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Dreamworks Animation Skg Inc. (NASDAQ:DWA)

Q1 2014 Earnings Conference Call

April 29, 2014 4:30 PM ET

Executives

Rich Sullivan – Deputy CFO

Lewis Coleman – President and CFO

Jeffrey Katzenberg – CEO

Ann Daly – COO

Analysts

Ryan Fiftal – Morgan Stanley

Ben Mogil – Stifel

James Marsh – Piper Jaffray

Vasily Karasyov – Sterne Agee

Tuna Amobi – S&P Capital IQ

David Miller – Topeka Capital Markets

Eric Wold – B. Riley

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the DreamWorks Animation First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. (Operator Instructions).

As a reminder this conference is being recorded. A digicast replay would be available after the call, you may dial-in by dialing into 1-800-475- 6701 and entering the access code 323099. International participants may dial 320-365-3844, and dial-in the access code 323099.

I would now like to turn the conference over to our host, Mr. Rich Sullivan from DreamWorks Animation, please go ahead.

Rich Sullivan

Thank you, good afternoon everybody. Welcome to DreamWorks Animation’s first quarter 2014 earnings conference call. With me today is our Chief Executive Officer Jeffrey Katzenberg, our Chief Operating Officer Ann Daly and our President and Chief Financial Officer Lew Coleman.

The call would begin with a brief discussion of the quarterly financials disclosed in today’s press release, followed by an opportunity for you to ask questions. I’d like to remind everyone that the press release is available on our website, web address www.dreamworksanimation.com.

Before we begin, we need to remind you that certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company’s annual and quarterly reports, as well as in other filings with the SEC. I would encourage all of you to review the risk factors listed in these documents. The company undertakes no obligation to update any of its forward-looking statements.

With that, I’d like to hand the call over to DreamWorks Animation’s President and Chief Financial Officer, Lew Coleman. Lew?

Lewis Coleman

Thanks, Rich and good afternoon everyone and thank you for joining our call. For the first quarter of 2014, the company reported revenue of $147.2 million and a net loss $42.9 million or a loss of $0.51 of earnings per share.

To date, our most recent film, Mr. Peabody & Sherman has delivered $108 million in domestic box-office and $261 million on a worldwide basis. At this level of performance, it will not be a profitable sell.

The end of the first quarter, our assessment of Mr. Peabody & Sherman’s ultimate revenue and our expectations of its future net cash flows, resulted in an impairment charge of $57 million, which was primarily allocated to the feature film segment.

This charge is materially larger than the impairment recorded on Turbo, which had similar box-office results for two key reasons. First, Mr. Peabody and Sherman had a higher production cost and second, Turbo benefited from a larger consumer products and licensing program.

Additional drivers of this segment’s quarterly revenue were the domestic pay-television performance of both, The Croods and Turbo as well as our library, which contributed revenue of $37.9 million driven primarily by the worldwide free television performance of Puss in Boots.

Total, The Croods contributed revenue of $41.7 million to the quarter, and reached an estimated $7.1 million net home entertainment units sold worldwide. Turbo contributed revenue of $22.3 million for the quarter and reached an estimated $4.8 million net home entertainment units sold worldwide. In total, the feature film segment contributed revenue of $110.1 million and a gross loss of $25.4 million for the quarter.

Moving on to television, this segment contributed revenue of $17.9 million and a gross profit of $5.8 million to the first quarter. Key contributors of television revenue are the Dragon series as well as the classic media title, including Veggie Tales.

Consumer products statement contributed revenue of $12.1 million and a gross profit of $6 million to the quarter. Finally, all of the revenue in the first quarter totaled $7.1 million and a gross profit of approximately $200,000.

The part of the other segment, AwesomenessTV recorded revenue of $4.1 million and a gross loss of $80,000 in the quarter.

