Less than an hour before Comcast announced its NBCUniversal division is buying DreamWorks for $3.8 billion on Thursday, BTIG Research analyst Richard Greenfield had penned an open letter to Comcast CEO Brian Roberts explaining why he thinks the deal would be a “mistake.”
Greenfield thinks Roberts has “mouse envy” and wants to use DreamWorks to transform Comcast into Disney.
But that won’t happen, according Greenfield, who outlined seven reasons why:
1. DreamWorks is “overvalued”
Greenfield says that while DreamWorks’ stock is trading at $32, “it has never been able to consistently earn $1.” He also questions the quality of DreamWorks’ television content.
2. DreamWorks’ track record is “underwhelming”
Greenfield thinks the studio has released few “iconic” movies beyond “Shrek,” “Madagascar, “Kung Fu Panda,” and “How To Train Your Dragon” in the past 18 years. Some of its sequels have also disappointed in the box office, with Greenfield referencing “Kung Fu Panda 3” as an example.
3. “Gimmicks vs. quality”
Greenfield thinks DreamWorks spent too much time focusing on “gimmicks” such as spending heavily on talent, opting for 3D to boost ticket prices, or making its characters travel the world to help its titles in certain markets.
4. Comcast already has an animation studio
The company launched Illumination Entertainment in 2007, the study behind “Despicable Me.”
5. Comcast will probably now produce too many animated movies each year
Running both DreamWorks and Illumination, or consolidating them together, will result in producing too many animated movies each year — and Greenfield thinks this will cause it to lose focus and harm its best projects.
6. DreamWorks’ IP isn’t impressive
“Nobody is walking around in Turbo costumes the way they walk around in Minions costumes and nobody is singing Croods songs the way they sing Frozen songs,” Greenfield writes. He also notes that DreamWorks missed its own expectations for merchandising and licensing revenue last year.
7. DreamWorks has an expensive stake in AwesomenessTV
Verizon acquired a 24.5% stake in youth-focused digital media company AwesomenessTV for $159 million earlier this month. DreamWorks is the majority owner in AweseomnessTV (51%) which now, as a result of the Verizon investment, is valued at around $650 million. Greenfield thinks this valuation is “awfully rich” and that Verizon is “meaningfully overpaying” AwesomenessTV in order to get content on its Go90 video app.