Why Comcast May Covet DreamWorks For China, Millennial TV Content

By | April 27, 2016

Scalper1 News

Comcast ’s ( CMCSA ) interest in acquiring DreamWorks Animation ( DWA ) likely goes beyond movies and stretches to content for Web TV streaming services, especially programming targeted at millennials. In addition, both DreamWorks and Comcast, which owns NBCUniversal, have been expanding in China. Comcast has been racing against  Verizon Communications ( VZ ) to make investments in original content for millennials, aged 18 to 34. Millennials spend more time watching Netflix ( NFLX ), Alphabet ‘s ( GOOGL )  YouTube and social video on Facebook ( FB ) than they do viewing traditional TV, according to studies. DreamWorks stock surged 18% to 32, hitting a two-year high, in midday trading in the stock market today on reports that Comcast is in talks to acquire the movie studio. Comcast did not directly comment on the DreamWorks speculation during its Q1 earnings conference call early Wednesday. “DreamWorks has a robust TV business, owns (millennial-focused) AwesomenessTV and has access to China via DreamWorks Oriental,” said Stan Meyers, a Piper Jaffray analyst, in a research report. “Comcast management has discussed launching a number of (Internet video) services, so we believe teaming up with DreamWorks would provide access to exclusive content.” Verizon in early April acquired a 24.5% stake in DreamWorks’ AwesomenessTV for $159 million. Both Comcast and Verizon have been pursuing original content for millennials, a demographic coveted by advertisers. Benjamin Mogil, an analyst at Stifel, says Comcast is likely eyeing a few DreamWorks assets. “China operations, which Universal could likely expand, is likely one area of focus,” wrote Mogil in a report. “On the Awesomeness TV front, we see the ability to carve out a window outside of Verizon’s mobile window for such content on a cable video-on-demand service, which would be attractive for Comcast.” DreamWorks’ current films include “Kung Fu Panda 3,” while its earlier box office hits include “Shrek” and “How to Train Your Dragon.” DreamWorks has also been developing TV shows for video streaming services. Customers include Netflix and Amazon.com ( AMZN ). NBCU owns cable channels including USA Network, SyFy and Bravo. Amid falling audience ratings, the cable channels also need better original content to compete with Web streaming services, analysts say. Aside from Universal Films, Comcast owns Focus Features and Illumination Entertainment, the latter of which developed the “Minions” movies. NBCU’s filmed entertainment revenue jumped 46% to $7.3 billion in 2015, thanks to the box office success of “Minions,” “Jurassic World,” “Furious 7” and “Fifty Shades of Grey.” NBCU’s film and entertainment revenue, however, fell 4.3% in Q1, to $1.38 billion. Scalper1 News

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