DreamWorks makes sense for Comcast, but will Katzenberg cede control?

Comcast Corp. could leverage such popular characters as Shrek and Kung Fu Panda's Po for theme parks and boost the cable giant's animated-movie business if it closes on a $3 billion deal for the Hollywood studio DreamWorks Animation SKG Inc., analysts said Wednesday.

Comcast's Universal would likely combine DreamWorks' studio with an animation unit at Universal Studios that made such blockbusters as Despicable Me and Minions.

DreamWorks has been on a downward spiral, losing $364 million over the last two years. Still, experts see Comcast as emulating the Walt Disney Co., which has made profitable franchises from movies, theme parks, and merchandise.

On Comcast's quarterly earnings call Wednesday, chief executive Brian L. Roberts had no comment on the leaked DreamWorks negotiations, first published late Tuesday in the Wall Street Journal.

Telecom analyst Craig Moffett hinted at the topic, asking Roberts whether he would expand cable distribution or NBCUniversal.

Roberts didn't take the bait. "They are both great businesses," he said, adding, "If you have more than one kid, you love them equally."

DreamWorks stock soared 18.7 percent, or $5.08 a share, to $32.20 on reports of a potential Comcast deal. Comcast stock was flat, up 25 cents to $61.30.

Jason Schloetzer, an associate professor at the McDonough School of Business at Georgetown University, said he believed that Comcast would not run into problems with an antitrust review of a DreamWorks deal, as it had for the proposed $45 billion deal for Time Warner Cable a year ago.

But the Philadelphia firm should work to retain DreamWorks' creative employees who might clash with the Universal corporate culture, Schloetzer said.

"You would not like the key talent in DreamWorks to jump ship," he said.

DreamWorks chief executive Jeffrey Katzenberg, 65, owns about 60 percent voting control of two classes of DreamWorks shares. He was paid $13.5 million in 2015, when DreamWorks lost $54.8 million on revenue of $915 million. The studio lost $309.6 million on revenue of $684.6 million in 2014.

Katzenberg, a former Disney executive, has been expanding the television business at DreamWorks, selling films and cartoon series such as The Adventures of Puss in Boots to Netflix as he seeks to break a dependence on the traditional movie box office.

Katzenberg has tried to sell DreamWorks in the past, but those deals foundered, and this one may, too, over issues involving price and control.

DreamWorks spokesman Dan Berger said the studio had no comment on the speculation of a deal.

A Comcast deal "would secure Universal with a well-established animation studio, a burgeoning TV business, and two gems in the portfolio: AwesomenessTV and Oriental DreamWorks," Amy Yong, an analyst with Macquarie Capital, wrote Wednesday. AwesomenessTV produces short video clips for millennials on mobile phones, while Oriental DreamWorks is a Chinese American film production firm.

As an independent company, DreamWorks spends about $300 million on marketing, selling, and general administrative expenses. Yong said that about $100 million of those costs could be cut if Comcast closes the deal.

As for Comcast's first-quarter financial results released Wednesday, the Philadelphia company reported that revenue rose 5.3 percent to $18.8 billion as it added 53,000 TV subscribers and 438,000 high-speed Internet customers.

At this pace, based on prior years' numbers, Comcast could add one million high-speed Internet customers in 2016. The Philadelphia firm also has said it would like to grow its TV subscription business again after millions of subscriber losses to satellite TV and online streamers.

First-quarter profits rose 3.6 percent to $2.1 billion.

NBCUniversal's theme parks had revenue of $1 billion for the quarter, more than a 50 percent jump from the year-ago quarter. Universal Pictures, or filmed entertainment, reported a slight revenue drop to $1.4 billion.

NBCUniversal chief executive Steve Burke said on the conference call that five years ago the film studio had one movie franchise: Fast & Furious.

The studio has expanded that to eight franchises: Bourne, Despicable Me/Minions, Fifty Shades, Jurassic, Pitch Perfect, Purge, and Neighbors, in addition to Fast & Furious.

bfernandez@phillynews.com

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