Moving on to the remainder of the income statement, cost of revenue for the quarter approximately $160.7 million resulting in gross loss of $13.4 million. Selling, general and administrative expenses for the quarter totaled $49.7 million, including a $5.1 million stock compensation expense.

Turning to taxes. Company’s income tax benefit as opposed to an expense for the quarter was $22.5 million. Our combined effective tax rate, including the impact of our tax sharing agreement with a former stockholder was approximately 35.5% for the first quarter.

Moving to current volatility of profit, and our expected tax rate, we determined that using the annual effective tax rate would not represent a reliable estimate of our interim tax rate. Accordingly, the tax rate used in the first quarter is based on this quarter’s financial results.

Moving on to the balance sheet, the company ended the first quarter with a cash balance of $69.6 million. Our diluted share count for the first quarter was 84.5 million shares and our remaining share repurchase authorization is $100 million.

Looking ahead, significant events for the second quarter includes the theatrical release of How to Train your Dragon 2, and the release of The Croods into the international PayTV markets.

A couple of final notes. First, we currently estimate the fair value of the AwesomenessTV contingent consideration to be $99 million, represents an increase of $2.5 million from our assessment in year-end 2013, partially as a result of the passage of time. As a reminder, this value will fluctuate based on the passage of time as well as other changes such as adjustments in forecasted performance.

At the end of the second quarter, we expected to be in a better position to assess AwesomenessTV’s performance 2014. Second, beginning of this quarter, we are including our adjusted EBITDA in our earnings press release.

We’ll find it along with a reconciliation of adjusted EBITDA to net income and cash flow from operating activities following the financial statements in today’s press release. This non-GAAP measure is an indicator of our ability to incur additional debt under the debt coverage covenants that are campaigned in the high yield note intentions.

With that, I’ll hand the call over to Jeffrey.

Jeffrey Katzenberg

Thank you. As Lew indicated, the theatrical performance in Mr. Peabody & Sherman fell well below our expectations. Three of our last four films have not delivered in terms of audience turnout or financial performance.

As we have discussed many times before, the film business has inherent risk especially around original films. Whether it’s Shrek, Madagascar, Kung Fu Panda, Dragons, Puss in Boots or 2013, it has the Croods, all of our most popular and profitable franchises started as an original film with uncertainty and risks.

Historically, we’ve managed that risk well and our process has delivered consistent, creative and financial success. Our films have been most successful when we’ve executed in a few key areas, playability, or creating content with global appeal, marketability of that idea and availability of a strong release window to exploit it.

However, in consistent execution and some combination of these factors has led to lower performance with several of our recent releases. It is our number one priority to address each of these factors and make the necessary changes to get us back to the high standard for consistency and performance that DreamWorks has set for itself.

First, we have to focus on the creative side of the business. For evaluating and adapting our creative process to ensure that our ideas have the broadest global appeal. Additionally, we have to execute on those ideas in a way that allows each concept to reach its fullest potential.

Secondly, in a marketplace with more competing entertainment options than never before, we need to adjust our marketing approach to ensure that all of our film releases standout to audiences as must see theatrical experiences.

We’ve invested significantly in our capabilities in this area and we brought on-board some of the best executives in the business, Don Calvin and Jim Gallagher, who are new to our organization have incredible track records and will ensure that our marketing and promotional campaigns are world-class.

Additionally, we’re thrilled that our new marketing partners at Fox, have recently made significant additions to their marketing and distribution teams.

Lastly, as we’ve stated before, in a market with more blockbuster releases than ever before, finding a strong release date for our ten-fold films is increasingly difficult. This means, we need to be more selective of our release dates and we have to be much more flexible in terms of the number of films we release in the given year.

I’m absolutely focused on addressing the current challenges I’ve outlined, getting our feature film business back on track is my number one priority.

We have some of the most talented creative professionals in the industry and they have been responsible for the unprecedented 16 consecutive DreamWorks branded hits in a row we have enjoyed. I believe we can achieve that level of consistent success once again.

