Katzenberg Might Leave Dreamworks: Stunning New Details from Comcast Negotiations

If Comcast is able to acquire Jeffrey Katzenberg’s Dreamworks Animation, Katzenberg would likely exit the company as part of the deal, The Wall Street Journal reported this evening.

Katzenberg would leave not because Comcast doesn’t want him running the movie division, but because as we suggested last night, Comcast doesn’t really even want Dreamworks feature animation capabilities.

The reality is that Comcast already owns Despicable Me maker Illumination Entertainment, which makes far higher-grossing films at almost half the cost that Dreamworks does. It doesn’t need to maintain a second, more-expensive-to-operate studio. The appealing part of Dreamworks is its IP, which Comcast can use synergistically across its various divisions, including NBCUniversal.

Per the Wall Street Journal:

Rather than continuing as an independently run subsidiary, DreamWorks Animation would be mined for intellectual property ranging from Madagascar to Lassie that could be used in toys, T-shirts and theme-park attractions, the people said. In addition, the studio has in the past few years built a small but potent television business that NBCUniversal hopes could make it more competitive in children’s programming and help it to adapt other movie properties, from Fast and Furious to Pitch Perfect, for the small screen.

In potentially spending billions to acquire a repository of intellectual property it can exploit through its numerous businesses, Comcast is pursuing a strategy similar to one followed over the past decade by Walt Disney Co. with acquisitions such as Marvel Entertainment Inc. and Lucasfilm LLC.

NBCUniversal, whose top ranks include several former Disney executives such as Chief Executive Steve Burke, has more than doubled investment in its theme parks, spending $2 billion between 2013 and 2015, and expanded its consumer-products business to more than $100 million in annual revenue last year, from $30 million before the cable company took over in 2011.

While still small compared with Disney, those businesses are growing fast and could accelerate with the infusion of new intellectual property. NBCUniversal has also lagged behind competitors such as Disney to date in using its movie franchises on its suite of television channels.

So, where would that leave Dreamworks’ most well known component, its feature animation division? According to the latest reports, Comcast would leave the decision to Illumination head Chris Meledandri, who “would be tasked with looking under the hood of DreamWorks Animation and determining what movies it should produce as part of Universal.”

Layoffs on both the production and administrative side are likely, sources told the WSJ. Katzenberg would receive not only $21.9 million for leaving Dreaworks, but because he owns more than 60% of the studio’s stock, he could potentially receive billions from the sale.

As a final note, it’s important to remember this deal hasn’t been finalized and could fall apart at any time, like the previous attempts to sell the company. But the writing is on the wall, and whether it’s this deal or another deal, it’s becoming clear that media companies are less interested in Dreamworks feature animation studio than the possibilities of exploiting its intellectual property holdings.

(Photo at top: Shutterstock.com)