DreamWorks Animation to Lay Off 350 Employees

DreamWorks Animation lost $83 million in the fourth quarter of fiscal year 2012

DreamWorks Animation will lay off approximately 350 employees, about 15 percent of its full-time staff, CEO Jeffrey Katzenberg and CFO Lewis Coleman said Tuesday during the company’s fourth-quarter earnings call.

The Glendale, Calif.-based company posted a loss of $83 million in the fourth quarter of fiscal year 2012 due to development costs and the poor performance of its latest film, "Rise of the Guardians." 

Also Read: DreamWorks Animation Loses $83M in Q4, Posts Net Loss for Year

Those losses necessitated cutbacks at a company with about 2,200 employees, with most of the cuts hitting the production department. Katzenberg said both the support and overhead departments would be affected as well.

Katzenberg previously recognized that DreamWorksAnimation would be “adjusting [its] operating infrastructure costs,” but this was the first time he spoke publicly on the subject and the first time the company announced a number.

"Rahm Emanuel had that really greart expression, ‘you need to take full advantage of every crisis that you face,’" Katzenberg told analysts. "'Guardians' was the first movie of ours, after 17 in a row, that didn’t work. When that happens, it really makes you rethink everything."

That figure of 17 refers to the numbers of movies DreamWorks Animation has made since DreamWorks spun the animation division off as a public company in 2004. The company has created a series of major franchises in that time, such as "Madagascar" and "Kung Fu Panda," though it did have one bomb — "Flushed Away."

Katzenberg said the company faces a new challenge from “broad four quadrant movies” rather than just more traditional computer-generated family films. He cited movies like "The Avengers" and the upcoming "Oz: The Great and Powerful" as films that appeal to all moviegoers.

“It makes the need for quality release dates critically important,” Katzenberg said, using that point to justify the company's recent decision to delay “My. Peabody and Sherman” from this November to next March. Fox, which replaced Paramount as DWA's distribution partner this year, pushed for the move because of a crowded holiday schedule and its past success releasing animated films in March.

Also Read: 'Ice Age' Earns Fox Animation a Seat Alongside Pixar, DreamWorks Animation

DreamWorks Animation will need its next few movies, beginning with March's "The Croods," to meet or exceed expectations. Because of the changes to its release slate, the production costs on its next two movies will rise to $135 million, and the two after that will cost $145 million. And those are internal numbers.

In 2015, costs wil return to $120 million, according to Katzenberg.

"You need the best margins when output fluctuates," he said.  

"Our profit depends on the success of our next two films, 'The Croods' and 'Turbo.'"