Our next theatrical release is How to Train your Dragon 2. I could not be more confident that Dragons is going to be great success and I’m very proud that it has been invited to Premiere as an official selection at this year’s Cannes Film Festival in just a couple of weeks from now.

With that, I’ll hand the call over to Ann.

Ann Daly

Thanks Jeffrey. Over the past several years, we’ve taken meaningful steps as a company to improve our film making process and to diversify the overall enterprise in order to mitigate risk and volatility in the film business.

Our main area of focus has been on our film production costs. We have invested significantly in both our technology and production process which has allowed us to bring our costs down.

Mr. Peabody and Sherman had $145 million in production cost was the last of our original movies under our old cost structure. Beginning with our November release of Home, our average per film production cost excluding incentive based compensation will fall to $125 million or less.

As we fully implement our new technology and production process, we believe that film costs will continue to decline while retaining the quality of a DreamWorks branded film.

Our objective is to ensure that our box-office successes will be more lucrative. And in the case where a film performs below expectations that it can still be profitable.

Second, we are focused on a more balanced release date of originals and sequels each year, which we have always believed is another way to reduce risk and increase consistency for our film business.

Sequels typically achieve a larger and more predictable box-office results. In fact, historically a DreamWorks sequel has never generated less than $600 million in worldwide box-office.

Our upcoming slate includes Dragons 2 and 3, Penguins in Madagascar, Kung Fu Panda 3 as well as sequels to The Croods and Puss in Boots.

We currently plan to average one franchise film every year through 2018. We’re excited about the next chapter for each of these franchises, each sequel has a great story idea and an experienced creative leadership team at the helm.

In addition to improving the results from our film business, we continue to diversify and grow our non-film revenue streams. Over the past two years we’ve been focused on finding new ways to exploit the IT created from our films across other platforms. And we continue to make great progress on our television, digital and consumer product businesses.

Last month, we announced three new television series that will launch our Netflix later this year including King Julian from the Madagascar franchise, Puss in Boots and Veggie Tales.

AwesomenessTV continues to see very strong growth in video views and subscribers on their network. Since our call two months ago, subscribers have grown from 37 million to 42 million and video views have climbed from 3.2 billion to 4.6 billion.

Very recently, AwesomenessTV announced their acquisition of Big Frame, another very successful digital content creator and curator. In total, AwesomenessTV networks now have over 85 million subscribers.

With this level of viewership and engagement, there are considerable opportunities beyond the YouTube platform. The consumer products team that we put in place over the past year has already identified significant off-platform synergies that we are now working to capture.

Overall, the DreamWorks consumer products team remains focused on the many opportunities in this segment and on delivering consistent annual growth. Our Dragons program is already ramping up at retailers and will continue to expand as we approach the theatrical release.

Each of the growth areas I’ve outlined expands the revenue generating opportunities for our franchises as well as for the DreamWorks brand overall. In the face of an ever-changing and increasingly complex film business, we are taking the steps necessary to position our films segment for future success, while making significant strides to diversify the enterprise into key growth areas.

With that, we’ll be happy to take your questions.

Question-and-Answer Session

Rich Sullivan

Great, operator. Can we have the first question please.

Operator

Absolutely. The first question comes from the line of Ryan Fiftal with Morgan Stanley. Please go ahead.

Ryan Fiftal – Morgan Stanley

Hi, thanks for taking the question. Two if I may, first for Jeffrey on the changes you’re making to the film development process. First you mentioned some changes to the creative process, I’d imagine that’s something that’s very tricky to tweak.

So, any more color that you can give us on how you’re thinking about reforming that process? And if you do have new priorities, how does your current development slate match up to those priorities?

Jeffrey Katzenberg

Yes, Ryan. I think that where I would frame it is, is that – up until the last year or two, the thing that we focused on almost exclusively with playability. If we made a movie and it played well, DreamWorks animated movie, we got our space in the marketplace. We get a high multiple on it. And we got from a good to a great return.

