Event Brief of Q3 2009 DreamWorks Animation SKG, Inc.

Earnings
Conference Call - Final

OVERVIEW
DWA reported 3Q09 total revenue of $135.4m and net income of $19.6m or $0.23 per share on fully
diluted basis.
FINANCIAL DATA
A. Key Data From Call 1. 3Q09 total revenue = $135.4m. 2. 3Q09 net income = $19.6m. 3. 3Q09 fully
diluted EPS = $0.23. 4. 3Q09-end cash = approx. $347.2m. 5.During 3Q09, no shares were
repurchased.
PRESENTATION SUMMARY
S1. 3Q09 Business Review (J.K.) 1. Highlights: 1. Monsters vs. Aliens got off to a strong start in its
domestic home video release. 2. Continues to see good performance from home video
for: 1. Madagascar 2. 2. Kung Fu Panda. 3. Catalogue. 3. Earnings, down vs. 3Q08. 4. YTD: 1. Revenues,
up almost 18% YoverY. 2.EPS grew 24%. 5. Monsters vs. Aliens: 1. Released in domestic home video
market on 09/29/09. 2. Sold an estimated 4.6m net units. 3. Seeing number of positive
indications: 1. Continues to observe strength in wholesale pricing. 2. Seeing favorable mix of premium
product including [two-packs] and Blu-Ray, which constitutes substantial portion of unit sales to
date. 4. Still too early to know how Monsters vs. Aliens will ultimately compare to last few
releases. 1. CG animation continues to perform well and remains leader category in home
video. 5. Expects title to sell into holiday season and will know about its overall performance after that
period. 6.Shrek The Musical: 1. Announced last week that show's final Broadway performance will be
on 01/03/10. 2. Hopeful, will have a longer run in New York. 1. Believes Broadway served as an
important launch for the show. 3. Now looks forward to other opportunities Shrek The Musical has to
create value to DWA, beginning with a touring co. next summer. 2. 4Q09 Outlook: 1. Excited to be
airing two new TV specials: 1. Monsters vs. Aliens: Mutant Pumpkins from Outer Space. 1. Premieres on
NBC on 10/28/09 night followed by Merry Madagascar on 11/17/09. 2. Will release Merry Madagascar
into home video market supported by a merchandizing program.2. Above two new specials join Co.'s
holiday hit, Shrek The Halls, which will make its annual appearance on ABC on 11/30/09. 1. With three
DWA holiday specials in prime time over next two months, has made progress on this line of business
in 2009. 3. TV Series: 1. The Penguins of Madagascar is currently Nickelodeon's Number 2 animated
series behind SpongeBob SquarePants and audience reaction remained strong. 1. In 1Q10, will launch
a merchandising program for the series, including home video release. 2. Remains hard at work on
other two TV series, based on Kung Fu Panda and Monsters vs. Aliens. 2. Anticipating launch of Kung Fu
Panda World, which will be in beta in 4Q09 and open for business in 1Q10. 4. Additional
Metrics: 1. Online virtual world space continues to show growth potential. 2.Continues to grow and
diversify. 1. So far in 2009, has made significant progress towards this goal. 1. 2010 is shaping up to be
biggest in history of DWA with three new movies scheduled to be released next year. 3. Along with
three fantastic films, anticipates number of new business initiatives will contribute revenue and profits
in 2010. 5. Summary: 1. Recently finalized feature film slate for 2011 and 2012. 1. Puss In Boots will
now be released on 11/04/11. 1. A follow-up to Shrek Forever After, Puss is an extension of franchise
with strong story and highly anticipated cast. 2. Together with Kung Fu Panda: The Kaboom of Doom on
June 2, believes this makes lineup for 2011 extremely strong. 3. Solidified 2012 slate. 1. The Croods
will be released on March 30 and The Guardians on Nov. 2. 2. Above two exciting original concepts will
join Madagascar 3, which will be released on May 25.
