DreamWorks Under Pressure With Release of 'The Croods'
The pressure is on for DreamWorks Animation this weekend to have a big hit with the release of "The Croods."
After "Rise of the Guardians" bombed at the box office, the studio had to take an $87 million write-down, and lay off 350 employees.
DreamWorks needs a success to show it has what it takes to lure in family audiences in an increasingly competitive environment. And with the successful "Shrek" franchise behind it, it could use the kind of hit that creates a massive brand and spawns sequels.
The Croods is a digitally animated comedy that follows the world's first modern family, and is the first DreamWorks Animation film Fox is distributing as part of a new agreement struck last year—it's hitting 5,850 screens in the US, about 1,200 of them in 3-D. With the stock down more than 26 percent over the past few years while the Dow has gained more than 20 percent over the same period, the company could use the kind of hit that could also create a multi-film franchise.
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The Croods has a timing advantage—there are no other big kids movies hitting theaters until late spring, when Fox's digitally-animated 3-D movie "Epic" opens at the end of May. The hope is that the new film will perform like the studio's "How to Train your Dragon," which in 2010 opened with $43 million at the U.S. box office opening weekend, but performed well for the following two months, ultimately grossing nearly $500 million worldwide. That slow, steady performance was enough for Dreamworks Animation to commission a sequel, hitting theaters next summer, along with a TV show, "Dragons: Riders of Berk," which Cartoon Network (owned by Viacom) picked up.
DreamWorks Animation releases so few films every year that each one has an impact on the company's bottom line and stock performance.
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Caris' analyst David Miller noted that although the film is visually stunning that it "falls flat" and is "not particularly funny." Miller predicts that The Croods will open with $41 million in the United States, but if it's less than $35 million expect the stock to "trade off measurably."
The big challenge, he explained, is that Disney's 'Oz: The Great and Powerful,' continues to have legs, making it a formidable competitor, holding up at the box office for several weeks after its debut.
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But Cowen's Doug Creutz said investors shouldn't worry about the film's domestic debut, but rather should focus in on its international opening. Creutz added international performance will "ultimately prove more significant for DWA shares, given that a key piece of the current bull thesis is that Fox can do a superior job of distributing DWA's films internationally vs. Paramount's prior efforts."
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin