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SAN FERNANDOVALLEY BUSINESS JOURNALVolume 19, Number 20 October 6 - 19, 2014 • $4.00

sfvbj.com

T H E C O M M U N I T Y O F B U S I N E S S TM

By MARK R. MADLER Staff Reporter

The proposed sale ofDreamWorks AnimationSGK Inc. to a Japanese tele-com company probablywon’t mandate relocation orreorganization of the moviestudio, experts say.

But it has alreadypumped life into the stock

and could inspire others to make a bid for theGlendale company.

SoftBank Corp., in Tokyo, reportedlymade a $3.4 billion offer for DreamWorks,the studio behind the “Shrek,” “Kung Fu

By STEPHANIE FORSHEE Staff Reporter

Julia Stewart has been getting a lot of press thesedays as chief executive of DineEquity Inc., the Glendalecompany that owns IHOP and Applebee’s. Mostly it’sbeen about the over-the-top IHOP menu item, theWaffullicious Waffle, which comes stuffed with bacon orcream cheese – and enough calories to raise eyebrows.That’s just fine with the 59-year-old CEO, who’s on amission to raise the profile of her restaurants, betterknown for comfort food than cutting-edge cuisine.

Stewart certainly knows the territory. She was a teenagewaitress, before heading to college and a series of man-agement jobs that led her to the top post at IHOP in2002. Then in 2007, she pulled off an audacious acquisi-tion, buying the faltering Applebee’s for $2.1 billion indebt, creating DineEquity. The recession threatened herplans to pay back that debt by franchising Applebee’soutlets. But the deal worked out and these days franchis-ing is hot on Wall Street. The Business Journal sat downwith Stewart to talk about her path to the C-Suite, whyshe’s irritated by questions about balancing work andfamily time, and how she handles her crazy travel sched-ule as DineEquity expands globally.

Simi ResortMay Fly OffREAL ESTATE: HummingbirdRanch site on the market.

PROFILE: Julia Stewart raises profile ofIHOP with wacky menu items.

By ELLIOT GOLAN Staff Reporter

Just a few months after getting entitlementsto build a resort at the Hummingbird NestRanch, the owner of the unusual Simi Valleyproperty has decided to put it up for sale.

The 123-acre site is on the market for $49.5million, with the brokers at the Beverly Hillsoffice of Sotheby’s International Realty han-dling the upscale listing.

In late April, Simi Valley granted theranch’s wealthy owner, David Saperstein ofHouston, permission to build a hotel, wellnesscenter and spa, conference center and otheramenities.

Play Date forDreamWorks?ENTERTAINMENT: SoftBank’s$3.4 billion offer pumps stock.

LOS ANGELES • GLENDALE • SANTA CLARITA • BURBANK • CONEJO VALLEY • SIMI VALLEY • SAN FERNANDO • CALABASAS • AGOURA HILLS • ANTELOPE VALLEY

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OTO

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By MARK R. MADLER Staff Reporter

The Optimus Prime collectible found onTarget shelves this month is as deceptive as aTransformer can be.

Sure, the arms and legs pull out and the alienrobot’s armor is finely detailed, but this is no meretoy. For on the back is a round case containing aDVD or Blu-ray copy of “Transformers: Age ofExtinction,” the fourth entry in the ParamountPictures Corp. sci-fi film franchise.

The “Age of Extinction” packaging is exclusiveto Target, while versions sold at Wal-mart andAmazon.com come with collectible figurines

specifically made for those retailers. Prices rangefrom $29.99 to $52.99.

Even in the age of digital downloads andstreaming of feature films and television series, pro-duction companies distribute content in a physicalformat – and they find there are still profits inDVDs, especially if they come with somethingextra that a download cannot provide.

“By offering a special collectible artifact orcharacter from a film in physical form, it makes itmore desirable to buy a physical product,” said BillHoward, chief executive of Snap Creative, the

Please see ENTERTAINMENT page 34Please see RETAIL page 34

Please see PROFILE page 8

Katzenberg

Camarillo firm’s DVD packaging boosts dwindling sales.

Please see REAL ESTATE page 33

DineEquity CEO Gobbles Up Attention

Inventive: Bill Howard, CEO ofSnap Creative, with the elaboratecases his company makes tohelp sell DVDs in download era.