S2. 3Q09 Financial Review (L.C.) 1. Highlights: 1. Reported total revenue of $135.4m resulting in net
income of $19.6m or $0.23 per share on fully diluted basis. 2.2009 film, Monsters vs. Aliens

contributed approx. $33.4m of revenue to qtr., primarily from its domestic home video release. 1. Title
reached an estimated 4.6m net units sold. 2. This release had an earlier Street date than is typical with
Co.'s titles. 3. Expects to sell additional units during holidays. 3. Results reflect upfront marketing costs
associated with home video release, including costs to produce B.O.B.'s Big Break, part of additional
content in premium pack. 1. Both aforementioned items are an offset to revenue reported for Monsters
vs. Aliens in qtr. 4. 2008 fall film, Madagascar: Escape 2 Africa contributed $35.4m of revenue to
qtr. 1. Majority of film's revenues came from domestic pay TV and international home video with an
estimated 11.3m home video entertainment net units sold worldwide through 3Q09-end. 5. Kung Fu
Panda contributed $21.9m of revenue, generating majority of its international pay TV [revenue in
qtr.]. 1. Title continued to perform well in home video, reaching approx. 16m net units sold worldwide
through 3Q09-end. 6. Remaining films, including 2007 releases contributed approx. $44.7m of
revenues in qtr. including $10m from Shrek the Musical. 7. Musical: 1. Remained in an operating loss
and will remain so for full-year. 2. Will conclude its Broadway run on 01/03/10. 1. This decision resulted
in acceleration of Co.'s amortization costs associated with Broadway production equating to
approx. $0.03 per share. 3. In total, Shrek the Musical resulted in $0.05 per share reduction to
earnings. 4. Expects to incur: 1. Loss in 4Q09 comparable to impact seen in prior quarters this
year. 2.Additional costs associated with closing the show in 1Q10, which Co. estimates will not be
material. 5. Plans to monetize Shrek the Musical in a number of ways going forward. 8. Received a
credit from distributor relating to overcharge on [prior year's] distribution costs, resulting in $3m
revenue benefit. 1. Credit primarily impacted revenue for 2006-2008 releases. 1. Resulted in
approx. $0.02 of EPS. 2. Additional Metrics: 1. Costs of revenues, $89.1m. 1. Resulted in gross profit of
$46.4m or 34% margin. 2. SG&A expenses, together with product development expenses totaled
$24.8m. 1. Down 17% YoverY. 2. Stock compensation expense included in SG&A number, $7.4m
vs. $10m in 3Q08. 3. Included in effective tax rate is an increase in federal R&D tax credit, which
resulted in benefit of approx. $0.02 per share.1. Permanent deferral. 4. [Vulcan] tax agreement
resulted in benefit of approx. $0.01 per share. 5. 3Q09-end cash, approx. $347.2m. 6. No shares were
repurchased, leaving current authorization at $150m. 7. Has chosen to pay off long-term debt
obligation of $73m, which was originally established to finance campus. 8. Will continue to assess
financing options as Co. completes Glendale campus expansion. 3. 2009 Guidance: 1. Reported at
Analyst Day last Dec. that Co. hopes to deliver $40-60m of revenue from TV specials and series in
2009. 2. As it was determined that launch of merchandise program, The Penguins of Madagascar would
be better served during 1Q10, it is likely that Co. will finish the year at low end of this revenue
range. 1. Believes this timing will be beneficial to TV series, home video and retail program
launch. 3. 4Q09 earnings will be driven primarily by: 1. Revenue from 2009 TV specials. 2. Continued
home video performance of Monsters vs. Aliens. 4.Given performance of Monsters, expects to amortize
costs at higher rate for this film vs. 2008 releases. 5. Despite having only one film released in 2009
and including aforementioned expenses associated with closing of Shrek The Musical on Broadway,
expects to deliver full-year EPS close to $1.57 that Co. reported in 2008. 6. Will be hosting 2009
Analyst and Investor Day at Glendale campus on Dec. 1 and 2. 1. Slight change from the expected
Dec. 2 and 3.
QUESTION AND ANSWER SUMMARY
OPERATOR:(Operator Instructions). Benjamin Swinburne, Morgan Stanley.
BENJAMIN SWINBURNE, ANALYST, MORGAN STANLEY: A couple of questions. Maybe we could talk about
the pricing. Jeffrey, you had commented you are seeing strong pricing at wholesale on DVD. Maybe you
could give us a little more color on Blu-ray, some of the premium packs.And specifically on MvA, if you
could help us think about how many weeks of inventory you shipped in in the third quarter, given the
timing. You've got the holidays coming up. I don't know if that made you ship more than you may have
typically on sell-in, some color there would be helpful, pricing and weeks of inventory. And then I have
a follow-up.

JEFFREY KATZENBERG, CEO AND DIRECTOR, DREAMWORKS ANIMATION SKG, INC.: So on the first part,
and again, on all MvA DVD-related questions, they are all framed in, and all answers will be framed in,
we're partway through the process here. This is unusual in that we have a title that has been released
at the very end of a quarter. And so you are getting only a snapshot of where we are. And we have a
lot of activity over these next weeks and believe it is prudent for everyone involved, including us, that
we not get ahead of ourselves on this. So we're going to tend to kind of hold to give any summary of
this until we actually see the real results of it.
Having said that, our wholesale pricing has remained very strong and has been consistent, and this is
something that we have shared with you over the last three releases.So now we can add number four
to that. There has been consistency for us on pricing.
On the Blu-ray and premium pack, right now today we've been running in the 40%-plus range, which is
very strong. And the slight color I will give you on this, which is interesting for us, it's the first time we
actually saw some meaningful movement in our product in Blu-ray. That has not been the case with us
in the past. And there has been a nice uptick on Blu-ray product for MvA.
BENJAMIN SWINBURNE: Okay, that's helpful. And then maybe we could just follow up on 3D and digital
cinema.Since the last call, there's been some activity on the financing front. And I know, given your
release slate for next year, 3D is pretty important for you guys. How are you thinking about screen
counts as we look out for the three films next year, given where we stand today on DCIP and some of
the, maybe as a corollary, pricing expectations on your front for ticket pricing on 3D releases as we
move into next year?
JEFFREY KATZENBERG: There's been a lot of activity in the last 60 or 90 days, all of it very, very
positive. The financing does seem to be moving along now well on the DCIP front. There are several
other sources of revenue that have come in both domestically and, just as importantly, internationally.
Our screen count as of today is right in the neighborhood of about 3300 to 3500 screens domestically
and about 3300 internationally. We expect that to take another pretty good jump between now and
Christmastime and then for there to be a meaningful uptick in that through the first half of next year.
So we remain optimistic about the rollout. The result for virtually every film that has been released in
3D has been outstanding. I think the reaction, first and foremost, and most importantly from the
customer standpoint, has been a very, very high degree of interest and satisfaction and, most
importantly, value for the incremental experience.
From an exhibition standpoint, I think everybody is on board now and very committed. And I think quite
importantly, we got indications in the last 24 hours that Warner Brothers has now moved on the virtual
print fee, and they have now gotten alignment on this. They were the last one, and obviously being as
big as they are, having 100% of the majors on board is very, very, very positive.
So, all good. Pricing, I would hope as the economy gets stronger, pricing will move up to the place that
we have indicated we think is kind of target that where we think the right value and right pricing is,
which is in the $5 premium experience.
BENJAMIN SWINBURNE: And Lew, just so I understood I heard you right, on guidance, you said you
thought you'd come in close to last year's $1.57. Is that correct?
LEW COLEMAN, PRESIDENT AND CFO, DREAMWORKS ANIMATION SKG, INC.: That's what I said.
BENJAMIN SWINBURNE: Okay, thanks a lot.
OPERATOR:Jessica Reif Cohen, Banc of America.
JESSICA REIF COHEN, ANALYST, BAS-ML: The press release, and actually on the call as well, you guys
have alluded to other ways to monetize Shrek the Musical besides the touring show. Can you
elaborate?
JEFFREY KATZENBERG: Sure, Jessica. I would say that probably -- well, I mean, there are several of
them. It's not just the touring in Chicago, but there are multiple touring opportunities that have come
to us from around the world.Some of them are license agreements, some of them are partnership
agreements, and some of them are just opportunities for us.And that is the first.

And then the second is that we filmed the show about 10 days or so ago in anticipation that at some
point there will be a home video release, which we think will be pretty exciting and will be a very, very
strong product for us, particularly in the larger Shrek franchise. We think there will be a lot of very
interesting ways for us to uniquely package and bring the Shrek musical to home video. So we have
actually filmed this now, as I say, about 10 days or so ago, and we are pretty excited about how that
went.
JESSICA REIF COHEN: By the time the show closes in January, how much of the upfront costs will have
been amortized?
LEW COLEMAN: About half, Jessica.
JESSICA REIF COHEN: And then, Jeffrey, I think you went on an international tour to find out why
Monsters vs. Aliens underperformed in some markets. Can you give us any color on what you found?
JEFFREY KATZENBERG: I went to 19 countries in 18 days.
JESSICA REIF COHEN: Well, you are still alive.
JEFFREY KATZENBERG: It was pretty exciting, actually. I have to say, I've done these tours now usually
a couple of times a year. This was the most expensive one that we've ever done. We took about an
hour of How to Train Your Dragon, about 40 minutes of Shrek and about 20 minutes of [Uvamine],
meeting with our distribution and marketing and strategic partners in 42 territories, actually, as I said,
visited 19 countries. And on the topic was -- so from that standpoint, it was just a very, very, very
productive trip, as I said, I think probably the best we've ever done.
MvA was on the agenda of things, to try and get feedback on it. I think we've come to a place that it is
not something we're going to pursue as a sequel. Although it has played well in certain territories,
there are others that it just didn't really connect in the same way.
I would like to tell you that there is a perfectly rational and clean and very clear answer as to why
not. There isn't. But I think there was enough consensus from our distribution and marketing folks in
certain parts of the world that we would be pushing a boulder up the hill. And given the slate of
product that we have and the movies coming and our development, it just doesn't seem to be the best
way to do it.
Having said that, we will be continuing to develop some franchise opportunities for the movie,
particularly the specials and the TV series that we are doing with Nickelodeon. So we think the
franchise will go on; we just don't see a sequel in it right now.
JESSICA REIF COHEN: And has the domestic home video performance impacted your international
home video expectations? How have they changed?
JEFFREY KATZENBERG: No, in fact, our international performance has been, actually, for us been above
plan in a number of ways. The most striking thing, which is -- this is the first time that we have, on a
fairly extensive basis, offered premium two-packs internationally, and it has been a big, big success for
us. So the international performance has been solid, and the two-pack conversion has been
surprisingly good for us, as well as retail. Everybody is kind of nicely surprised by it.
