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New York (pte032/12.07.2005/14:21) - DreamWorks Animation http://www.dreamworksanimation.com/ , the spin-off of the DreamWorks Hollywood Studio founded by entertainment moguls Steven Spielberg, Jeffrey Katzenberg and David Geffen, delivered its second profit warning in three months yesterday.
The result was a 14 per cent drop in the company's share prices to US$23.10, and the faltering of a planned $500 million (£284 million) stock sale by some of its main investors.
Lack of profits has been blamed on waning home video and DVD sales, and points to company losses in the second quarter, rather than breaking even, which effectively cuts its profit margin for the entire year by about 20 per cent.
Disappointing DVD sales of Shrek 2 and Shark Tale led to a cutting of the 2005 forecast. Analysts say that consumer thriftiness may have to do with a saturated computer animated film market.
Chief financial officer Kris Leslie speculated that the problem could be specific to certain releases, or part of a general shift in the home video and DVD market. DreamWorks had "observed changes in the marketplace", she said, and felt it needed to re-evaluate market predictions accordingly.
Although DVD sales continue to grow, the market's expansion is slowing, and because DVD sales now account for almost half of a film's predicted revenue, this is worrying some Hollywood studios.
Despite lukewarm reviews, DreamWorks' Madagascar, the story of escaped New York zoo animals, has made $180 million at the American box office, which still makes it one of the top 10 animated films ever.
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