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'Shrek' studio Dreamworks remakes itself with a flurry of deals

Producer Jeffrey Katzenberg, chief executive of DreamWorks Animation, arrives at the Academy of Motion Picture Arts & Sciences 4th annual Go
Producer Jeffrey Katzenberg, chief executive of DreamWorks Animation, arrives at the Academy of Motion Picture Arts & Sciences 4th annual Go

By Ronald Grover and Lisa Richwine

LOS ANGELES (Reuters) - Dreamworks Animation SKG Inc, the studio that built one of Hollywood's largest film franchises on the back of a green ogre named Shrek, has suddenly become one of the entertainment industry's busiest dealmakers.

In the last year, Dreamworks has bought a YouTube network aimed at teenagers and picked up a company that controls such iconic characters as Lassie and Casper the Friendly Ghost. It acquired the rights to the Troll toy franchise and in June, signed a deal to produce a TV series for streaming video service Netflix Inc. It also plans to build a $3 billion entertainment complex with partners in China.

And Dreamworks isn't finished.

"There will definitely be more deals," Chief Executive Jeffrey Katzenberg said in an interview. "I have never seen more opportunities to build our brand in our 19 years in business."

Katzenberg will not say what else is on his list, or whether he prefers to buy or partner with other companies.

One thing still percolating, he says, is a Dreamworks cable channel, "but there's nothing out there right now for us."

A few years back, Dreamworks considered selling itself to a larger media company in hopes of converting its cable channel to one featuring Dreamworks movies or TV shows, according to news reports at the time.

Dreamworks' acquisition spree comes at a time when the animated film market has become so saturated with studio-backed fare that the studio's most recent entry, "Turbo," debuted with two other animated films already in the market.

"Turbo" ended up with lackluster ticket sales of $21 million in the United States and Canada during its first weekend. Earlier this year, Dreamworks took an $87 million write down for its holiday-themed "Rise of the Guardians," and another $54 million charge to rework "Me & My Shadow."

Dreamworks hopes acquisitions can help expand its popular franchises, such as "Shrek" and "Kung Fu Panda," beyond the big screen to television, toys and even theme parks. It is a formula that helped turn Walt Disney Co into the largest media conglomerate, with a market value of $118 billion. Dreamworks is tiny in comparison, with a market value of about $2.3 billion.

Investors have welcomed Katzenberg's diversification strategy, sending Dreamworks shares up 50 percent in the past year.

As a result of dealmaking, analyst Tony Wible of Janney Montgomery Scott predicts about 45 percent of Dreamworks' revenue this year will come from non-movie making, including TV shows produced by Classic Media, which Dreamworks bought last summer for $157.6 million.

Classic Media owns the rights to animated characters Richie Rich, Dick Tracy, and George of the Jungle, among others.

A year ago, Wible said, Dreamworks was getting only about 15 percent of revenue from areas other than newly released films, with most of that coming from DVD sales of older movies.

This year, Dreamworks expects to bring in $100 million in revenue from its television ventures. The estimate does not include revenue from AwesomenessTV, the teen-oriented YouTube network Dreamworks acquired in May.

Over the next five years, Dreamworks says it will produce 1,200 hours of programs for companies such as Netflix and German kids channel Super RTL, including those inspired from "Turbo" and "How to Train Your Dragon."

Dreamworks also will market merchandise from the Troll toy franchise after buying the rights to the line in April.

In July, a Dreamworks attraction with a Disney-style character-parade and other entertainment opened at the Sands Cotai Central casino, owned by Sands China Ltd, in Macau.

Dreamworks also is expanding in China, and is working with partners through a joint venture called Oriental Dreamworks to build a $3.1 billion entertainment district that will open in Shanghai in 2016. In addition, the venture will produce live-action movies and animated films for Chinese audiences.

But Katzenberg, who headed Disney's movie studio for a decade until 1994, denies the flurry of deals is a bid to recreate a modern day version of the media giant's far flung entertainment empire.

"Times have changed, this is totally different," he said. "The thing we had in common were a great brand, some great content and a lot of opportunities to expand."

(Reporting By Ronald Grover and Lisa Richwine; Editing by Edwin Chan and Leslie Gevirtz)

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