OPERATOR:(Operator Instructions). Ingrid Chung, Goldman Sachs.
INGRID CHUNG, ANALYST, GOLDMAN SACHS: I was wondering if you could talk about the changes to
your schedule in 2011 and 2012. Why did you make these changes? And just a very quick question,
hopefully -- on your decision to pay down debt instead of buying back stock, I was wondering why you
make that decision, and what would get you to buy back the stock going forward?
JEFFREY KATZENBERG: I'll answer the first and let Lew answer the second, Ingrid. On our schedule, we
actually discussed the timing of Puss in Boots and being able to have that fall a little bit closer in
timing to the sort of heat and cycle that we are in on the Shrek franchise, was just a much more
opportunity time for us.And it was actually doing great and was in a position where we could flip that
and make the move.
We also love the idea of just giving more time for The Guardians as an original film. Just giving it a bit
more time to percolate seemed awful advantageous. The reason it was flipped a year as opposed to

just interchanging them is it is a holiday title. So we think just being opportunistic about where these
films would actually play best. And Lew, on the -LEW COLEMAN: On paying down the debt, we paid down the debt because it matured. So it wasn't
entirely optional in that respect. We did elect not to refinance it now, even though the market
conditions are getting better, primarily because we are still completing the campus expansion and we
thought it would be better to bundle up the financing with a completed campus as opposed to a partly
completed campus, if that's what we ultimately decided to do. Our view on stock repurchases has not
fundamentally changed, although it is probably somewhat influenced by price.
INGRID CHUNG: Got you. Okay, thank you.
OPERATOR:James Marsh, Piper Jaffray.
JAMES MARSH, ANALYST, PIPER JAFFRAY: I was wondering if you guys could comment on some of the
film-based 3D formats that are being discussed out there, if that is something you're interested in
pursuing, and obviously not the digital 3D, but the Technicolors and the Oculus formats?
JEFFREY KATZENBERG: James, here is the way we looked at it, which is that there are places in the
world in which digital is a long way away.It is a very, very capital-intensive project to roll digital out. We
think there are a number of places, particularly internationally, where this could be an interim
solution. It's not at the same standard and quality of digital. So it's not high on the list of things that we
are super-excited about, but we do think that it is a quality experience, and we do think that it is a
bridge that can help get some of these growing and emerging markets and smaller markets into 3D,
which in itself could help finance digital. So we do see opportunity with it.
JAMES MARSH: Okay, and then just one quick follow-up. I was hoping you guys could comment a little
bit on the kiosk rental business. And obviously, that's been growing rapidly.You guys are less exposed
to the rental side of the business. But I just wanted to know what your current thoughts were on
redbox and some of the other kiosks.
JEFFREY KATZENBERG: Again, we probably have to step away from this, because we are not impacted
in the same way as -- or seem to be in the same way as everyone else. Redbox has actually served us,
as best we can tell, in a very positive way in that it has become a sampling.
Remember, 50% of the people that buy our DVDs actually have not seen the movie in the movie
theater. And so the opportunity to sample our products on a rental basis, particularly with redbox,
we've seen a very good conversion from rental to purchase. And so as I say, we are not actually seeing
the same impact and effect, or the change in the mix of some sell-through to rental that the industry
as a whole is doing.
I think you just -- again, we just are going to have to say over and over, CG is a unique category and
it's not impacted and affected in the same way. It's not to say it's not impacted and that there are not
changes that are occurring and adjustments that we're making in it, but it clearly is not on the same
trends as the industry as a whole.
JAMES MARSH: Understood.Thanks very much, Jeffrey.
OPERATOR:Rich Greenfield, Pali Capital.
RICH GREENFIELD, ANALYST, PALI CAPITAL: Kind of a follow-up on Jessica's question in terms of the
learnings from overseas. When you look at how you marketed Monsters vs. Aliens and you look at two
kind of original ideas now coming out in 2010, will you market any differently? Will you spend any
differently? Is there anything you can kind of utilize from what happened overseas specifically that
might benefit you and/or your development processes? Is there anything in terms of films for the
future that you might do differently in terms of tailoring them to kind of avoid what you saw happen
overseas from a box office standpoint?
And then two, you mentioned, obviously, that a big chunk of MvA occurs in the fourth quarter. Is there
any way you can give us any color on what you have seen since quarter end from a unit
standpoint? Thanks.
JEFFREY KATZENBERG: I'll start with the last first, Rich, and just say, no, not yet.We really, as you know,
are about to get into the next wave of the selling season. We have anticipated this for many months. It

was -- it has been part and parcel of our strategy and our plan for the release of MvA. So we see some
pretty good opportunities coming our way as we get into the high selling season, and we're going to do
our best to capitalize on them for the title. But I can't be more specific than that.
On the MvA side of it, again, I think these things are -- it is a little bit more art than science to it. I think
to try and do a -- certainly, there are things that you learn every time from both your hits and your
misses, and there are adjustments that you are constantly making.
I don't think that there is a specific MvA-related distribution/marketing feedback that came from this
tour that has actually changed or impacted how we are releasing or marketing our 2010 titles. We
think they are very, very strong titles, very different from one another, and also very different from
MvA. So for both Dragons and for Uvamine, we feel pretty strong.
RICH GREENFIELD: Can you just talk about your marketing plan, just to follow up that first question?Is
there any way you can talk about your marketing plan surrounding the Halloween special and how
you're going to remarket the MvA title?
JEFFREY KATZENBERG: Sure. But, Rich, just one other thing on this, which is I just want to be careful
here that we don't characterize MvA in the wrong way. It certainly is not a hit on the same level of Kung
Fu Panda of last year, but at $380 million, it is one of the top 10 performing films this year, and I think
number four or five here in the US.
So it is a super, super-strong title, but we've been fortunate to play in a unique stratosphere of these
things and have the luxury of being able to take something, even as big a hit as MvA is, and say, we
can do bigger and better and use that production slot for something that we think has got even greater
potential to it.
So, anyway, moving on to the second, I'm sorry, what was your next -RICH GREENFIELD: Just the marketing program that you have specifically tied to the Halloween special
and how you're going to reintroduce MvA.
JEFFREY KATZENBERG: Well, it is out there. I mean, there's been some high visibility, People Magazine,
US Magazine, huge promotion effort made on the part of NBC.They've actually overdelivered their
commitment to us in terms of their on-air work that they are committed to doing on it. So they are
very, very excited about the show. It's very good. It really turned out fantastically.It's actually gotten
very good reviews. So we've got our fingers crossed.
OPERATOR:Michael Morris, UBS.
MICHAEL MORRIS, ANALYST, UBS: You mentioned two merchandising programs, one for Merry
Madagascar, one for Penguins, starting beginning of next year. Can you give us some more details on
that in terms of -- I'm particularly interested in the magnitude of your expectations for the size, but
also what types of products you're looking at, who your partners are, things like that, to help us gauge
that.
And then also, I believe you guys announced attraction at a Singapore theme park in spring of
2010. Again, if you can just give us some color on the timing and what your expectations are for the
economics there, that would be great. Thanks.
JEFFREY KATZENBERG: So on the merchandising programs, Michael, I think that we've got a big
program in place on Merry Madagascar, hard for me to quantify it for you other than we have -- we
think we've got something special with it and think we've set it up in a great way to really capitalize in
the fourth quarter. And I think, stand by; you will be hearing and seeing plenty about it. We hope to
make a pretty good amount of noise with it.
And then for the Penguins program, we will begin in the first quarter of next year. And this is something
that we're in for the long haul. We're trying to build a multi-multiyear program, and we will get
launched in the first quarter. Again, have some very strong programs in place. It's going to be
supported by a McDonald's Happy Meal on the marketing side of it, one of their larger programs that
they do for a TV property.
So I think you will see a fair amount of activity on both of these and they will be pretty high profile.

In terms of Singapore, we have DreamWorks land within the park. I visited it while I was over there. It
looks sensational. We're very, very excited about it. It's very strong representation for us. There are
four or five attractions within the park that are DreamWorks-specific around Shrek and Madagascar.
They are anticipating a soft opening in the first quarter and then a grand opening I think either the end
of the second quarter or beginning of the third quarter. I don't think the date is firm. The kind of license
deal, we're paid a fee and then I think we're paid an annual fee on top of that.
MICHAEL MORRIS: So just back on the merchandising, is that something that you think will become
more clear to us from an analytical perspective just how big this could be potentially and what the
economics are? Because right now, it's just -- it's kind of a -- it's very obscure in terms of what the
potential is for you and how extensive the product distribution will be.
JEFFREY KATZENBERG: Well, because of the competitive nature of the marketplace right now, we think
we will stay a little obscure.
LEW COLEMAN: And Mike, I think there's a reason why we gave a guidance number for the overall
(inaudible -- microphone inaccessible) to help with some of that financial analysis that you're looking
[to do]. So I think (inaudible -- microphone inaccessible) went into detail about it in his prepared
remarks on the guidance for the TV specials, as well as with the rest of our TV businesses, and that
guidance has been out there for the year.
JEFFREY KATZENBERG: And there are competitive factors, Michael. We're not being evasive for the sake
of it. We actually just want to be competitive in terms of when our product is coming and how it is
going to be presented and who we're doing it with. And, yes, I think it will become incredibly
transparent quickly to you.
MICHAEL MORRIS: Okay, great. Thank you.
OPERATOR:Vasily Karasyov, JPMorgan.