CASE STUDY

SpecialReport

Annual Banking &Finance Reporthighlights the struggles of localbanks. PAGE 21

Up Front

Want someDonkey Kong withyour wings? Thesetwo entrepreneursmay know a place.PAGE 3

Staffing firms andfamily-ownedbusinesses.PAGE 10

Lists

Top Chef: Stewart at Glendale office.PHOTO BY DAVID SPRAGUE

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34 SAN FERNANDO VALLEY BUSINESS JOURNAL OCTOBER 6, 2014

Panda,” and “Madagascar” franchises, on Sept.27. Shares jumped up the next trading day, andthough they gave back some gains, they closedOct. 1 at $26.75, about 20 percent higher thanbefore the offer.

And even as talks between the two compa-nies have since cooled, the SoftBank offermakes it a company in play. DreamWorks’small size, low market capitalization and stableof movies present an attractive package. In addi-tion, the company has diversification plans thatinclude television series, online content, and athemed entertainment center in China.

“They also own (YouTube network)AwesomenessTV, which has a great lock on

web properties targeting pre-teens and teens,”said Eric Wold, an analyst in the SanFrancisco office of B. Riley & Co., a LosAngeles investment bank, which issued a“neutral” rating for the company in August.

DreamWorks Animation was founded in1994 as the animation portion of theDreamWorks studio started by former Disneyexecutive Jeffrey Katzenberg, film directorSteven Spielberg and record producer DavidGeffen. The company was spun off in 2004 andhas a workforce of more than 2,600 employees inGlendale, Redwood City and Shanghai, China.Katzenberg remains as chief executive.

The big question for the Valley: how muchof the operations would stay in Glendale,where the studio has a 6-acre campus, about460,000 square feet of offices and the pluralityof its employees?

Marty Shindler, entertainment technologyconsultant at Shindler Perspective in Encino,believes the dislocation would be minimal, and

he pointed to the experience of PixarAnimation Studios. Its majority owner, the lateSteve Jobs, insisted that when Walt DisneyCo. bought the studio in 2006 its culture andlocation in Emeryville stay intact.

“There is a strong business argument tokeep operations away from the prying eyes ofcorporate,” Shindler said.

Steve Hulett, the business representativefor the Animation Guild in Burbank, agreeswith that take. He said that if a sale does gothrough he did not expect any impact to themembership in Glendale, where the union rep-resents more than 500 employees.

Asian connectionSoftBank was established in 1981 and is a

majority owner in U.S. telecom companySprint Nextel Corp., and has e-commerce,technology services, media and marketingbusinesses. Earlier this year, the company con-sidered and dropped a bid to buy T-Mobile USfor $32 billion.

By comparison, DreamWorks’ current mar-ket cap is about $2.3 billion after the recentstock run- up.

If the SoftBank transaction forDreamworks is finalized it would represent thefirst sale of a Hollywood studio to an Asiancompany in 25 years.

The last was in 1989 when Sony Corp.acquired Columbia Pictures EntertainmentInc., in Culver City, in a deal valued at $4.9 bil-lion with financing provided by five Japanesebanks. The name was changed to SonyPictures Entertainment two years later. SonyEntertainment produces both feature films andtelevision programming.

Top studio deals since 2006 include Disney’s$4.2 billion acquisition of Marvel Entertainment,in New York and its $4 billion acquisition ofLucasFilm Ltd., in San Francisco, by Disney $4billion. Then there was the mammoth $30 billionacquisition of NBC Universal, which includesUniversal Pictures, by Comcast Corp., inPhiladelphia, from General Electric Co. thatwas concluded last year.

Common to all these deals was that the stu-dio facilities stayed in place and didn’t requiremass relocation of employees.

LucasFilm did have a change in executive

leadership when noted producer KathleenKennedy was named chief executive themonth before its acquisition, a move likelymeeting the approval of Disney, Shindler said.

“As far as I can tell there have not beenwholesale changes in management atLucasFilm,” he added.

But Disney did make staffing cuts by clos-ing the LucasArts video game division in2013 and letting got more than 100 employ-ees. That, too, could be what’s in store forDreamWorks if SoftBank or another newowner eliminates administrative, legal oraccounting jobs at the headquarters.

“If they are not separate they might notneed that full set of operations,” Shindler said.

Competing candidatesDreamWorks isn’t the only entertainment

company on SoftBank’s radar. The company isreportedly looking to make an investment inLegendary Pictures, the Burbank productionhouse behind “The Dark Knight” and“Hangover” franchises, according to mediareports.

This fits with SoftBank’s growth strategy,which was highlighted by company spending$21.6 billon to acquire Sprint last year. Thecompany is described in media reports as anoutlier in the traditional risk-averse mentalityof corporate Japan. Its chief executive,

Masayoshi Son, also is seen as a maverickwith more in common with U.S. executivesthan Japanese. Forbes magazine named Son asJapan’s richest man with a net worth of morethan $20 billion.

The deep pockets of SoftBank would provea benefit to DreamWorks, considering the com-pany’s weak financial performance this year.This summer the studio had a hit with “How toTrain Your Dragon 2,” but previously had astring of box office bombs that prompted write-downs, layoffs and a decline in the stock price,which topped $35 a share last December.

The studio has taken a total of $158 millionin write-downs on the 2014 release “Mr.Peabody and Sherman,” the 2013 release“Turbo” and 2012’s “Rise of the Guardians.”

The summer release “How to Train YourDragon 2” will likely recoup its expenses whichwill lead to investor optimism for the second half,according to the B. Riley report from Wold.

“However, given “Dragon 2” was alwaysexpected to perform relatively well we are look-ing for indications of both continued box officestrength with “The Penguins of Madagascar”this Thanksgiving as well as improving film-level profitability trends,” Wold wrote in theAugust report.

“Dragon 2” had a global box office of $613million, with the international performancedoing better than domestically.

Entertainment: DreamWorks Campus Is JewelContinued from page 1

Shaded: Main Glendale campus employs more than 1,000 workers.

Camarillo company that has designed thepackaging for the “Transformers” home enter-tainment releases since the first film in 2007.

These extras designed by Snap Creativeare the latest iteration of what DVDs need tostay viable, the equivalent of behind-the-scenes footage, deleted scenes, outtakes,interviews gag reels and other bonus content.

Snap Creative is not alone working in thisspace. There is also AG Properties, with alocal office in Sherman Oaks, as well as thehome entertainment divisions of the majorstudios. Still, releasing content in the DVDformat is swimming against the technologi-cal tide as more people turn to digital distri-bution to access movies and television seriesin the home.

This year, U.S. revenue for physical homeentertainment releases is expected to bearound $12.8 billion while digital formats willbring in about $6 billion, according to PwC,the London-based accounting and consultingservices firm.

The physical format total is down from$13.8 billion last year and it’s going to getworse. Digital formats are expected to over-take DVDs by 2018 when the physical formatwill total $9.9 billion compared to $14.7 bil-lion for digital distribution.

Still, Jonathan Dern, chief executive of

DVD distributor SD Entertainment inWoodland Hills, said that old viewing habitsdo not die fast and the DVD format willremain around as long as mega-retailers likeTarget, Wal-mart and Best Buy stay open.

“The decline is undeniable but neverthe-less there will still be a business there for awhile,” Dern said.

Big-budget extrasHoward founded Snap Creative in 1996

when videotape was primary in home enter-tainment. One of its first collectibles was acoin for “Space Jam,” the live action/animat-ed sports comedy with basketball legendMichael Jordan and Looney Tunes charac-ters that came out that same year.

The company has relationships with allthe major studios – Walt Disney Co.,Warner Bros. Entertainment,DreamWorks Animation SKG Inc., andUniversal Pictures. The company has 10employees in Camarillo, eight in HongKong and two on mainland China where themanufacturing is subcontracted out to sever-al factories.

Howard said it is often the titles that deter-mine the extent to which Snap Creative willcreate striking packaging. “It is not right forevery title,” he said. “You are not going to putsomething with a romantic comedy.”

Retail: Company Has Deals With Major StudiosContinued from page 1

Please see DVD page 35 Fighting Words: Howard discusses Ninja Turtle case with COO Anya Zemliacova.PHOTO BY DAVID SPRAGUE

DreamWorks AnimationSKG Inc.GlendaleCEO: Jeffrey KatzenbergEmployees: 2,200Market Cap: $2.3 billionP/E: N/AEPS: -$0.37

Source: Yahoo Finance

(Nasdaq: DWA)

FRI. CLOSE, PAST 5 WKS

8/29 9/5 9/12 9/19 9/26

2726252423222120

Oct. 1: $26.75

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