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‘Home’ Box Office Holds Key to DreamWorks Animation’s Bottom Line

If the kids movie winds up in the red, the restructuring studio is likely to as well this year, and it doesn’t look good

When the family movie “Home” lands in theaters Friday, Wall Street will be watching as closely as the kids that DreamWorks Animation’s first — and last — release of 2015 is aimed at.

Jeffrey Katzenberg’s struggling studio rolled out a massive restructuring plan in January. Five hundred workers were laid off and its campus in Glendale, California, went on the block as part of the recovery strategy designed to save $30 million in 2015 and $60 million by 2017.

Investors and analysts have been cautiously hopeful and the company’s shares have leveled off at around $22, after plunging to $18.30 after the restructuring was announced, well off its 52-week high of $35.37. That’s despite reporting a $247 million fourth-quarter loss in February.

Part of the recovery plan called for cutting back the number of films, and when the holiday release of “Kung Fu Panda 3” was pushed to next year to avoid competing with “Star Wars: Episode VII” in December, DWA was left with only “Home.” That puts a lot of pressure on a computer-animated family film about cute but inept purple aliens invading Earth, even if it does have a starry voice cast that includes Rihanna, Jim Parsons, Jennifer Lopez and Steve Martin.

DWA management projected a break-even or better 2015 as part of the restructuring plan, but that was based on a break-even or better performance by “Home.” So if it doesn’t wind up in the black, it’s likely the studio won’t, either.

On Tuesday, pre-release tracking suggested that “Home” will land between $30 million and $35 million in its domestic opening this weekend. That’s not terrible, but it’s not great either, and not what you’d normally look for from a movie that cost $130 million to make. Profitability will come down to foreign grosses, just as it did for four of the last six DWA releases, “Turbo,” “Mr. Peabody & Sherman,” “Rise of the Guardians” and “Penguins of Madagascar,” all of which resulted in millions of dollars in write downs.

“I don’t think anybody will be shocked if this movie loses money, but I also don’t think that it’s that big of a deal in the long term,” B. Riley analyst Eric Wold told TheWrap on Tuesday. “I upgraded the stock in January based on its price, the focus on 2016 and the recovery plan, and I think those remain the key factors.”

Wold has since downgraded DreamWorks Animation from “buy” to “neutral” however, based on soft early buzz surrounding “Home.” DWA shares received a minor bump on Monday based on a strong performance over the weekend by the film in its first overseas openings in the U.K. and Russia, but expectations remain modest. Wold sees it taking in $85 million in North America and $170 million overseas. That’s not enough given its cost and what it must pay Fox off the top for marketing and distribution.

“Its release date was pushed,” said Wold, “so you have to figure that meant more spending on marketing and that will be tough to make up. ‘Penguins of Madagascar’ made more than $300 million ($367 million worldwide, actually) and DWA still took a $57 million write down, so I don’t see the numbers adding up for this one.”

There’s hope that “Home” could pull a surprise and the marketplace is set up for it, according to Chris Aronson, head of distribution at Fox. There is no fresh kids’ fare out there at the moment, and the next family film to compete with it will be Disney’s “Inside Out,” which opens on June 19.

“It’s going to play and play,” Aronson said. “It’s a really good movie that strikes an emotional chord with the mother-daughter relationship, so I think audiences’ response will be better than the reviews.”

That’s familiar territory for Fox marketers, who played up the father-daughter subplot and helped turn animated “The Croods” into a global hit in 2013. But the reception “Home” receives from moviegoers will be key, since the critics have it at a weak 38 percent positive on Rotten Tomatoes.

“There isn’t another animated movie for more than two months, so it should go for awhile if the word of mouth is good,” Exhibitor Relations senior analyst Jeff Bock said. “The problem is, it hasn’t been so far.”

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