DreamWorks to cut 500 jobs and number of films made

DreamWorks will cut about 500 jobs, more than a fifth of its workforce, and produce one fewer movie a year as part of a major restructuring after a string of box-office misses.

The Hollywood studio, which held unsuccessful buyout talks twice last year, said it plans to produce two feature films per year, down from three, and close its Northern California studio.

"We believe that our efforts to make three films each and every year was just too ambitious and has led to inconsistent performance," chief executive Jeffrey Katzenberg said.

The maker of the Shrek and Kung Fu Panda franchises has reported losses in two of the last four quarters, as movies such as Rise of the Guardians fell shy of expectations.

DreamWorks has faced increasing competition for family audiences as other studios have turned out hit animated films, such as the Despicable Me franchise from Universal Pictures and The Lego Movie from Warner Bros.

Three of the six movies DreamWorks plans to release over 2016 to 2018, are sequels, which require less advertisement costs and almost guarantee strong ticket sales.

DreamWorks has worked to diversify its business in recent years, making a deal to supply more than 300 hours of programming for Netflix and purchasing YouTube network AwesomenessTV.

The company, which had about 2,200 employees as of 2013, said the 500 job cuts will span all divisions of the studio. vice-chairman Lewis Coleman and COO Mark Zoradi will leave, the company said.

The company will take a pre-tax charge of about $290 million, most of which would be accounted for in the quarter ended December 31st.

The quarter will also include a $55 million impairment charge, related mainly to weaker-than expected collections for Penguins of Madagascar and Mr. Peabody and Sherman.

The company said the pre-tax charge includes $30 million for the California studio closure, about $200 million in costs for unreleased projects and changes in its release slate, and $60 million in severance-related costs.

DreamWorks expects to complete most of the restructuring by the end of 2015, helping it save $30 million in pre-tax costs this year and about $60 million by 2017.

Reuters