Playability, honestly is just not enough today, given both the demands of marketing and how competitive the marketplace is in terms of – we’re competing against a much, much broader segment of just animated movies. And availability of release date.

And so, today, we really feel a different level of criteria in terms of the ideas that we’re picking and the marketability of those ideas. So now, given that and this is something that we’ve – we didn’t wake up to yesterday. We have been actually very focused on it as Ann said, we have probably more sequels lined up and in the production pipeline today than we’ve ever had before. So we are continuing to lean on them heavily.

And the movies that are not sequels, we are – I think really triple or looking at those to make sure that they are big concepts and highly marketable concepts. Specifically when I look at the release schedule going forward, in the coming years out into ‘15, ‘16, ‘17, I actually think we have very, very strong titles. They are marketable.

So, even an original movie like Boo, which is coming next summer is ghost movie. It’s a flat-out comedy with Seth Rogen, Melissa McCarthy, Bill Murray, big visual fun kind of Ghostbusters ideas, it’s a little early, its more than 15 months out from release in it. But it feels like a very big idea. It feels like a very marketable idea, it’s got very strong elements to it.

So, I think when we’re looking at original movies they actually need to check-off a lot more boxes than they’ve had to in the past.

Ryan Fiftal – Morgan Stanley

Okay, thanks. And then, I guess one follow-up just on the marketing side. You mentioned, you’re investing in your capabilities that you talked about some of the hires you’ve made and strong track records of the people you have there.

But any, maybe any help for us to think about like what are the levers that you think you can pull on the marketing side other than just ramping up total dollars? I didn’t hear you say that you’re ramping up total dollars, so it sounds to me like you’re trying to think about how you get more efficient, how you broaden your reach with the dollars that you do spend?

Jeffrey Katzenberg

Well, that’s it. And it’s actually been much, much long-term planning, much more strategy and how we’re doing it. And so, I think we rely on the Fox team to be, when we get into a release window, which is three, four months out, they’re very, very strong at executing on that. But for an event movie, you actually have to be working 18 months out.

And bringing Don Calvin and very specifically Jim Gallagher, this is really his expertise, he’s superb at this. And he’s already been well at work on this force. So, today going out with Dragons is a really wildly funny teaser that he has created for next spring’s release of the Penguins of Madagascar.

They’re already well at work on materials for Boo for next summer so much, much more long range. And then, what is becoming both I think it’s a really opportunity today, is just the use of social media. And how we can actually connect with and find our audience in difference ways. Our audiences are engaging today, in a lot of different places, in a lot of different ways than they were even three, four years ago. So, all of those things are in play for us.

Ryan Fiftal – Morgan Stanley

Okay, thank you.

Rich Sullivan

Thanks Ryan. Next question please.

Operator

Our next question comes from the line of Ben Mogil with Stifel. Please go ahead.

Ben Mogil – Stifel

Hi, good afternoon. Thanks for taking my call – my question. Jeffrey, I think end, in the last call you talked about Dragons, the first one had done around $60 million of CP and that was that Wal-Mart exclusive. This time we don’t have an exclusive but you’re confident given the sequel that you’re sort of on-track if not ahead of that.

Sort of one quarter later, can you give us a sense of how you’re feeling with the CP around Dragon?

Jeffrey Katzenberg

Still the same, nothing has – it’s not gotten measurably changed from that one way or another. We have a very strong campaign. You’ll start to see CP products hit the marketplace here in the next few weeks. And retail is very excited about it. This will be a multi-prong campaign that will go through both the theatrical and home video release.

We have a very, very strong home video release date on the movie, I think it’s November 11, and which comes right into the holiday selling season in this. So, this will be a one-two punch for us on the CP side.

