DreamWorks exits from in-house production in Los Angeles; Sony Imageworks becomes new production partner.

[Exclusive] As part of its cost-cutting efforts, DreamWorks Animation is moving away from entirely in-house production at its Glendale, California studio and relying more heavily on third-party studios. The studio's chief operating officer, Randy Lake, revealed the studio's plans at a series of meetings last month.

Cartoon Brew understands that morale at the studio is low, according to several employees who contacted us. There is a reason for that: along with Walt Disney Animation Studios, DreamWorks was the last of the major feature animation studios in Los Angeles to still produce some (but not all) of its films in-house. Two of the feature films scheduled for next year, "Kung Fu Panda 4" and "Wild Robot," are completely in-house, with only the direct-to-stream feature "Orion and the Darkness" being produced by a partner studio.

However, according to Lake's presentation to workers, everything will change in 2025. None of the studio's three films currently scheduled for 2025 will be produced entirely in-house.

One of those three films (an unannounced sequel) will be produced with Sony Pictures Imageworks, using the studio's new "mixed production model." DreamWorks' other two 2025 films - the previously announced "Dog Man" and the unannounced film - will be produced by the studio using Jellyfish Pictures for "Spirit Untamed" and Mikros Animation for "Captain Underpants" in Similar to how they utilized, they will be fully animated at partner studios (not Imageworks): First Epic Movie

The new mixed-production model is being tested at Imageworks, which has production studios in Vancouver and Montreal. ImageWorks is the main animation studio of Sony Pictures Animation, responsible for the "Spider-Verse" and "Hotel Transylvania" franchises, but has also worked with Netflix ("Kaiju," "Over the Moon") and Warner Bros. ("The Storks, and Smallfoot), it also serves as a vendor studio that produces animated films for companies like Netflix ("Storks" and "Smallfoot").

According to comments made to workers last month by DreamWorks Vice President of Feature Production Erica Burton, DreamWorks will be responsible for all creative front end (story, art, editorial, previs) of the unreleased sequel, as well as about 50% of asset building and one-hour production. Imageworks will be responsible for the remaining 50% of the asset build and 20 minutes of shot production. While this is the current thinking of DreamWorks management, Barton said the exact percentages are still being worked out and are subject to change.

Burton added that Imageworks will be given greater responsibility and will not receive random shots or pickup work, but will handle entire sequences and independent parts of the film. DreamWorks' creative leadership will remain involved with ImageWorks throughout the process. She believes that if this initial production goes well, there is the potential for a "long-term strategic partnership" with Imageworks. In the past, DreamWorks has repurposed partner studios with which it has had successful relationships, notably Mikros and Jellyfish.

In a presentation to workers, Lake indicated that the Comcast-NBCUniversal-owned studio wants to cut production costs by 20%. DreamWorks workers fear that this new partnership with ImageWorks reflects a new reality for the studio and that DreamWorks will no longer produce animated films entirely in-house.

Lake has already suggested that the studio will cut its workforce. This would mean that the studio would not renew some of its contract workers. Lake has stated that workers will receive at least four weeks' notice if they are to be laid off due to attrition or layoffs. He has also floated the idea of consolidating staff so that DreamWorks does not occupy the entire Glendale campus and renting a portion of the 15-acre campus to other parties.

He told the workers, "We want to do most of the work in-house and outsource some of the asset and filming work to tax-advantaged/low-cost regional partner studios." The goal of the mixed production model is to maintain the same quality of work at lower production costs. To that end, Lake wants to keep the most complex work in-house to "set the creative bar for the film." He said he will retain key talent across all parts of the company because he does not want to dissolve the entire department.

In a statement to Cartoon Brew, a DreamWorks spokesperson further explained:

The industry is facing a more challenging box office environment and the cost of producing creative and ambitious animated films is increasing. In order to reduce production costs while maintaining quality, DreamWorks is defining a new feature production model in which some of the asset and filming work will be done by partner studios on a case-by-case, budget-driven basis. This strategy will be implemented for feature films released after 2025.

Lake's management background has raised questions among dreamers about his true intentions. Lake, a former securities attorney and strategic consultant for Booz Allen, was one of the senior executives at Sony Pictures Imageworks from 2006 to 2019, during which time the studio took advantage of favorable foreign tax credits by shifting most of its production from Culver City to the Canadian It was shifting production to Vancouver. In fact, ImageWorks, with whom DreamWorks would partner on one of its 2025 productions, had been directed by Lake for a number of years. While Lake was at ImageWorks, the company also established a studio, albeit briefly, in Albuquerque, New Mexico.

To be fair to Lake, however, DreamWorks' mixed production model has kept production work in Los Angeles more than can be said for any other animation studio. Sony Pictures Animation, Skydance Animation, and Illumination produce most of their assets and animation at studios they own outside the U.S., while Warners and Paramount outsource production to third-party studios in other countries. Lake said DreamWorks does not want to own vendor studios like Sony, Skydance, and Illumination.