VASILY KARASYOV, ANALYST, JPMORGAN: My question is for Lew first.If we look at the cost of revenue
excluding film amortization, it seems to be trending down in the past several quarters. Can you please
talk about what is driving that and what the run rate of that line item is a quarter? Thank you.
LEW COLEMAN: I think you're referring to the SG&A that is not included in capitalized film amort.
VASILY KARASYOV: No, if I look at cost of revenue and then subtract film amortization write-off.
LEW COLEMAN: Yes, and then you look at the remainder.
VASILY KARASYOV: Well, excluding SG&A.
RICH SULLIVAN, IR, DREAMWORKS ANIMATION SKG, INC.: This is Rich. I'm not sure we break out what
film amort is. So I'm confused on where you're getting your numbers from. Clearly, the way we
amortize our film costs will relate directly to how much revenue per each film we're recognizing in the
quarter and the overall profitability of that ultimately.
So, clearly, depending upon the quarter and what hits in that quarter, the film amortization costs will
vary pretty dramatically, again, depending upon what revenue items from what films are hitting. But
I'm not really sure where you're getting the film amort fees.
VASILY KARASYOV: Well, let me ask it this way. Gross cost of revenue excluding film amortization, is
that changing also from quarter to quarter? And if it is, you spoke a couple of quarters ago about
spending on the Kung Fu Panda virtual world and that's the kind of spending I'm talking about.
RICH SULLIVAN: Yes, I mean, there is certainly an amount in there called product development, which is
pretty immaterial. We also have our normal film development costs which flow to that line. But the
overwhelming majority of cost of revenue is exactly film amort.So I think any fluctuations you're seeing
in that line item is due directly to film amortization, not any of those other line items.
VASILY KARASYOV: All right, thank you very much.
OPERATOR:Barton Crockett, Lazard Capital Markets.
BARTON CROCKETT, ANALYST, LAZARD CAPITAL MARKETS:If I can, I would like to squeeze a couple of
questions in here. First is, just in the wake of the Disney acquisition of Marvel, I was wondering if you
could comment on whether that has had any impact on your discussions with Paramount about

potentially adjusting the distribution deal over the next couple of years, and just more generally on
your ability to kind of interact with other studios or other media conglomerates?
JEFFREY KATZENBERG: I don't know -- I'm not sure 100% what the question is. But is there an impact of
Marvel on our situation?
BARTON CROCKETT: Yes, just the fact that Disney is buying Marvel, is that in any way making your
interactions with Paramount easier or more difficult as you try and negotiate the distribution deal or in
any way inciting more interest in some of the other studios and conglomerates in working with you?
JEFFREY KATZENBERG: I think it is unchanged. I think Paramount has been very, very attentive to
DreamWorks Animation, and they continue to be. So no change on that front.
BARTON CROCKETT: Okay. And then the other thing I wanted to ask is on the TV specials. You've guided
now to the low end of the range on revenues. Are you guiding to the low end of the range on operating
income? You've been talking about $20 million to $30 million. And related to that, could you give us in
any way a little bit more color on the split of revenues between advertising and DVD sales and other
items that would come up in the quarter for the TV specials?
JEFFREY KATZENBERG: Lew?
LEW COLEMAN: Yes, I think there was at least one question there, Barton.We are guiding, in addition to
the revenue guidance downward, guiding the profits down. I think we described that business as about
a 50% margin. I don't expect to see a lot of change in the margin, but I do expect as the revenues
come down, the profits will come down, the bulk of which is the shift of the merchandising program
from Penguins into next year, which I mentioned to you.
We don't really provide any detailed breakdowns of profit on the television specials in particular. We
obviously have, as you've seen going back to the first Shrek special, we have merchandise, including
DVD kinds of revenue, which you can expect here. On the shows that we produce, we also gain some
revenue as a portion of the advertising, but we haven't described exactly what it is. So there are three
or four buckets of revenue. They're about what you think they are. We have not provided a breakdown
of exactly what they are.
BARTON CROCKETT: Okay, all right. That's helpful. Thanks a lot.
OPERATOR:Doug Creutz, Cowen and Company. (Operator Instructions).
DOUG CREUTZ, ANALYST, COWEN AND COMPANY: Just to clarify, earlier in the year you had said you
expected earnings to be up year over year, and now you are guiding more to flat. And you've
mentioned the pushout of the Penguins licensing deal and the incremental amortization on Shrek the
Musical.I just wanted to see if there was anything else that's driving that shift, or if that is really the
bulk of it?Thanks.
LEW COLEMAN: Let me just first of all say I didn't mean to tell you there was a shift.I think we sort of
said that we were able -- we would be able to beat last year's earnings or come out approximately the
same. A penny is a beat, so we are not talking about a substantial shift in guidance.
I think what we're really saying is that, particularly given some of the revenue that we've moved out
into next year, we still think it is possible, give or take a few cents, that we're going to be close to last
year's earnings. I didn't try to say that was a change in outlook as much as I'm trying to reaffirm what I
thought we said a year ago. So don't look at it as an attempt to try to get out of where our guidance is,
because that wasn't the intent behind it.