Ben Mogil – Stifel

And then, thank you Jeffrey. And then, sort of just onto the overall home market and when you were sort of coming up with the ultimate surround on Mr. Peabody & Sherman. I mean, are you expecting the title kind of converts similar to Turbo, any sort of commentary that you can give us on the home entertainment market in general right now?

Ann Daly

Yes. We have seen these two versions to be relatively stable year-over-year. I would say that for a film that’s going to have box-office in the level of Peabody that we’ve seen a little bit higher conversion, just because you have a much higher level of awareness in the marketplace. And people having gone to the box-office. So, we believe that we should be kind of in the world that what we saw on Turbo.

Jeffrey Katzenberg

The other thing is, both – and this goes to the point I was making, as both Turbo and Peabody actually had very high playability. So, the audience that did go see it actually loved it. It was an A-Cinema score, A-plus Cinema score for kids, well reviewed.

So, that actually was the case with Turbo, as box-office wasn’t great but the people that did see it really connected with it. And that actually has value when you get into the ancillaries.

Ben Mogil – Stifel

That’s great, Jeffrey and Ann. Thank you very much.

Rich Sullivan

Thanks, Ben. Next question please.

Operator

Our next question comes from the line of James Marsh with Piper Jaffray. Please go ahead.

James Marsh – Piper Jaffray

Hi, thanks very much. I guess I recall, one of the benefits of working with you guys on the distribution side in the past was it, you’re always recouped. So that distribution partner wasn’t taking a lot of risk. And I guess, obviously with the recent box-office performance, where you’ve been un-recouped on few names, kind of changes that risk return profile for the distributor.

So, I guess, two questions related to that. One, I was hoping you could remind us how those mechanics work on recouping and un-recouping. Actually one of these storms across, but maybe you can elaborate on that a little bit?

And then secondly, your impression is this changes Fox’s appetite to spend marketing dollars in the future. Just trying to get a sense for how that might change if at all?

Jeffrey Katzenberg

Well, we’ve never had a movie that’s not recouped, including these three. So, it’s not an issue, not an issue with them, not an issue with us. So they are – they will be fully recouped on their marketing expenditures at Fox. And so, we’ve had no push-back whatsoever from them.

Rich Sullivan

Hi James, and part of your question, you asked the question of films being cropped just to be clear. We do not crop the films. The market in each film are cropped so you got to recover, it not only gets the theatrical window for your marketing. But if you’re not recouped after that theatrical window, drops all that and then pull in might for the home video or television.

And Jeffrey referred to this, and we’re going to tell them, we’re happy to recoup, I mean, to the home video market at the latest. So, we have not had an issue with Fox nor do we have an issue with Paramount.

James Marsh – Piper Jaffray

Thanks very much.

Rich Sullivan

Okay, thanks James. Next question please.

Operator

Next we’ll go to the line of Vasily Karasyov with Sterne Agee. Please go ahead.

Vasily Karasyov – Sterne Agee

Thank you, good afternoon. I have one for Ann and one for Lew. Ann, can you remind us please or is there any update on your guidance for television revenue ramp over the next several years and specifically the gross margin that you guys are looking at. I believe on the last call you said it was still from with influx, because of the marketing? And then I have one follow-up.

Ann Daly

Hi, so we are – we’re so, on our track to do about $250 million in 2015. We do have baked into that number and expectation that we’re marketing the release of these series as they come into the market and then supporting them during the period of the season.

But, we continue to be enthusiastic about what’s happening there. We have more territory signing app for distribution. And so, we’re looking at the – and we looked like we’re holding on the margin target.

Vasily Karasyov – Sterne Agee

Thanks, Ann. A quick follow-up, if I understand correctly, a deal with Netflix is that internationally you can sell rights and license the products you made from Netflix in territories where they are not present. So, my question is, as they roll out into these territories, there are rumors they can go into France and Germany. Does that preclude you from selling the product that you made for them in those territories does it limit your revenue opportunity?

