DreamWorks Animation Takes $57 Million Hit on ‘Mr. Peabody & Sherman’

The movie has grossed $261 million at the worldwide box office

DreamWorks Animation took a $57 million writedown due to the box office struggles of “Mr. Peabody & Sherman,” the company said Tuesday in its earnings report for the first quarter of fiscal year 2014. That was the main reason the company lost $42.9 million in the quarter, which amounts to $0.51 per share.

“Peabody” has grossed $261 million at the worldwide box office – a large sum, but not enough for a movie that cost $135 million to produce and millions more to market. The movie contributed just $3 million in revenue this quarter, but the costs accrue in the lead-up to the movie’s release. DreamWorks Animation said its main distributor, Fox, had yet to recoup its investment.

DreamWorks Animation has taken a writedown on three of its last four movies — “Turbo,” “Rise of the Guardians” and “Peabody.”

“The box office shortfall of ‘Mr. Peabody & Sherman’ is evidence of the current challenges we face within our feature film segment, and restoring the strength in our core business is my number one priority today,” DreamWorks Animation CEO Jeffrey Katzenberg said in a statement. Katzenberg elaborated on these challenges in a call with analysts, citing increased competition in the marketplace and difficulty marketing movies in that environment.

For the past few years, the company has focused on playability — movies that appeal across the globe. That is no longer enough, Katzenberg said, prompting DreamWorks Animation to adjust its marketing approach and ensure it only makes original movies that can launch a franchise.

“Looking at original movies, they have to check off a lot more boxes than they have in the past,” Katzenberg said.

The company’s next release, “How to Train Your Dragon 2,” is a great example of what the company wants to produce every time out. The original grossed $494.9 million at the box office and earned an Oscar nomination. The sequel will be an even bigger hit. No DreamWorks Animation sequel has ever grossed less than $600 million.

Though weakness in the company’s film division is hurting the company’s share price,  movies still contribute the vast majority of the DreamWorks Animation’s revenue. The film segment accounted for $110.1 million of the $147.2 million DreamWorks Animation generated in the quarter. It also posted a gross loss of $25 million.

Every other division of the company posted a profit, as television, consumer products and other items contributed a combined gross profit of $18.9 million. AwesomenessTV, which DreamWorks Animation required a year ago, remains a negligible contributor to a small business, contributing revenue of $4.1 million.

However, DreamWorks Animation CFO Lewis Coleman projected AwesomnessTV’s earn-out from that will be $99 million — a bit more than previously projected.