The second part of your question, now that I've sort of gone through all those disclaimers, was what?
DOUG CREUTZ: That was mainly, I just -- if there was anything else besides the Penguins licensing deal
and the accelerate amortization on Shrek the Musical that has changed since nine months ago.
LEW COLEMAN: You know, I'm not really -- possibly, the overall MvA performance, although I think a
year ago we were probably pretty careful in terms of being conservative about what we were
projecting anyway. So I think you got the major items.
DOUG CREUTZ: Thank you.
OPERATOR:Tuna Amobi, Standard & Poor's.

TUNA AMOBI, ANALYST, STANDARD & POOR'S: So, Jeffrey, I wanted to go back to the last answer you
gave regarding your Paramount relationship. I was a little bit struck that you said there was no change
in your perception of how that relationship had evolved. Is it not reasonable to conclude that your
relationship has gotten considerably -- that your leverage in that relationship has gotten considerably
stronger over the past year or maybe even 18 months, given the overall developments in the
marketplace, not just because of the Marvel deal that was mentioned, but also the successes that
you've had in your lineup, as well as the overall improvement in the capital markets?
And along those lines, could you comment if at all it is something that may be on the radar that -- any
advantages that you might see by remaining independent as a studio, would be helpful, or vice versa?
JEFFREY KATZENBERG: So I guess I would say that everybody has to understand, we are in a
contractual arrangement with Paramount. They have been attentive in servicing our deal over there
now for a four-year period of time. There are three years remaining on the contract. Clearly, our
business is growing in a significant and meaningful way, and with that comes opportunities,
opportunities for them and opportunities for us.
I guess I would have to say that when you are in a good partnership, the word "leverage" probably
doesn't enter the conversations until a ways down the road. And we're not there. So if we have it, and
I'm not sure that we do, but for sure we are not in a place where we are trying to exercise it.
I think to your second part of your question, so we expect we'll be in conversations with Paramount,
but there is nothing new to report on it. And when there is, we obviously will keep everybody well
informed.
In terms of DreamWorks and our future, all I can do is say that we couldn't be more excited about our
slate of films of the next two to three years. Right now, the way in which our product is performing and
the values that we are seeing for it in the marketplace are singularly unique. And certainly as a standalone, albeit small, independent company, we can enjoy enormous growth opportunities in the next 24
to 36 months, irrespective of anything else that happens in the larger world out there. With that said,
we will be opportunistic when and if there is something to respond to.
OPERATOR:Drew Crum, Stifel Nicolaus.
DREW CRUM, ANALYST, STIFEL NICOLAUS: I wonder if you could spend a moment on an update on the
cost situation. You've articulated savings in production for your 2010 films.And just provide us an
update on what you are seeing as far as talent costs and a more favorable advertising spending
environment, which I think was prevalent earlier in the year.
JEFFREY KATZENBERG: I think the trends continue to be the same. There really isn't any change. We
are going to enjoy some savings next year, both just the cost side, as well as on the productivity
side. In terms of the cost of product and production for us, the trends have stayed consistent and there
really isn't any change.
I think I would have to say the same on the marketing side of the equation right now. We have to see -I mean, the one thing that is sort of interesting in which we do see an impact on us is in terms of what
happens currencywise in that we would expect to be a very large, international performer next year. At
least certainly the trends in where currency is headed today are favorable for us.The cost side of
advertising and marketing are down. Obviously, they're going to be impacted by what we're able to
buy with our dollars. But overall, the trends continue to be in all the right directions for us, both on the
spending and cost side, as well as on the income side.
DREW CRUM: Okay.Thanks, guys.
OPERATOR:Ben Mogil, Thomas Weisel Partners.
BEN MOGIL, ANALYST, THOMAS WEISEL PARTNERS: With the performance of MvA DVD so far, have you
changed at all your marketing budget expectations or your retailer strategy for the Christmas
relaunch? And I'm wondering what you're hearing not just about your title, but in general, from the
major mass merchants in terms of DVD as a key category for the holiday season.
JEFFREY KATZENBERG: I don't think it's right for us to comment on the industry as a whole, particularly
in that we have one title in the marketplace, and that title is probably, with the exception of Ice Age 2

-- or 3, which comes out today, and Up, which comes out a week later or -- yes, a week or two, maybe
two weeks later, which are the only two other titles that are probably in the same world and position
that we are. So commenting about the trends in general for the DVD marketplace doesn't seem right
for us to be doing.
In terms of our plans, we are on our plan. This is why we chose the date in late September. We thought
that we could get a very clear, solid launch platform without being crowded in what is about to come
into the marketplace, did, and that we would then have an opportunity to come back in as we get into
the Christmas season, which will happen over the next two weeks. We get on the other side of
Halloween, our activities will pick up again, and we think there will be some good sales for us.
