago Dreamworks Animation announced a monstrous deal with Netflix, this deal gives Netflix the right to distribute TV series based on film franchises from Dreamworks Animation. What may be surprising to most is the almost immediate announcement of a TV spin-off Turbo their upcoming film that’s hitting theaters this Friday below is the story on the deal, quoted from CEO of Dreamworks Animation, Jeffrey Katzenburg:
“As we’ve mentioned in the past, television is a key part of our growth and diversification strategyfor the Company. These two deals are the most recent strategic steps that we have taken to move very aggressively into the TV business. Today we’re announcing that over the next five years we will produce nearly 1,200 new episodes of DreamWorks-branded programming. This production slate will feature TV series that are based on our current franchises, our future films, and the most popular heritage properties from Classic Media.
So in addition to being the world’s largest feature animation studio, we are now on a path to becoming one of the biggest producers and distributors of high-quality family TV programming on a global basis. I’d like to summarize what the Netflix and SUPER RTL announcements means for DreamWorks specifically. Netflix announced yesterday a new long-term multi-property licensing agreement that makes them our exclusive subscription television partner in various parts of the world. In the single largest deal for original content in their history, they have pre-ordered more than 300 hours of our new programming, with rights across the 40 countries where their service is offered today.
It’s a very significant opportunity for DreamWorks to partner with Netflix, which is the fastest-growing destination for families watching television today.Additionally, we are forming new long-term agreements with dominant telecast partners in other territories around the globe, beginning with SUPER RTL, Germany’s leading children’s TV network. We’ve signed a five-year agreement, under which SUPER RTL has licensed 1,100 episodes of programming, including much of what we have also licensed to Netflix, as well as additional content from our vast DreamWorks and Classic Media libraries of titles. The first series that will be made available to SUPER RTL starting this September is Dragons, which will be followed by Turbo.
The programming we are supplying under these two deals, and subsequent placement of our high-quality content in other territories on a worldwide basis, will give us a significant footprint across the global TV landscape. These developments are possible today because of the long-term investment we’ve made in feature film franchises, our acquisition of Classic Media, and the growing momentum of the DreamWorks brand around the world. We believe that our strategy of entering into long-term distribution deals with leading telecasters across the globe provides the most immediate and meaningful impact for our brand, for our Company, and for building shareholder value.
Today, television is a transformative line of business, and going forward we believe it will be a substantial and consistent revenue generator for the Company. This now includes the following items — first, our recently acquired Classic Media television production distribution business. Second, our existing TV series that are licensed to Nickelodeon, including Penguins of Madagascar, Kung Fu Panda, and Monsters Versus Aliens, as well as DreamWorks’ Dragons, to cartoon network. The third component of our television business is the DreamWorks and Classic Media collection of holiday specials, which features some of the most beloved titles, including Frosty the Snowman, Rudolph the Red-Nosed Reindeer, and Santa Claus Is Coming To Town, as well as our own Shrek the Halls.
And fourth, our TV business now includes the new programming that we’ve licensed to both Netflix and SUPER RTL, which we are in the process of selling to other leading telecasters on a worldwide basis. Altogether, we believe television will generate approximately $100 million in revenue in 2013, 50% of which is expected to come from Classic Media. We believe our television revenue will grow to a steady state of more than $200 million annually, starting in 2015.
And we expect the gross profit margins from television to be around 30%, which is close to what we have historically achieved from our feature film business. The revenue and profit projections I have just laid out for you do not include the substantial benefit that television will have on our rapidly expanding consumer products business, or the long-term library value from owning these negatives. We believe a number of our new series will have significant merchandising value associated with them, which would result in meaningful incremental revenue, as well as higher profit margin.
A second area of potential upside that is not included in our projections is our acquisition of AwesomenessTV. Since we acquired the Company less than 60 days ago, it has continued to see incredible growth in both the number of network subscribers, which has increased 40% from 14.”
What this deal means is that Netflix and Dreamworks Animation will soon being work on TV series exclusive to the streaming service. Dreamworks already has experience spinning off their films into TV; the first being The Penguins of Madagascar spun off from Madagascar, followed by Kung Fu Panda: Legends of Awesomeness and Dragons: Riders of Berk from “Kung Fu Panda” and” How To Train Your Dragon” respectively, however as previously mentioned Netflix has grabbed the right to a TV spin off of the upcoming film Turbo which stars Ryan Renolds, Snoop Lion, and other high ranked cast members.
However, this deal could potentionally lead to a major grab for Netflix, a possible TV spin off of Dreamworks popular Ice Age franchise. While no formal announcement or even hint of interest in a possible Ice Age TV spin off from either parties was made, you can’t help but wonder if a deal of some kind for production of one is in the works, especially considering the Turbo spin off is slated for release as early as this Fall. It is also believed that the recently announced TV spin off of The Croods may head to Netflix rather than Nickelodeon or Cartoon Network as well. Furthermore, the aforementioned current Dreamwork TV titles will become available for streaming soon as well.
