Studios Sign Digital Deployment Deals

More studios will be signing digital cinema deployment deals in the next few weeks, with 2,500-3,000 screens ready by the time DreamWorks Animation debuts its first digital 3-D pic Monsters vs. Aliens in March, Jeffrey Katzenberg said Tuesday. Prediction, which was significantly more optimistic than the toon studio topper's comments in April, came during a call with analysts following a solid earnings report driven by the strong bow of Kung Fu Panda.

Katzenberg, who said in April that the pace of movie screens transitioning to digital had been "pretty disappointing," said he was encouraged by Fox's recent agreement with Digital Cinema Implementation Partners, the org formed by AMC, Cinemark and Regal to fund the installation of digital projectors.

"It has taken a good 60 days longer than we or anyone else anticipated," the exec granted. "Now that the first one is done, I think we're going to see very rapidly, in the next two to three weeks, at least two or three additional studios come onboard."

If most of the 2,500-3000 screens Katzenberg predicts will be digital by March are devoted to Monsters vs. Aliens, DreamWorks should be able to project the film in 3-D at about half of its playdates.

In a follow-up interview, DreamWorks Animation prexy Lew Coleman said that the level of digital deployment should allow the toon company to at least break even on the $15 million extra it spends to produce its pics in 3-D, with profits rising as more screens make the transition. Extra revenue will come from higher ticket prices. Katzenberg said he is expecting the average price increase to be $5 for digital 3-D films.

DreamWorks Animation reported a $27.5 million profit for the quarter ended June 30 on $140.8 million in revenue. That's down substantially from last year, when the studio was raking in cash from the megahit Shrek the Third. But Wall Street seemed pleased since it was fueled by Kung Fu Panda, which is on track to be the studio's biggest nonsequel. Jack Black starrer has already grossed more than $510 million worldwide. A sequel is likely, though Katzenberg said no decisions have been made yet.

Film has already recouped distributor Paramount's print and marketing costs and brought in $46.4 million to DreamWorks this quarter. Slightly less than half came from what the studio described as the "completion of a strategic relationship," which is believed to be its deal with Toshiba to distribute in the now defunct HD DVD format. Majority of the rest came from consumer products.

Kung Fu Panda is expected to bring in substantially more revenue this quarter and next from international box office and then homevideo. Company also earned $29.9 million from Shrek the Third, primarily in the pay TV window, and $25.5 million from last fall's disappointing performer Bee Movie via international DVD. Pics have sold 20.3 million and 7.1 million DVDs worldwide, respectively.

In November, DreamWorks releases sequel Madagascar: Escape 2 Africa.

Studio also said Tuesday that it is spending $85 million to expand and upgrade its Glendale HQ in the next two years. In addition, Coleman has extended his contract through 2011, and executive chairman Roger Enrico is transitioning to non-exec chairman, meaning he won't play a day-to-day role in running the company.

By Ben Fritz, Variety