NEW YORK (CNN/Money) -
Are a great white shark named Lino and his vegetarian son Lenny about to take a bite out of DreamWorks' stock market dreams?
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| They'd better have kids |
Friday's nationwide release of "Shark Tale," the latest flick from DreamWorks and the studio's second computer-animated feature this year, comes amid a surprisingly steep falloff in U.S. movie attendance in September.
It also comes as DreamWorks, the 10 year-old studio run by three of Hollywood's biggest names, gears up to take its animation unit public next month.
To pull off a planned $650 million initial public offering, DreamWorks Animation needs "Shark Tale" to be a big hit. But DreamWorks has a spotty record when it comes to animation -- unlike chief rival Pixar Animation Studios (PIXR: Research, Estimates), which has never misfired with a feature film and whose stock is trading near an all-time high.
Of the eight animated films DreamWorks has produced, only "Shrek" and its sequel have been blowout hits, with $1.35 billion in combined worldwide ticket sales. In fact, "Shrek 2" has brought in more revenues this year for DreamWorks than all six of its 2004 other releases, all of them live action. "Shrek 2" is now the most successful animated feature in history and No. 3 overall.
But DreamWorks Animation has had its share of box office duds. "Spirit: Stallion of the Cimarron" and "Sinbad: The Legend of the Seven Seas" both flopped. The animation unit, weighed down by expensive marketing campaigns, has lost money in three of the last five years.
Given the risk that "Shark Tale" sinks, analysts wonder why DreamWorks would go public now and risk reminding prospective investors of past failures.
"Why not go public earlier in the year, like when 'Shrek 2' came out (in May)?" asked Paul Kim, an analyst with Tradition Asiel Partners. Given all the hype over the green ogre and his smart-aleck sidekick, a blockbuster stock debut "was pretty much in the bag," he said.
For DreamWorks, which formally registered to take its animation division public in July, the opportunity is obvious.
Animation, namely computer-generated graphics, has become a hot genre.
David Mumpower, president of box office analysis firm Box Office Prophets, said audiences "have locked onto" computer-generated films with a passion. He cited the surprise success of "Ice Age," a 2002 Twentieth Century Fox animation that reaped $380 million in worldwide ticket sale despite negative reviews.
So a public offering is one way DreamWorks can cash in on the hype when other company ventures have floundered. Founded in 1994 by Hollywood powerhouses Steven Spielberg, Jeffrey Katzenberg and David Geffen, DreamWorks has long aspired to be a major entertainment distributor. But forays into video games and music floundered and television is still nascent.
That leaves animation as the company's crown jewel.
But why wait until now to take it public?
One theory: DreamWorks officials are eager to show investors that, despite the intoxicating success of "Shrek," they're more than a one-hit wonder.
In one recent example, the studio teamed up with NBC Universal to produce its first television computer-generated animation. Ratings for "Father of the Pride," about white lions performing in the "Siegfried & Roy" show in Las Vegas, have declined since its Aug. 31 premiere.
Analysts said the computer graphics used in "Father of the Pride" are dazzling to see, but the story line is hard to bear. Parent groups are up in arms over the show's adult themes. And with a production budget estimated at an eye-popping $2 million a show, analysts said the long-term prospects aren't good. For DreamWorks, that would mean more than just a creative stumble.
The company "wants to show it can expand the animation unit without doing just movies. It's a tough game," said independent stock research analyst Dennis McAlpine.
"Pixar has had a remarkable run of success," continued McAlpine. "But all Pixar has to worry about is one release a year."
With the television foray floundering, the pressure is on "Shark Tale" to hit big. "If it doesn't do well, the whole IPO could be ruined," said Kim.
The advance buzz on Wall Street and from box office analysts isn't great, with the potential for a repeat of the studio's "Sinbad" debacle. In that 2003 film, even the voices of Brad Pitt and Catherine Zeta-Jones couldn't overcome what was fundamentally a dull story.
This time, analysts aren't so sure that Will Smith, Robert de Niro and Angelina Jolie can carry "Shark Tale."
"I'm hearing that 'Shark Tale' is unoriginal and uninspired," said Brandon Gray, the editor and publisher of BoxOfficeMojo.com, a movie tracking site. Added Kim, "'Shark Tale' looks contrived and plagiaristic to me," referring to last summer's smash hit "Finding Nemo" from Pixar and Walt Disney Co (DIS: down $0.25 to $22.55, Research, Estimates).
Working in the flick's favor, however, is a dearth of big box office draws generally -- and family feature films in particular. This has been one of the worst Septembers at the box office in recent memory, with ticket sales from the first three weekends down roughly 10 percent from a year earlier.
"There's enough room for 'Shark Tale' to have a huge opening," said Gray.
But "Shark Tale" will soon face stiff competition. Pixar is on track to release "The Incredibles" in early November, a release time that "Shark Tale" shared until DreamWorks pushed it up. Also due in November are Viacom-owned Paramount's "The SpongeBob Square Pants Movie" and "The Polar Express" from Warner Bros., a unit of Time Warner and corporate cousin to CNN/Money.
For DreamWorks, October might be just the only window of opportunity.
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