Ann Daly

It actually improves the opportunity because as Netflix will determine what territories they might want to go into next. We can – we have the opportunity to talk with them about distributing either first or second window that in general that is a positive for us and the opportunity for the content in those markets.

Vasily Karasyov – Sterne Agee

Thank you. And Lew, a question on the ultimate, it was very useful and helpful when you compared Turbo and Mr. Peabody in terms of the size of the write-down. Can you also probably compare those with the Rise of the Guardians? I think for us on the outside, this all did pretty much very similar box-office but the impact is very different. So, if you could help us understand how to size it and what factors go into it?

Rich Sullivan

Vasily, this is Rich here. Obviously, Guardians did not have a considerable product licensing partner like same with Turbo. And the comp structure, we ignored that of Mr. Peabody & Sherman heading to larger size. So, for the most part Guardians is more in the tight budget of Peabody & Sherman than it was for Turbo.

Vasily Karasyov – Sterne Agee

Right. And does Turbo, is there some Turbo shares revenue included in the Turbo film ultimate?

Rich Sullivan

Well, for Turbo and for Peabody there is TV Series like the Tinkerbells, yes.

Vasily Karasyov – Sterne Agee

Thank you very much.

Lewis Coleman

Whereas for Turbo, it’s not for Peabody.

Rich Sullivan

I apologize.

Lewis Coleman

So, there is for Turbo, not for Peabody.

Vasily Karasyov – Sterne Agee

Thank you.

Rich Sullivan

Next question please.

Operator

And the next question comes from the line of Tuna Amobi with S&P Capital IQ. Please go ahead.

Tuna Amobi – S&P Capital IQ

Hi, thank you so much. I have a few questions. So, Jeff, I was very interested in your recent prediction regarding the shrinking of the theatrical window potentially to three weeks, which I was very, very curious as to if that indeed comes to path, in such a world.

Do you think, how does that affect your film strategy overall, a, in terms of distribution and production, and b, do you think that scenario gives you – kind of places, kind of films an advantageous position or maybe vice versa relative to the overall competition out there in the marketplace. I know this is all hypothetical but I’m just kind of trying to pick your brains a bit more?

Jeffrey Katzenberg

Well, I’m glad you said that because the conversation was hypothetical. And the context is hypothetical at a media conference yesterday in which I had a theory about 10 years from now. So that certainly is a way down the road. There might be a different model for how our movie is made it to the market.

And I can think it’s ultimately not going to come to path. I can think there is going to be another model from the current distribution that exists today. But it’s way down the road and certainly not anything that we’re focused on in our day to day business today.

Tuna Amobi – S&P Capital IQ

Okay, that’s understood. Separately, with regard to the multi-channel content networks which has been kind of busy off late. I mean, you guys are already there in that space with AwesomenessTV. Ann alluded to some off platform opportunities that you’re planning for Awesomeness.

So, I’m just kind of trying to get a sense as to how big that you think that these opportunities are? And ultimately, what kind of business model that can be supported by aspect such as that. I’m sure that when Disney went out pay, the kind of money they did for make a studio that caught your attention.

So that got us believe in that this is really a very, very potentially significant space that you guys are pretty well fixed with it. Any color on those views would be helpful?

Jeffrey Katzenberg

You’re suggesting that their $1 billion investment got more attention than our $33 million?

Tuna Amobi – S&P Capital IQ

I wasn’t quite suggesting. You guys obviously had the first mover advantage for sure.

Jeffrey Katzenberg

Listen, I think it is too early for us to start to – for us to want to side with this business opportunity is going to be. What I will say is that we think we are building very, very meaningful assets for us. And those assets are going to have many different ways in which we can monetize them, which is in fact, the Awesomeness is focused on.

