Liberty Posted October 10, 2011 Share Posted October 10, 2011 This is an interesting company that is slowly making its way in the top tier of my watchlist. I can't do better than the analysis here, so I'll just link it (check out the PDF in that post): http://www.frogskiss.com/2011/10/dreamworks-animation-write-up.html My main worry is that the shift from DVDs to streaming will reduce their post-box office margins significantly... Anyone has thoughts on it? Link to comment Share on other sites More sharing options...
twacowfca Posted October 11, 2011 Share Posted October 11, 2011 This is an interesting company that is slowly making its way in the top tier of my watchlist. I can't do better than the analysis here, so I'll just link it (check out the PDF in that post): http://www.frogskiss.com/2011/10/dreamworks-animation-write-up.html My main worry is that the shift from DVDs to streaming will reduce their post-box office margins significantly... Anyone has thoughts on it? I'd rather pay $3.50 for a movie from apple TV than a buck from Redbox. Less hassle. :) Link to comment Share on other sites More sharing options...
bathtime Posted October 11, 2011 Share Posted October 11, 2011 Thanks for the heads up on this one. I don't have any additional thoughts to offer, but looks interesting. Link to comment Share on other sites More sharing options...
Liberty Posted October 11, 2011 Author Share Posted October 11, 2011 I'd rather pay $3.50 for a movie from apple TV than a buck from Redbox. Less hassle. :) That's potentially very profitable. What's probably less is $X per month for 'all you can eat', on the netflix model. Link to comment Share on other sites More sharing options...
tombgrt Posted January 4, 2012 Share Posted January 4, 2012 Still looking at this Liberty? Today I found this good bear post on the company: http://www.blogvesting.com/2012/01/01/dwa-a-few-thoughts/ One remark: What is the share of income coming from DVD/Blu-ray sales? And how much of the income comes from the theater viewings? And if needed: Merchandising and other income sources? Haven't looked at any numbers yet in detail, maybe I will later. I'm also not sure that something like a pay-per-view-model couldn't work because of the much lower margins. DWA essentially makes movies for kids. If they do one thing that adults don't, it's watching the same movie over and over again. Parents would have to pay every time their kid wants to see the movie. Unless 'all you can eat' is truly the future of course. :x IDK, maybe this thought has very little meaning when looking at the bigger picture. At some point this probably is a good 'hidden asset play' but I wouldn't bet on it now as dowside is hard to determine (because future cash flows are so hard to predict). And what would the upside be? Nothing too impressive I'd say. It's easy to overstate the real value of such extraordinary assets. Link to comment Share on other sites More sharing options...
Liberty Posted January 4, 2012 Author Share Posted January 4, 2012 Hi Tom, I never took a position in DWA because I could never quite value their back library, and after thinking about it for a while, I came to a similar conclusion to the article you link; the value will be higher than zero (and will on average have better shelf life and long-term profitability than non-kid movies), but lower than at the recent DVD peak, which was kind of a perfect storm (in a positive way) for the movie studios. It's unlikely to happen again. A kid watching Shrek 100 times on Netflix or Amazon Prime (or on a downloaded copy) won't be as profitable... I also never got into it more because companies that I like a lot more were cheap, so I just added to my existing positions (I compare everything to my favorite companies, and so I tend to end up with a very concentrated portfolio). Link to comment Share on other sites More sharing options...
beerbaron Posted January 4, 2012 Share Posted January 4, 2012 Anybody remember Buffett's thesis when he bough a bunch of Disney in 1966? I'd be happy to have a refresher... BeerBaron Link to comment Share on other sites More sharing options...
merkhet Posted January 4, 2012 Share Posted January 4, 2012 Anybody remember Buffett's thesis when he bough a bunch of Disney in 1966? I'd be happy to have a refresher... Mindshare -- a parent picking up a video will reach for Disney vs. Universal because they know essentially what the Disney movie will bring with it but not necessarily what the Universal movie will bring with it. Link to comment Share on other sites More sharing options...
Green King Posted January 4, 2012 Share Posted January 4, 2012 Here its not that cheap yet ! too much thinking hurts the brain :D We bought 5% of the Walt Disney Company in 1966. It cost us $4 million dollars. $80 million bucks was the valuation of the whole thing. 300 and some acres in Anaheim. The Pirate’s ride had just been put in. It cost $17 million bucks. The whole company was selling for $80 million. Mary Poppins had just come out. Mary Poppins made about $30 million that year, and seven years later you’re going to show it to kids the same age. It’s like having an oil well where all the oil seeps back in....in 1966 they had 220 pictures of one sort or another. They wrote them all down to zero – there were no residual values placed on the value of any Disney picture up through the ‘60s. So (you got all of this) for $80 million bucks, and you got Walt Disney to work for you. It was incredible. You didn’t have to be a genius to know that the Walt Disney company was worth more than $80 million. $17 million for the Pirate’s Ride. It’s unbelievable. But there it was. And the reason was, in 1966 people said, ‘Well, Mary Poppins is terrific this year, but they’re not going to have another Mary Poppins next year, so the earnings will be down.’ I don’t care if the earnings are down like that. You know you’ve still got Mary Poppins to throw out in seven more years…I mean there’s no better system than to have something where, essentially, you get a new crop every seven years and you get to charge more each time…I went out to see Walt Disney (he’d never heard of me; I was 35 years old). We sat down and he told me the whole plan for the company – he couldn’t have been a nicer guy. It was a joke. If he’d privately gone to some huge venture capitalist, or some major American corporation, if he’d been a private company, and said ‘I want you to buy into this’...they would have bought in based on a valuation of $300 or $400 million dollars. The very fact that it was just sitting there in the market every day convinced (people that $80 million was an appropriate valuation). Essentially, they ignored it because it was so familiar. But that happens periodically on Wall Street. Link to comment Share on other sites More sharing options...
