Shrek 3 Drives DreamWorks Profits

DreamWorks Animation sure loves its Shrek.

A $321 million box office bonanza for this summer's Shrek the Third resulted in a stunning 3rd quarter for the Glendale-based studio, where its profits more than quadrupled over last year. Shrek the Third was the second biggest box office earner for the summer of 2007, behind Sony's live-action Spider-Man 3.

DreamWorks Makes $47 Million Over 3rd Quarter

Thanks to those numbers, DreamWorks recorded a $47 million (47¢ a share) profit over the period, a vast improvement over the same time last year where less-than-stellar box office for Over the Hedge resulted in a $10.5 million (10¢ per share) profit.

"We are extremely pleased with the theatrical results of Shrek the Third," DreamWorks Animation CEO Jeffrey Katzenberg enthused in his statement. "Especially with its performance overseas, where it has nearly equaled the box office of Shrek 2."

That 2004 film made $400 million in non-USA markets, according to IMDb.

Shrek the Third's success tripled revenues during that quarter, generating $160.8 million. That's in contrast from from $55.6 million a year earlier. Some $92.1 million of that cash intake (about 57% of third-quarter revenue) was directly attributed to Shrek the Third.

Further cash for DreamWorks came from the DVD release of its 2006 movies, Over the Hedge and its final collaboration with Britain's Aardman Animation, Flushed Away.

Over the first nine months of 2007, DreamWorks Animation earned $124.2 million ($1.22 a share) over revenues of $476.95 million. During the same period of last year, it only earned $36.46 million (35 cents a share) on revenues of $190.57 million. It also had to apply for a $109 million tax write-down, thanks to the commercial collapse of Flushed Away.

DreamWorks' 4th Quarter: Shrek the Halls, Shrek the Third DVD and Bee Movie

DreamWorks Animation now looks to its fourth quarter and the release of Shrek the Third on DVD on November 13th.

"DreamWorks could sell 18 million Shrek the Third DVDs this year and another 13 million in 2008," wrote Bank of America Securities analyst Michael L. Savner. "The market for blockbuster, family-orientated DVDs is healthy."

However, the DVD market is looking pretty intense this Christmas, with home-video bows from Spider-Man 3, Harry Potter and the Order of the Phoenix and Transformers potentially cutting into Shrek the Third's profits.

DreamWorks also looks to its fall film, the Jerry Seinfeld vehicle Bee Movie, which comes out on Friday, November 2nd. So far, that flick has earned a lacklustre 46% Rotten rating on Rotten Tomatoes, with 7 out of 13 reviewers panning the flick and all notices giving it a 5.7 out of 10.

Shrek the Third garnered similar reviews (and a 42% Rotten rating), but still managed to score some mighty impressive box office. However, DreamWorks animated movies that don't feature the big green ogre have not been quite so critic-proof, and have generally made less than $200 million at the box office.

Bee Movie is expected to pull around $175 million from North American theatres, says Pacific Crest Securities analyst Evan Wilson.

DreamWorks' other 2007 Shrek offering, the half-hour Christmas special Shrek the Halls, won't be a factor in the studio's fourth quarter since revenues from the that film still have to pay off the company's production and promotional fees. Shrek the Halls airs November 28th on ABC.

Shrek the Third poster

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