Well, the government’s seemingly relentless campaign to criminalize business in the post-Enron era has finally reached the one industry — the movie business — that relishes such matters when they happen to somebody else.
The Wall Street Journal ($) is reporting today (free article here) that an ongoing investigation into DreamWorks Animation SKG Inc has been broadened by an SEC informal inquiry into Pixar Animation Studios after Pixar had over-estimated the number of sales upon its release of The Incredibles DVD.
This particular saga began when DreamWorks cut its earnings forecasts twice after heavy returns of its Shrek 2 DVD. In the case of DreamWorks, the SEC is apparently focusing on whether the studio should have informed investors earlier of the problems with Shrek 2 given the studio’s knowledge that DVDs were having an increasingly short shelf life than previous DVD issues. DreamWorks shares fell about 5% in May ahead of the release of its first-quarter results after an online report predicted that the results would be worse than expected, and then the company subsequently warned of lower earnings forecasts because Shrek 2 DVD sales had fallen short of expectations. Similarly, on June 30, Pixar announced that it would miss its second-quarter earnings because it had underestimated the rate of returns by retailers of The Incredibles DVD and that sales of the movie’s DVD had fallen about 7% short of estimates.
The studios are probably already working on a documentary similar to this one. As for what such a film would look like, Professor Ribstein — the expert on how business is portrayed in films — presents his case.