Animated Features Aren’t Studio’s Dream Come True

The giddy high point in fledgling DreamWorks SKG’s short history came a month ago when it scored a best picture Oscar for “American Beauty.”

Just five days after the applause died down, the studio slammed back to Earth when its animated feature film “The Road to El Dorado” opened. Anemic ticket sales assured their expensive animated movie would be a big money loser.

For most studios, a single animated dud would be a short, painful event soon forgotten. But at DreamWorks, this genre of entertainment is critical to its financial health. Many in Hollywood believe that the division will make or break the company. So far, after spending hundreds of millions of dollars in start-up, production and marketing costs, DreamWorks has little to show for its efforts.

Without the cavernous pockets of DreamWorks’ billionaire backer Paul Allen, the studio’s animation business might well be on the ropes.

Back in late 1994 when DreamWorks was little more than a handshake between partners Jeffrey Katzenberg, Steven Spielberg and David Geffen, animation was all the buzz. Katzenberg was fond of boasting he could repeat his spectacular success when he headed Walt Disney Studio and oversaw such hits as “The Lion King,” “Beauty and the Beast” and “Aladdin.”

At stake was the balance of power in Hollywood. If Katzenberg succeeded, DreamWorks would be the first serious challenger in animation to Walt Disney Co. since Disney himself released Hollywood’s first animated feature, “Snow White and the Seven Dwarfs” in 1937.

So confident was Katzenberg in his animation prowess that top secret forecasts given to potential investors in early 1995 projected an astonishing average pretax profit of $200 million per animated film, and a huge $355 million in pretax profit for the company in 2003 just from animated movies.

Katzenberg was unavailable for comment. He is traveling in Asia researching “Tusker,” a future animated movie about elephants.

“When Jeffrey was putting the business plan together for DreamWorks, I remember him saying, ‘If we do 80% of “Lion King” business every time, we’d be fine,’ ” recalls one industry analyst. “That’s what he envisioned. It was completely unrealistic.”

After 5 1/2 years in business and three animated releases, DreamWorks hasn’t come close to challenging Disney’s dominance. And its animation studio is far from the economic juggernaut that Katzenberg envisioned. Add up the box-office receipts for all three DreamWorks animated releases to date and the total falls dramatically shy of the $768 million worldwide box-office gross for a single Disney film, “The Lion King,” the biggest animation hit ever.

“Making animation the cornerstone of their business was very shortsighted,” said a top industry executive. “It’s the fatal flaw of their business plan because animation is the most cost-intensive and the least productive in that it takes so long to make one picture.”

Ann Daly, the studio’s animation chief, said, “You have great ambition for the performance of these movies both artistically and commercially. As a new studio, we’re finding our way to meet that goal.”

DreamWorks executives say they will turn things around this summer with their next animated feature, “Chicken Run,” a stop-motion clay animation comedy produced by Britain’s Aardman Animation scheduled to open in June. They also are high on next year’s “Shrek,” a comedy about a donkey and an ogre who save a princess, which features voice-overs by Mike Myers, Eddie Murphy and Cameron Diaz.

To be sure, other studios, notably Warner Bros. and 20th Century Fox, envied Disney’s animation gold mine and tried to stake a claim for themselves. Five years ago they all plunged into animation with unrealistic expectations, paying top dollar for animators and expecting huge profits. All have been burned, dramatically scaling back on their once-ambitious plans.

DreamWorks has continued to invest heavily in animation. The company built an elaborate $85-million animation campus on 14 acres in Glendale with a man-made stream, a 330,000-square-foot studio and five Mediterranean-style villas. One structure, called Campanile, is a mock Italian building that appears to have been plucked from the hills of Tuscany.

The company raided Disney for animators, helping drive up artists’ salaries to unprecedented levels.

Since those boom days, animator salaries have come down. DreamWorks, like other studios, has thinned its ranks by laying off artists between projects, a once unheard-of economic move. As of now, DreamWorks has 324 animators at its Glendale studio compared with 500 last summer.