And I think, some of the things that we’re doing today are on a singular and unique path that are very specific to AwesomenessTV. It’s not applicable to all MCMs or to all demographics in it. Brian Robinson and Brett Lottie (ph) have really carved out a 12 to 24-year old female audience that they are in service with all kinds of original content and lifestyle and fashion and beauty and affection and a vast thing.

And with that comes an opportunity to get a value ad of it in a number of different ways, one of which is the brand itself, which is why Jim Fielding, was recently brought on very specifically to run consumer products for the Awesomeness platform.

So, we do think there is plenty of opportunity there. These guys are doing a spectacular job. The growth that we continue to see in the MCM, end on the channel itself, on the main channel is super, super strong. And we’re literally now doing more than 1 billion views a month. And we think that that is going to – it’s actually going to accelerate.

So, with those kind of eyeballs on a very specific defined demographic, we think there are many ways in the coming year or two to start to monetize it. We can’t frame that in dollars expense for you yet.

Tuna Amobi – S&P Capital IQ

All right, that’s helpful. Just a quick clarification, does those opportunities potentially include maybe launching a new franchise off of that platform, in new film franchise, do you preclude that or?

Jeffrey Katzenberg

No, not at all, no. They actually have movies that they are – that they’ve made. And in particular we’ve seen movies that have aired on their platform and had graced after market values for them. And they’re in the midst of doing new ones that they’re doing right now. So many different forms of content, short-form and even some long-form.

Tuna Amobi – S&P Capital IQ

Okay, thank you.

Rich Sullivan

Thank you. Next question please.

Operator

Our next question comes from the line of David Miller with Topeka Capital Markets. Please go ahead.

David Miller – Topeka Capital Markets

Hi guys, thanks for taking the question. Jeffrey, you mentioned some of the changes that you’re making to the average negative cost per film for originals going forward starting with Home. Have you had any conversations with Fox here in town about changes to the overall sort of average P&A commitment per film or you’re just going to stick with the model as it stands right now? Thanks very much.

Jeffrey Katzenberg

Thanks, David. Well, let me just say on the negative cost of our movies. We continue to see downward pressure, pressure buyouts on those. So there is continued savings for us on our feature film slate. And so, we don’t think we’re done there at all.

And then, in terms of the P&A side of it, it’s a picture by picture, the P&A cost on Peabody is not at the level of what the P&A cost is going to be on Dragon. This is much driven by performance as anything. So, Fox has been more efficient than we were at Paramount. So, we have seen savings there. And but I think it’s a picture, I think it’s really driven more by the season and the competitiveness of the marketplace that we’re in.

David Miller – Topeka Capital Markets Okay. Thank you very much.

Rich Sullivan

Thanks, David. Next question please.

Operator

And next we go to line of Eric Wold with B. Riley. Please go ahead.

Eric Wold – B. Riley

Thank you, good afternoon. I was just kind of thinking about the classic media portfolio, given the performance theatrically for Mr. Peabody & Sherman, how does that impact your thoughts on what properties out of that portfolio may or may not work now in kind of a theatrical world that we’re in. And we saw, as I saw recently that is a hot stuff, double movie in the work. Does this performance impact what you think in that probably may or may not work or it has not changed it?

Jeffrey Katzenberg

No, it has not changed the value of the library, the way we’ve looked at the library. As I said, we’re being very focused about the marketability of each of our ideas. And so, that is an overwriting consideration. But it is no way diminish the value of – and the opportunities that exist in that library for us.

Eric Wold – B. Riley

Perfect. Thank you.

Rich Sullivan

Thanks, Eric. Next question please. Okay. Well, that concludes today’s first quarter earnings conference call. I’d like to remind everyone that a replay of this call is available shortly on our website. That web address again, www.dreamworksanimation.com.

If you have any additional questions, please feel free to contact Investor Relations Department. Thanks again for participating. And have a great evening.

Operator

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive TeleConference service. You may now disconnect.

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Source: Dreamworks Animation's CEO Discusses Q1 2014 Results - Earnings Call Transcript
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