Dreamworks Faces a Lawsuit Over

On Thursday the shareholders of DreamWorks Animation filed a lawsuit
stating that DreamWorks did not disclose proper sales information the
the “Shrek 2” DVD. The lawsuit states that even though sales declined,
Dreamworks still shipped out more and more titles to stores.

DreamWorks Animation official report came out on May 10th stunning
investor with news that the first-quarter DVD sales for “Shrek 2” fell
far short of the company’s earlier projections and that the Glendale,
Calif., studio would realize no revenue from the title in the quarter.

Jeffrey
Katzenberg said DreamWorks had overestimated retail sales of “Shrek 2,”
and had been saddled with returns of unsold discs from retail outlets.
The announcement during the company’s May 10th earnings call sent
DreamWorks shares tumbling 12 percent the next trading day. This is the
first lawsuit that Dream Works has had since it has gone public.
Falling stocks should not be a shock in this case, but they continue to
fall.

DreamWorks stocks sank another 7 percent Tuesday,
after the debut of “Madagascar” over the long holiday weekend failed to
meet analysts’ expectations. The shares fell another 1.5 percent
Thursday.

DreamWorks has not revised their previous projections
stating that they expect 40 million parts of “Shrek 2” in DVD sales.
DVD sales have only recently reached 35 million parts and vendors
continue to return unsold copies of the overshipped title.