DreamWorks: toons in transistion

Animation offshoot seeks to combine CGI tentpole slate with realistic expectations

By BEN FRITZ, NICOLE LAPORTE

On a recent investor conference call, DreamWorks Animation CEO Jeffrey Katzenberg did a very un-Katzenbergesque thing: He soft-pedaled one of his films.

"We're trying to advise people that ("Wallace and Gromit: Curse of the Were-Rabbit") is not a CG-animated movie," he stated. "It's a unique and special property, not made in the same economics that our CG movies are."

It's an unusual twist for a man who has gotten in trouble with Wall Street for hyping the prospects of his company's recent films.

But as it reaches the end of its first year as a public company, one Katzenberg admits has had "some bumps in the road," DreamWorks Animation is trying to prove to Wall Street and the world that it's a mature player focused on long-term success.

Company took a step in that direction last week when, for the first time, it revealed a long-range development slate that can take it into 2009 and beyond.

"We're transitioning from our startup phase," asserts chief operating officer Ann Daly.

With original pics in the works ranging from a Jack Black vehicle to a tale of humans landing on Mars -- from the Martian perspective -- as well as several upcoming releases with sequel potential, DreamWorks Animation seems well positioned to fulfill its business plan. Company has promised two big-budget CGI toons per year (with one a sequel whenever possible) along with, starting in 2008, a direct-to-video spinoff of a theatrical hit.

The hope is clearly that when another disappointment comes -- whether real or perceived -- investors won't worry about DreamWorks Animation's long-term prospect and send the stock plummeting, as happened with news of less-than-expected "Shrek 2" DVD sales.

Proving it has its house in order while at the same time not overselling itself is the complex tune that the toon company is now playing as it tries to make up for a year of often botched relations with Wall Street.

Communication got so bad that many investors considered "Madagascar's" $61 million bow a disappointment, sending DreamWorks Animation stock down 9%. The film has gone on to earn nearly $500 million worldwide, prompting the studio to begin work on theatrical and direct-to-video sequels.

Company also is reeling from shareholder lawsuits resulting from badly missed sales targets for the "Shrek 2" DVD and execs' failure to warn investors of the shortfall before first-quarter earnings.

In a way, that makes "Wallace and Gromit" -- which launches in the U.S. Oct. 5 and is the studio's only release this year besides "Madagascar" -- a very welcome anomaly for DreamWorks Animation.

By playing it cool on "Gromit's" prospects, company gets the chance to show Wall Street that it can predict a single in the right situation, rather than always leaving the crowd disappointed with anything except a homer.

"You don't want to suggest this film doesn't have a path to success," Daly says of the new pic. "But you don't want to hang the expectations of a 'Shrek' on it. That's the line we're walking."

Stop-motion clay toon from the U.K.'s Aardman Animations is smaller in size and more narrow in appeal than the $100 million-plus "Shrek"-size spectaculars it typically makes.

DreamWorks bought distribution rights to "Wallace and Gromit" from Aardman for just $45 million to plug a hole in its release calendar that left it without a second CGI toon this year. Pic is outside of the studio's five-film deal with the British toon house because Aardman exclusively owns rights to the characters, who debuted in a series of acclaimed shorts.

But the film isn't an anomaly just for its lack of digital animation. Since it's not a studio-owned franchise, it would seem to do little for DreamWorks' new plan to avoid another homevid debacle like "Shrek 2."

At an investor conference last week, Katzenberg said he hoped to use franchise releases to push homevideo titles on the slow-selling library shelves, where the "Shrek" sequel has lagged.

Model is the first "Shrek," which has sold an additional 9 million DVD units since "Shrek 2" came out.

But company is finding a way to tie "Wallace and Gromit" into the family, placing a 10-minute short with the popular penguins from "Madagascar" in front of the claymation pic. Studio is clearly aiming to goose sales of the "Madagascar" DVD, which comes out Nov. 15.

And if it draws a few more viewers to the theater for "Wallace and Gromit," DreamWorks marketing execs will surely appreciate the help.

Among the pic's many challenges is its distinct Britishness, a quality that doesn't always resonate with family auds.

"Valiant," a British CGI toon about World War II fighter pigeons that was recently released Stateside by Disney, has made less than $20 million in the U.S.

(Some words and phrases in "Wallace and Gromit" were altered for American auds. A squash plant, which in the British version is referred to as a "marrow," in the U.S. edition is a "melon.")

But despite that challenge, Katzenberg didn't engage in much of his trademark hands-on involvement on "Wallace and Gromit."

"He fairly much left us to it," says "Wallace and Gromit" creator Nick Park, who spent the last five years working on the film at Aardman's studio in Bristol, England. "He came over in his jet once every 10 weeks, if that, and would spend eight hours in the studio and then fly home again. We'd go over everything, and he'd make a few suggestions and help with any problems in the script. Some things we didn't agree with, but he didn't seem that insistent."

Katzenberg will have more creative involvement on 2006 release "Flushed Away," Aardman's first CGI collaboration with DreamWorks. Pic is being overseen by an Aardman director, but it's being produced at DreamWorks' Glendale, Calif., campus, and the two companies will jointly own the pic and its characters.

Daly says "Wallace and Gromit" is being backed by a "fully fledged marketing campaign," but the media splash is likely to be much more modest than that for "Shark Tale" or "Madagascar."

"Wallace and Gromit" -- whose main voice actors are Ralph Fiennes and a barely recognizable Helena Bonham Carter, who, for uppity effect speaks through plastic lips -- bowed at the Toronto Film Fest. Park and Bonham Carter were on hand for a gala and press junket, but that was about it for publicity pomp.

Five years ago, "Chicken Run," the first Aardman-DreamWorks film, made a tidy $106 million at the domestic box office. DreamWorks would likely be thrilled with anything in that ballpark on "Wallace and Gromit," since "Chicken Run" had the advantage of a distinctly American rooster voiced by Mel Gibson invading an Aardmanesque British farm.

Regardless, pic has no chance of coming close to the $436 million that "Shrek 2" made last summer, leaving investors' hearts aflutter.

"DreamWorks' stock can move up, but it will require a very strong performance on one or two films at the box office," says analyst Hal Vogel. "When that happens, people on Wall Street tend to forget recent problems."

That process may start with next May's "Over the Hedge," a CGI toon about forest animals' first brush with suburbia, which features the voices of Bruce Willis, Steve Carell, Allison Janney, Garry Shandling and Avril Lavigne.

But as an original pic (though it is based on a cartoon strip), "Over the Hedge" is still a sizable risk. DreamWorks doesn't have its next sequel until "Shrek 3" in May 2007.

In the meantime, studio is simply happy for whatever traction it can get to give investors a small surprise in "Wallace and Gromit."

Park says there was "no pressure" from DreamWorks to sex up his movie with A-list actors, but he admits that Aardman's choice of Carter and Fiennes put the studio at ease.

"They were happy we were thinking of someone known in the U.S.," he notes. "That pleased Jeffrey."