eclecticvalue Posted January 4, 2012 Share Posted January 4, 2012 I was looking through the blogvesting writeup. If he thinks it will go down to $12 per share. IMO that will be the time to strike since there will be maximum pessimism. DWA market cap 1.38 Billion is a bit expensive. At $12 a share the market cap would be around 1 billion dollars. My question is would it still be attractive if it traded at a mkt cap of 1 billion dollars? Link to comment Share on other sites More sharing options...
biaggio Posted January 4, 2012 Share Posted January 4, 2012 Anybody remember Buffett's thesis when he bough a bunch of Disney in 1966? I'd be happy to have a refresher... BeerBaron I think it was that all the old movies (snow white, etc) were hidden assets that were not reflected in their balance or then current income statements (and that every few years it could re release these films) Link to comment Share on other sites More sharing options...
Viking Posted March 5, 2012 Share Posted March 5, 2012 Dreamworks, after supplying disappointing guidance during Q4 results, is approaching its 52 week low below $17. Time to do some snooping. Con: http://notablecalls.blogspot.com/2011/11/dreamworks-nysedwa-renewed-optimism.html Pro: http://seekingalpha.com/article/404071-dreamworks-animation-s-fourth-quarter-miss-doesn-t-necessarily-signal-a-horrible-2012 Link to comment Share on other sites More sharing options...
Liberty Posted March 5, 2012 Author Share Posted March 5, 2012 Some more DWA discussion here: http://www.gurufocus.com/forum/read.php?2,165498,165498#msg-165498 Link to comment Share on other sites More sharing options...
Viking Posted March 5, 2012 Share Posted March 5, 2012 What I find most appealing about DWA is their underlying business (making great movies) is not what is causing the shares to decline. Yes, DVD sales are declining (hurting the bottom line) and they do need to finalize a new distribution agreement. Management looks to be getting no credit right now and their long term track record is quite amazing. Lot's of pessimism with what could go wrong dominating what could go right. My guess is content providers will find a way to get compensated fairly as the market moves from DVD to streaming services to watch newer released movies. And, given the bar for DWA is so low, I would expect one of the 2012 or 2013 new movies to do better than expected. And I would also expect lots of volatility given the underlying nature of their business (i.e. two movie releases this year and three next year) with the share price in the near term tied to expectations regarding the next movie release. Link to comment Share on other sites More sharing options...
u0422811 Posted March 15, 2012 Share Posted March 15, 2012 They will continue to have volatility in their business. The earnings from the library is small compared to box office and initial DVD sales. One item I am surprised no one has mentioned yet was the utter lack of control common shares have. The super voting shares held by Katzenberg et all really put a damper from a governance perspective. I think they will continue to be able to churn out quality films in that can gross near their average. I would not be surprised if the multiplier for foreign box office to domestic box office continues to expand from the current average of around 2.4x today. The one item though worth mentioning is that foreign box office is less profitable for them. That being said its always great to see that DWA hasn't had any bombs since the Aardman partnership ended back in 2006. Compared to the Disney John Carter fiasco this is a nice site. Competition in the space is heating up though as exhibited by the success of Blue Sky (Fox's unit), Pixar (obviously), and Universal (with the recent success of Lorax and Despicable Me). This means that any M&A talk that there once was is likely out the window and it also reduces their leverage on distribution negotiations. That being said I am a real believer in content being king and they are cobbling together a nice library that clearly has some value. Plus their efforts on tv are paying off really nicely. I would be interested to here what others think of valuation etc. Link to comment Share on other sites More sharing options...
eclecticvalue Posted January 22, 2013 Share Posted January 22, 2013 I don't think the voting shares Katzenberg has makes the governance unattractive. Because in the movie business you want a creative visionary who has control instead of short term minded shareholders who would try to monetize the library. For 2013 three films are slated to be released and it is all original films instead of sequels. The release schedule has pushed sequels for 2014 and 2016. All in all it could be great year for organic growth and lets hope it isn't priced in. Link to comment Share on other sites More sharing options...
twacowfca Posted January 22, 2013 Share Posted January 22, 2013 There is a fundamental problem with Hollywood studios: they have a culture of taking investors for a ride. Link to comment Share on other sites More sharing options...