BEN MOGIL: Okay, thanks.And then sort of as a quick follow-on, I guess, for Lew, excluding the
operating loss of $0.02 at Shrek the Musical, am I right that you had $0.05 benefit in the quarter and
$0.03 charges, so $0.21, excluding the operating loss in Shrek the Musical is kind of the clean EPS
number? Is that correct?
RICH SULLIVAN: This is Rich. I think your -- obviously, we're going to stick to GAAP numbers here, so I
don't want to do the math for you. We have disclosed several unique items in the quarter. The
acceleration of amortization for Shrek the Musical was $0.03, in addition to the normal operating loss
we got from the musical.That is $0.05, included in our operating income, as well as our net income
number.
There were two other items that we disclosed -- the $0.03 charge, because of the Paramount
distribution fee credit, as well as the tax -- the normal tax benefit that we get.So all those three items
we disclosed. I will allow you to decide what you want to do with them, because I don't want to start
disclosing non-GAAP numbers.But you do have all the charges in the order of magnitude correct.
BEN MOGIL: Okay, great. Thanks, Rich.
OPERATOR:David Miller, Caris & Company.
DAVID MILLER, ANALYST, CARIS & COMPANY: A question for Lew. I'm trying to understand the
accounting rules behind your decision to accelerate the amortization schedule on the musical in the
third quarter. Obviously, the show is playing or played throughout the third quarter.It is continuing to
play in the fourth quarter. You mentioned there will be some costs to shut down the show in the first
quarter of 2010. Why would you not therefore just accelerate the amortization schedule sort of in
wholesale fashion in Q1 of 2010?
And with that as a backdrop, should we expect that there could be the possibility of additional writedowns in the fourth quarter on the musical? Thanks.
LEW COLEMAN: David, as I mentioned, we changed the amortization rate on Shrek the Musical because
essentially, in our ultimates we're now forecasting lower revenue.And therefore, we have a higher
percentage amortization rate.
Now, remember, we are accounting for this just like we would account for a film. So we have an
ultimate out there.The ultimate now has lower revenue.Therefore, its gross profit is less. So that
amounted to about $0.03 a share just by changing the amortization rate.
We have no impairment, so there is no, quote, write-off for the impairment. So that is out of the
question. And we do have an ongoing operating loss for the fourth quarter, which I had mentioned was
similar to what we had seen in the first, second and third quarters.
So those are sort of the elements. You've got to be really careful we don't mix oranges and apples
here. We increased the amortization because the revenue went down, essentially, in the ultimate. And
we take our -- we have our operating losses, and we have the amount that we would amortize normally
in the fourth quarter.
DAVID MILLER: Right, I understand. (multiple speakers) your ultimate and you accelerate the
amortization schedule.What I'm trying to get to is, if the show doesn't pick up in the fourth quarter,
should we expect that you lower the ultimate again in the fourth quarter, or can you just not say at this
point?

LEW COLEMAN: No, I mean, we have to look at the ultimates at the end of every quarter. But we are
not projecting any great pickup in the fourth quarter.It would just be sort of silly to do so. So we have
to see the show through to the end. The amortization rates that we are sort of projecting in the quarter
are pretty much unchanged from where we were in the third quarter. And we do have some
abandonment charges, depending upon things like how much of the sets or the costumes, and we
think it's going to be very little, will be moved to the traveling show. Those things that aren't moved
are essentially written off at that point.
So for the first quarter of next year, I indicated that we would have some of these charges to close the
show. Mostly think about them like abandonment charges.But I indicated that they would not be
material.
DAVID MILLER: Okay, great. Thank you.
OPERATOR:Tony Wible, Janney Montgomery Scott.
TONY WIBLE, ANALYST, JANNEY MONTGOMERY SCOTT: Just a question on the cost base for the films
going forward. Should we use the Monsters vs. Aliens P&A as a good run rate, absent any kind of
discount for lower ad rates you might have seen in the upfront?
And then secondly, on Puss in Boots, should we look at that as a full-fledged sequel, or should we be
modeling the negative cost there to be somewhere between a sequel and a generic film?
RICH SULLIVAN: I'll take the first one. Puss in Boots, I think we have said that there is some voice talent
payments associated with that film similar to a sequel.It certainly doesn't approach the level of the
Shrek franchise, but there is incremental cost associated with the voice talent payments above and
beyond the direct production cost of that film. As far as the P&A -JEFFREY KATZENBERG: Relatively speaking to a sequel, small, [novice].
TONY WIBLE: And then directionally on just the P&A for Monsters vs. Aliens which frankly is your first
big 3D push, so I'm just trying to figure out if there's a benefit -JEFFREY KATZENBERG: It's competitive, other than the impact we're seeing of the overall marketplace,
but as a benchmark, we think it is competitive.
TONY WIBLE: Great, thank you.
RICH SULLIVAN: Great. I think that concludes the questions, unless there's anybody else that has a
question.
OPERATOR:There are no further questions.