THE film “Shrek” is a send-up of fairy tales made by DreamWorks Animation, a studio run by Jeffrey Katzenberg. In the film the real butt of the joke is the Walt Disney Company, which Mr Katzenberg left acrimoniously in 1994. Disney’s commercial exploitation of its characters in songs, toys and theme parks has long been an easy target for satire. Disney has also long been the envy of the industry. It is a kingdom that Mr Katzenberg helped to build but was denied the chance to rule.
Now he is helping to build a rival kingdom. On April 28th Comcast, the parent of NBC Universal, announced that it would buy DreamWorks Animation for $3.8 billion. DreamWorks stockholders will receive $41 per share in the deal, which should be completed by the end of the year, subject to regulatory approval. The acquisition brings together the animation studio’s popular franchises, including “Shrek” and “Kung Fu Panda”, with NBC Universal’s television channels, theme parks and consumer products business.
The purchase shows that NBC Universal is the only company that can come close to matching Disney’s portfolio of franchises, theme parks and merchandising. Under Bob Iger, its chief executive since 2005, Disney has invested heavily in content, buying Pixar Animation Studios in 2006, Marvel Entertainment in 2009 and Lucasfilm in 2012. The spending spree totalled $15.5 billion, but each property has become more valuable as part of Disney’s empire of monetisation. Disney’s market capitalisation has soared by more than $120 billion since the purchase of Pixar was announced in January 2006, to $172 billion today.
The DreamWorks deal is unlikely to prove quite as magical for Comcast. The acquisition might seem at first glance to be comparatively a steal, at about half of Pixar’s $7.4 billion price tag. But the circumstances are rather different. When it bought Pixar, Disney was in turmoil. The deal brought it not just hugely successful franchises, like “Toy Story”, but also visionary executives who turned around Disney’s own animation studio, which had become a shambles.
In contrast, DreamWorks’ biggest hits were some time ago. The last of the “Shrek” films was released in 2010. And NBC Universal has been on a strong run, helping support Comcast’s share price in a challenging time for cable companies, with concerns about cord-cutting and competition for content. Blockbuster franchises, including “Jurassic World” and “Furious 7”, helped make NBC Universal the top Hollywood studio with $2.4 billion in American box office receipts last year and $6.9 billion globally, narrowly beating Disney. Universal also already has a successful animation business called Illumination Entertainment. Run by Chris Meledandri, it has churned out blockbusters like “Minions” and the “Despicable Me” franchise.
Mr Meledandri, not Mr Katzenberg, will be running the newly combined animation business. There is more than a little irony in this. Instead of controlling a studio, Mr Katzenberg will be in charge of a new division called DreamWorks New Media. Just as he revived Disney’s animation in the 1980s and early 1990s with hits like “The Little Mermaid” and “The Lion King”, Mr Katzenberg can take credit for building DreamWorks Animation into a rival that Comcast felt compelled to buy. Yet while he has helped build another great kingdom, he still does not get to rule it.