“Turbo” won't be the biggest hit in DreamWorks Animation history, but the racing-obsessed snail's tale is still a landmark for the business — the beginning of an era where DWA depends less on box-office and more on TV, video games, theme parks and merchandising.
The film is tracking from $30 million to $35 million over its five-day opening weekend, a lower-than-desired result for the company with a remarkable history of hits. That legacy took its biggest blow last year, when “Rise of the Guardians” bombed (resulting in an $83 million loss in the fourth fiscal quarter, with subsequent layoffs).
DreamWorks Animation has always had to suffer watching its stock price fall after a film opens softly — which analyst Marla Backer of Ascendiant Capital blamed on the company's "binary business model."
"Every single movie is a very important annual revenue event," Backer told TheWrap.
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CEO Jeffrey Katzenberg said on a February earnings call that the "Guardians" aftermath was something that "really makes you rethink everything." Since then, DWA has been expanding the company in several critical ways, providing what analyst Tony Wible describes as levers to offset increased competition in the animation space from other studios.
“They will have bombs and they will have hits, but those things average out,” Wible told TheWrap. “It’s about adding new lines of business.”
The most important is television. DWA is at work on “Turbo”-based TV series, which will premiere on Netflix in December. Though not the company's first small-screen foray, the "Turbo” deal augured a far more ambitious future for the company in the TV business.
DreamWorks Animation's new Netflix deal includes at least 300 hours of programming, essentially replacing the content Netflix once got from Nickelodeon. And DWA made an even larger commitment (1,100 half-hours) to Super RTL, the largest kid's channel in Germany.
The company has several options with television, thanks to a pair of recent acquisitions – Classic Media and AwesomenessTV. The former is a library of content like “Casper” and "Lassie" — while the latter is a sprawling network of YouTube channels. Both offer DreamWorks Animation numerous pieces of intellectual property to turn into TV shows and put online.
"So far they have had great early successes with the Netflix deal and the RTL deal," Backer said. "We’re seeing what the people who have been bullish on the company have been waiting for — the opportunity to leverage the overall library."
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Applied across the company, the strategy explains why DreamWorks Animation hired former Target and J.C. Penney executive Michael Francis as its global brand officer last December, putting him in charge of making every DWA film a much broader consumer experience.
The result: Turbo is not just a film. It’s a TV series, a video game, a theme park attraction and, first and foremost, a brand.
It's a page from the Disney playbook: “Cars” grossed $461 million at the box office, solid for a Pixar movie but nothing extraordinary. Yet Disney took that movie and sold toys, a video game, and a theme park that has helped boost sales both at California Adventure and the adjacent hotel.
While DWA has a ways to go before rivaling Disney’s theme parks or consumer products, it has already begun its pursuit — particularly in the meteoric Asian market.
DWA has begun work on an entertainment district set to open in Shanghai in 2016 that will span six city blocks. It has announced plans to build several theme parks in Russia, replete with movie theaters, concert halls, hotels and attractions based on "Shrek," "How to Train Your Dragon," "Turbo" and other titles.
Last month, DreamWorks Animation also hosted a premiere for "Turbo" in Macao at the Venetian Macao, a casino and resort complex that is the site of a new DreamWorks Experience. That is one of several planned entertainment properties at Cotai Strip Resorts featuring characters from the company's movies.
"They are taking their intellectual property more broadly and licensing it, whether to locations, dog food or retail and t-shirts," Wible said. There are new opportunities have now that they never had in the past."
Wible predicted that the company, which counted on film for close to 90 percent of its revenues, would start to see as much as half of its revenue come fromm other areas of the company.
For that reason, despite prevalent anxiety about "Turbo" at the box office, that left him with one piece of advice for investors: buy.