Why Jeffrey Katzenberg’s DreamWorks Animation Finally Sold to Comcast

A couple of major pieces have moved on the landscape to make acquisition more likely — neither tied to movies

Last Updated: April 28, 2016 @ 6:32 PM

Update: Comcast acquired DreamWorks Animation for $3.8 million on Thursday.

It’s an open secret in Hollywood that Jeffrey Katzenberg has been trying to sell DreamWorks Animation for the last several years, and has been turned down by every major studio that kicked the tires. Until now.

So what changed?

A couple of major pieces have moved on the landscape — neither of which are tied to movies — making the proposed deal between Comcast and DWA appealing for both sides.

For Comcast, NBCUniversal has seen the blossoming of Illumination, the animation division built by Chris Meledandri on a model of relatively lean costs and whimsically sophisticated tales. The success of the “Despicable Me” franchise has led to “Minions” and more minions and billions in revenue.

But if the animation division has grown beyond the initial ambitions of the company, Illumination has no television assets to speak of and limited capacity with just 300 employees.

Meanwhile, Katzenberg — who until earlier this year had more than 2,000 employees — has tried to diversify his assets because of the punishing business model he chose: a publicly-traded animation company with two theatrical releases a year. His TV business is an enticing asset, having built successful shows on Nickelodeon around the “Kung Fu Panda,” “Penguins of Madagascar” and “Turbo” franchises. And that unit could be immediately leveraged to produce shows based on Illumination properties.

The other very enticing asset is Awesomeness TV, the digital video platform built by the talented Brian Robbins, in which DreamWorks Animation is a majority owner. What started as a YouTube channel has grown into a full-fledged content studio that produces content for all platforms, mainly targeted to teen and preteen girls. The demographic is hugely appealing to Comcast, as is the digital knowledge for a company that has no multi-channel network, or what used to be called that.

Analysts like Rich Greenfield point out that Verizon just took a 24 percent stake in Awesomeness TV’s subscription mobile video service focused on short-form content, putting Comcast in an “awkward” business arrangement with Verizon.

A couple other points: NBCUniversal vice-chairman Ron Meyer is a longtime friend of Jeffrey Katzenberg. If a deal can be done, he will help it happen. Another point: Steve Burke, NBCUniversal CEO, has been tipped as the best possible (and perhaps most qualified) replacement for Disney CEO Bob Iger, who leaves in two years and has no successor.

This seems like a very good time for Burke to go to his boss, Comcast CEO Brian Roberts, to ask for a few billion dollars to make NBCUniversal into a top-tier major studio, on par with Disney and Warner Brothers. A digital play and a robust animation studio would help put them there.

An individual with knowledge of the talks confirmed that Comcast is serious about getting a deal done but, one insider says, is determined not to overpay. Given the silence from Katzenberg’s camp, it’s clear that there’s a lot of nervousness about not seeing this deal go sideways, as others have in the recent past.

My bet is this one will happen — both sides are clearly motivated.