Daly explains that DreamWorks now ramps up only when movies are in production and while at its peak the animation studio will employ fewer than 500, it is not a sign of retrenchment. “We’re not scaling back, but we are continuing to get better at making these movies for a lower cost, which happens over time,” Daly said.

In a public relations coup aimed at ingratiating itself with animators who suddenly found themselves being courted by multiple studios, DreamWorks made a splashy announcement declaring it would share profits with its animators. But, according to the animators union, and lawyers who deal with DreamWorks, those profit-sharing pools haven’t yet materialized.

“No animator has seen a nickel as far as I know,” said Steve Hulett, business representative of Motion Picture Screen Cartoonists Union Local 839.

DreamWorks said its first two animated releases, “Antz” and “Prince of Egypt,” were profitable.

Daly said no bonuses have been handed out at the Glendale facility that worked on “Prince of Egypt” because the film “has not yet cycled through all its release windows to hit the level which will trigger the bonus pool.”

To compete with Disney’s successful partnership with Pixar Animation Studios--the company behind such hits as the “Toy Story” series and “A Bug’s Life”--DreamWorks made an additional investment recently to buy out the majority interest in Pacific Data Images, a Northern California computer animation house that produced “Antz” and “Shrek.” DreamWorks plans to launch a second PDI production facility, most probably in Glendale.

Ironically, on a return-on-investment basis, DreamWorks seems to have fared better in live action than in animation with a low-cost, multi-Oscar-winning hit such as “American Beauty,” which grossed more than $200 million worldwide and cost just $15 million. DreamWorks split the costs with Paramount Pictures on such higher-budget hits as “Saving Private Ryan” and “Deep Impact.”

Its next two live-action releases--”Gladiator,” a $100 million-plus action picture co-financed by Universal Pictures, and “Road Trip,” a $16-million, R-rated comedy--also are anticipated to be big hits.

On the animation side, “The Road to El Dorado” will probably wind up substantially in the red. One source said that its losses could wipe out whatever profits were made on “Antz” and “Prince of Egypt.” With an estimated production cost alone of more than $100 million, the film debuted with a lower-than-expected $12.8 million and after nearly a month in release has grossed $42 million. Even DreamWorks acknowledges that the film will struggle to reach $60 million at the domestic box office.

Sources say its prospects are dim overseas and on home video. They also say don’t count on many “El Dorado” figurines, T-shirts and lunch boxes being sold. Unlike in the mythical “El Dorado,” there’s no gold to be found there.

Neither “Antz” (which grossed $181 million worldwide) nor “Prince of Egypt” ($228 million worldwide) came close to the receipts generated by such recent Disney blockbusters as “Toy Story 2” ($477 million worldwide) and “Tarzan” ($446.7 million worldwide).

And, unlike Disney, so far DreamWorks hasn’t made the kind of animated movies that lend themselves to lucrative licensing deals or consumer product sales.

Many industry insiders suggest that DreamWorks has not only fallen short of financial expectations in animation, but artistically it hasn’t excelled as it had hoped.

Katzenberg has attempted to differentiate DreamWorks’ animated movies from the traditional family fare by broadening their appeal to older teens and adults, much as Disney successfully did under him with “Lion King,” “Beauty and the Beast” and “Aladdin.”

“Prince of Egypt” was a serious biblical story about Moses, while “El Dorado” failed at its attempt to be an adventurous romp in the spirit of the old Bob Hope/Bing Crosby road pictures as advertised.

“The movies are neither here nor there,” said one rival.

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Is the Dream Working?

These are the domestic box-office comparisons to date of Disney’s and DreamWorks’ major animated releases since 1998, in millions of dollars:

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Disney: $577.8 million

Toy Story 2: $243.9

Tarzan: 171.1

A Bug’s Life: 162.8

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DreamWorks SKG: $233.8 million

Prince of Egypt: $101.2

Antz: 90.6

The Road to El Dorado: 42 (still in release)

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Source: Times research