DreamWorks Animation SKG Inc., the Glendale-based entertainment company led by Hollywood film veteran Jeffrey Katzenberg, is expected to lay off up to 20% of its 2,200-employee workforce, following a decision to shelve production of the movie "Me and My Shadow."
The animation industry giant, home of the animated "Shrek," "Kung Fu Panda" and "Madagascar" films, also said it was changing the release date for its movie "Mr. Peabody & Sherman" from Nov. 1 to March 7, 2014, at the recommendation of its new distributor, 20th Century Fox.
As a result of the decision, "Me and My Shadow," which had been scheduled for release in March 2014, will suspend production and go back into development. The movie, about the secret world of shadows and their human counterparts, was to feature the voices of Kate Hudson and Josh Gad.
"We believe the best strategy for DreamWorks Animation in the long run is to ensure that every one of our films has an optimal release date with the biggest opportunity to succeed at the box office," Katzenberg said in a statement. "The move of 'Mr. Peabody & Sherman' means that we will now release two films in 2013, and we are adjusting our operating infrastructure costs accordingly."
Katzenberg did not specify what the cost-cutting would entail, and DreamWorks would not disclose how many positions would be cut.
But a union official representing workers at the studio estimated that 250 to 450 animators, technicians and other staff members would lose their jobs, making it the largest layoff since the studio was spun off as a public company in 2004. DreamWorks has steadily expanded in the U.S. and abroad in recent years.
"A lot of people are anxious," said Steve Hulett, a business agent for the Animation Guild, who said his estimate was based on conversations with supervisors at the studio. "Some people have worked there 10 years and they don't have any idea if they're going to be laid off."
The studio held a series of meetings with employees Wednesday to brief them on the developments, with some being asked to sign new short-term employment contracts, he said.
Removing one of three movies from its slate this year reduces future box-office revenue, thereby increasing pressure on the studio to cut costs to make up for the reduced business.
DreamWorks Animation faces additional financial pressures this year because the studio is widely expected to take a substantial write-off on its previous animated movie "Rise of the Guardians," which fared poorly at the domestic box office after its release last Thanksgiving.
Lazard Capital Markets analyst Barton Crockett said in a research note last month that he expects the Glendale-based studio to take a $96-million write-down on "Rise of the Guardians," a rare box-office misfire for the studio.
DreamWorks Animation's biggest money loser was 2006's "Flushed Away," co-produced with British-based Aardman Animations Ltd., for which it took a $109-million write-down.
The company's feature film slate for 2013 and 2014 is now as follows: "The Croods" on March 22; "Turbo" on July 19; "Mr. Peabody & Sherman" on March 7, 2014; "How to Train Your Dragon 2" on June 20, 2014; and "Happy Smekday!" on Nov. 26, 2014.
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