Can TV Be a Main Source of Income for DreamWorks?

dreamworks-logoDreamWorks Animation (NASDAQ:DWA) Chief Executive Jeff Katzenberg said that his company’s new forays into television production will yield $100 million in revenue this year, with that number swelling to over $200 million in 2015.

Amid news that DreamWorks will partner with Netflix (NASDAQ:NFLX) and Germany’s Super RTL channel, Katzenberg detailed the integral role television will play in the future.

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“We are moving very aggressively into the TV business,” Katzenberg said. “Television is a transformative line of business and we expect going forward it will be a significant source of revenue.”

The company will create a billion-dollar library consisting of over 1,200 new TV episodes in the next five years, according to Bloomberg. The studio hopes to produce at least 300 hours of programming in the deal with Netflix, using original DreamWorks characters.

The gross profit margin — the percentage of revenue after costs are deducted — will be 30 percent, similar to the company’s movie business, Katzenberg said. Additionally, the revenue projections don’t include money from potential merchandising popular with children, such as clothes and toys.

Television programming will largely be inspired by DreamWorks classics, such as “Kung Fu Panda” and “Madagascar,” but will also serve to augment new releases like “Turbo” with TV shows comprised of the same characters.

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Additional TV programming will come from characters in the Classic Media library, which DreamWorks bought last year, popular titles of which include “Casper the Friendly Ghost” and “Lassie.” Classic Media is expected to provide $50 million in TV revenue this year, according to Katzenberg.

In partnering with Netflix, DreamWorks essentially tabled the idea of creating its own cable channel.

“To start a cable channel from scratch today, the barriers to entry are very, very high,” Katzenberg said in a phone interview. “The success of Netflix, the spectacular growth they have had and the strong family audience there created this opportunity. We are more than happy to be on someone else’s platform. There’s nothing wrong with that.”

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The partnership was even more important after both companies failed to reach carriage deals with Viacom (NYSE:VIA). Netflix is still trying to negotiate a deal with Viacom, hoping to acquire shows from children’s network Nickelodeon, but has just seen the cable company strike a deal with Netflix-rival Amazon (NASDAQ:AMZN) to host shows from Nickelodeon and MTV. Meanwhile, DreamWorks’ relationship with Viacom is strained after the film company chose News Corp’s (NASDAQ:NWS) Fox to take over film distribution instead of Viacom’s Paramount.

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