Animated Films Take Summer Box Office
Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Shareholders are hopeful about DreamWorks Animation (NASDAQ: DWA) upcoming earnings call, especially with the spring success of The Croods and the buzz surrounding Turbo, voiced by Ryan Reynolds. Because DreamWorks has beaten estimates by at least 190% in the past three quarters and by more than 300% over the past two, investors have high expectations for the company's July 31 call.
Dream like earnings
These expectations are based on past performance, not on specific film releases, although DVD releases like its Madagascar and Megamind series are still going strong. DreamWorks recent track record is so impressive, the stock has earned the designation of being a Zack's Rank #1 (strong buy).
Its sales on past releases, along with the success of The Croods, helped DreamWorks bring in net income of more than $6.1 million on $134.6 million in revenue in its first quarter earnings report. Specifically, The Croods raked in $4 million of that revenue, while the DVD release of Rise of the Guardians brought in an additional $9.6 million.
Turbo is hitting theaters at the peak of the summer movie-going season. Summertime is notorious for family releases, as parents try to spend more time with their children who are out of school for the summer. In a unique move for a major production company, the release of Turbo in theaters will be followed six months later with an animated online series called Turbo: F.A.S.T., to air exclusively on Netflix (NASDAQ: NFLX).
Good day for Netflix
Netflix could be poised to become the big winner in the agreement, which specifies that DreamWorks will provide more than 300 hours of original programming for the online streaming giant. DreamWorks partner Jeffrey Katzenberg estimates the entire deal with Netflix will bring in $100 million in 2014, with an additional $200 million in 2015. Netflix has focused increasing attention on original programming in recent months, as it works hard to win the bulk of the streaming market.
It's a battle that is paying off. Netflix's aggressive pursuit of content led to a 25% increase in subscribers as of its last earnings report, with two million new subscribers signing up. But the company anticipated that subscriber growth would slow in this current quarter, leading it to continue to search for content that will lure subscribers in. In its last quarter, Netflix's revenue increased to $1.02 billion. Last year, the company reported only $870 million in revenue.
The new shift to original programming has shareholders concerned that subscribers might join just long enough to watch a particular show. While Netflix states only a small percentage of those who sign up exhibit that behavior, the deal with DreamWorks may resolve that concern. The deal includes ongoing original programming, as well as exclusive rights to many of DreamWorks older animated hits.
Despicable Me 2 debuts
Walt Disney (NYSE: DIS), part owner of Netflix rival Hulu, has plenty of reason to keep an eye on both DreamWorks and Netflix. Along with its partners, News Corp and Comcast, Disney recently confirmed it will not be selling the website, which was originally created to provide an outlet for TV networks to stream shows.
Since Disney owns ABC, part of that "original content" ends up on its own network. But when it comes to its own movies, the company turned to Amazon, making a deal that will include exclusive availability of Disney features on Amazon's LOVEFiLM site. Customers can currently stream Up and Cars 2.
Disney itself saw a revenue increase of 9.6% in its most recent quarter. Revenue was $10.55 billion, with analysts expecting $3.47 EPS for the current year. With The Lone Ranger and Monsters University currently packing theater seats nationwide. And let's not forget about the August release of Planes, and the Thanksgiving release of Frozen, both of which, should do well.
A streaming world
As the world continues to gravitate from DVDs and cable TV to online streaming, Disney and DreamWorks are positioning themselves to compete. But parents are more likely to join Netflix, with a multitude of family movies already online, than a site like Amazon LOVEFiLM, still struggling to add titles to its catalog. Ultimately consumers are the real winners, as Netflix, Disney, and DreamWorks all work to create the best content to satisfy an evolving customer base.
The future of television begins now… with an all-out $2.2 trillion media war that pits cable companies like Cox, Comcast, and Time Warner against technology giants like Apple, Google, and Netflix. The Motley Fool's shocking video presentation reveals the secret Steve Jobs took to his grave, and explains why the only real winners are these three lesser-known power players that film your favorite shows. Click here to watch today!
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation, Netflix, and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!