DreamWorks Animation has a lot to prove when its next movie comes out this weekend.
"The Croods," starring Nicholas Cage and Emma Stone as members of a Caveman family, will be the first feature released since the studio's domestic box-office bomb, "The Rise of the Guardians" last November.
Centered around holiday characters, "Guardians" opened to the studio's weakest performance since 2006.
As an immediate result, the company's stock dropped nearly five percent the following Monday. In the long-run, though the film picked up some steam overseas, the film's poor performance domestically resulted in an $87 million write-down.
Then in February, the animation studio altered its release schedule heavily.
When the company's fourth quarter earnings were released, DreamWorks Animation reported a loss of $83 million and announced 350 layoffs.
That leaves all eyes on "The Croods" this weekend.
Stifel analyst Benjamin Mogil predicts the film could earn $150 million domestically and another $300 million overseas.
If the film performs well, then it will prove the "Guardians" debut was simply an anomaly.
However, if it fails to meet analyst's estimates, and teeters close to DreamWorks Animation's Thanksgiving debut, the studio could have a larger problem on its hands with only one other film — about a racing snail— out later this year.
Right now, there are two major problems DreamWorks Animation has to overcome: it's over-inflated film budgets and its heavy reliance on animated features to produce most of the company's revenue.
The studio's immense budgets puts an insane amount of pressure on DreamWorks Animation to make sure every one of its features are box-office gold.
"They spend as if every movie they produce is a new 'Shrek,' but it's unreasonable to spend as if you are making big, big tentpoles when you really aren't," Vasily Karasyov, an analyst for Susquehanna Financial Group, told The Wrap.
Here are the previous estimated budgets and openings for its last five films:
|Title||Opening Weekend||Estimated Budget|
|"Rise of the Guardians"||$23.8 million||$145 million|
|"Madagascar 3: Europe's Most Wanted"||$60.3 million||$145 million|
|"Puss in Boots"||$34 million||$130 million|
|"Mega Mind"||$46 million||$130 million|
|"Shrek Forever After"||$70.8 million||$165 million|
Even the studio knows its films are gambles.
From DreamWorks Animation's latest 10K SEC filing:
"Our success is primarily dependent on audience acceptance of our films, which is extremely difficult to predict and, therefore, inherently risky … Our business is currently substantially dependent upon the success of a limited number of film releases each year and the unexpected delay or commercial failure of any one of them could have a material adverse effect on our financial results and cash flows."
The company reported it relies on the performances of its features to earn most of its revenue:
"We currently derive a significant percentage of our revenue from a single source, the production of animated family entertainment, and our lack of a diversified business could adversely affect us."
Translation: any film DreamWorks Animation puts out can be a huge success story or a potential disaster for the company.
This weekend, "The Croods" has a lot in its favor to perform well at theaters.
It will be the only animated kids' film out
The Weinstein Company's kid flick "Escape From Planet Earth" will be heading out of the box-office top ten this week during its sixth week in theaters.
Disney's "Oz," meanwhile, will be in its third week at the box office. After grossing $41.3 million last weekend, if it continues to follow the trend of similar film "Alice in Wonderland," it should take in somewhere around the range of $25-$30 million this weekend.
Positive ticket sales
As of Wednesday, "The Croods" was Fandango's number one selling movie representing 31 percent of daily ticket sales.
The film is currently outpacing ticket sales 2009's "Cloudy with a Chance of Meatballs." That film went on to earn $30.3 million opening weekend.
The only thing that could prevent the DreamWorks' cavemen family from a good weekend is the poor box-office performance of the year so far.