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DreamWorks Animation Strikes Resort Licensing Deal as Stock Drops

Shrek Princesses
AP
Shrek Princesses

DreamWorks Animation is bringing Shrek and Kung Fu Panda to Gaylord Entertainment's family resorts.

The company just announced that it's licensing its characters to Gaylord's four upscale hotels in Nashville, the Orlando area, Dallas area, and in Maryland.

The animation studio is calling it the "DreamWorks Experience," which means a Disney-style barrage of interactive experiences — breakfasts with the characters, themed food and drinks, themed entertainment, and of course parades.

The partnership aims to be a win-win: Gaylord gets big brand names to attract families year round, while DreamWorks Animation secures yet another licensing revenue stream. This is similar to the deal DreamWorks Animation struck with Royal Caribbean — "The DreamWorks experience" — replete with plenty of characters and the studios 3-D movies is available on four Royal Caribbean ships.

The company's announcing this partnership on the heels of lower earnings in the past quarter, in which it didn't release any movies theatrically.

Net income came in at $8.8 million in the quarter, down from $21.7 million a year ago. Morgan Stanley analyst Ben Swinburne weighed in that home video revenues for 'Megamind' were $12 million below his estimates, and gross margins were lower than expectations. But on the upside, 'Shrek Forever After' is yielding stronger than expected results in home video.

But the real question for DreamWorks Animation and Jeffrey Katzenberg is how it'll fare in the face of growing competition. Paramount, which distributes DreamWorks Animation films, for now at least, is moving into the digital animation space itself, and calls its first film in this arena, "Rango" a big success. Katzenberg responded to questions about rivalry from the likes of Rango by implying that some other films were "in fact not successful."

Now Wall Street will be watching to see whether digital animation from Paramount and Universal, which released 'Despicable Me' and 'Hop' poses a growing threat. In the meantime the spotlight is on 'Kung Fu Panda 2,' which opens in May and 'Puss in Boots,' which is due out this fall. DreamWorks animation has been relying on its proven franchises to drive the business — new titles like 'Megamind' haven't been as big hits. Does DreamWorks animation have another Shrek-sized character up its sleeve?

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.