BargainValueHunter Posted February 8, 2013 Share Posted February 8, 2013 http://www.businessweek.com/news/2013-02-07/dreamworks-animation-to-cut-20-percent-of-jobs-on-film-halt-union-says DreamWorks Animation SKG Inc. (DWA), producer of the “Madagascar” films, may fire as many as 20 percent of its Southern California employees after delaying the release of “Me and My Shadow,” a union official said. The studio is considering cuts of 250 to 450 jobs from a staff of about 2,200 at its campus in Glendale, California, and an unspecified number at its Pacific Data Images facility in Redwood City, California, Steve Hulett, business representative for the Animators Guild, said today in an interview. Meanwhile... http://www.insidermonkey.com/blog/horizon-kinetics-adds-shares-of-dreamworks-44836/ A filing with the SEC has disclosed that Horizon Kinetics, an asset manager run by Murray Stahl and his team, now own 9.1 million shares of Dreamworks Animation Skg Inc (NASDAQ:DWA). At the end of September, the fund had owned 4.2 million shares of the stock and so it has more than doubled the size of its position over the last four months. Maximum Pessimism? Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 26, 2013 Share Posted February 26, 2013 DreamWorks Animation Takes Write-Down . DreamWorks Animation SKG Inc. DWA -1.25%said Tuesday that it took a write-down of $165 million in the fourth quarter of 2012 due to the weak box-office performance of one movie and the decision to not release another as planned. The Glendale, Calif.-based movie studio took an $87 million charge for its November release "Rise of the Guardians," which grossed $303 million worldwide. That's the third-lowest take for any film from the company since it went public in 2004. A further $54 million was attributed to DreamWorks Animation's decision to halt production on "Me and My Shadow," which had been scheduled to come out in March of 2014. The company's statement didn't make clear when production would resume, if at all. Another $20 million was due to write-offs on other movies in development that the company didn't specify, and $4.6 million was related to restructuring. A knowledgeable person confirmed in early February that DreamWorks Animation was considering laying off several hundred people from its staff of about 2,000 people world-wide. DreamWorks Animation shares were down 10 cents to $16.51 in after-hours trading Tuesday, after dropping 1.3% to $16.61 at 4 p.m. on the Nasdaq Stock Market NDAQ +2.01%. WSJ Link to comment Share on other sites More sharing options...
BargainValueHunter Posted February 27, 2013 Share Posted February 27, 2013 A decent blog write-up (possibly from a CoBaF board member?): http://wallflowerseeker.blogspot.com/2013/01/dreamworks-animation-skg-dwa.html The analysis above ignores completely DWA’s recent acquisition of Classic Media, which I think was a stroke of genius. DWA paid $160m for all o/s of Classic Media in August 2012 – let’s look at what they get: - Net tangible book value of $140m , including $20m in cash i.e. essentially bought the whole company at cost - 9 months to Sep 12, Classic Media generated $45m Net Income, let’s say it generates $60m for the whole year – this means DWA bought it at about 2.7x P/E - For free: a library of 450 titles and more than 6,100 episodes, which have sold over two billion copies across 170 territories worldwide: Casper the Friendly Ghost, Frosty the Snowman, Rudolph the Red-Nosed Reindeer and Santa Claus is Comin' to Town, The Lone Ranger, George of the Jungle etc. Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 22, 2013 Share Posted March 22, 2013 some news about upcoming movie. http://www.bloomberg.com/news/2013-03-22/dreamworks-animation-seeks-to-regain-lost-luster-with-croods-.html http://www.cnbc.com/id/100582719 Link to comment Share on other sites More sharing options...
fareastwarriors Posted April 19, 2013 Share Posted April 19, 2013 Katzenberg Unveils China Film Project . With his "Kung Fu Panda" movies, Jeffrey Katzenberg offered American audiences a cuddly Chinese icon to love, and won the hearts of China's cultural czars, who are eager to soften the country's image in the world. On Friday, the chief executive of DreamWorks Animation SKG Inc. DWA +2.75%unveiled his latest China film project—"Tibet Code," an Indiana Jones-type adventure story based on a wildly popular series of recent Chinese novels set in 9th-century Tibet. Katzenberg_Unveils_China_Film_Project_.pdf Link to comment Share on other sites More sharing options...
Liberty Posted October 30, 2013 Author Share Posted October 30, 2013 Up 80% since I wrote about it. Wish I had bought some... :P Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 30, 2013 Share Posted October 30, 2013 I wish I didn't sell in the low 20s... hahaha greed 8) Link to comment Share on other sites More sharing options...
Viking Posted October 30, 2013 Share Posted October 30, 2013 A key learning for me over the past couple of years is to be more patient after a purchase has been made and not be happy with a quick 20% or 30% gain. It takes a great amount of work to find undervalued well run companies with very strong franchises. As the underlying business improves and Mr Market falls back in love with the company moves in the stock price of 100% are not uncommon. Link to comment Share on other sites More sharing options...
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