It’s the end of an era for the animators who brought Shrek to life.

DreamWorks Animation (DWA) this week announced plans to close its PDI studio by the end of the year as part of a cost-saving campaign that will save $30 million this year and $60 million by 2017. The budget-cutting will also see DreamWorks slash 500 jobs, or 18% of its current workforce.

PDI, which was founded in 1980 as the Pacific Data Images visual effects studio, quickly made a name for itself as a leading-edge producer of computer-generated imagery at a time when the industry was still figuring out what CGI was and how it could be used to advance the filmmaking state-of-the-art.

Early Wins in TV

The company, which was founded by Carl Rosendahl, set the tone for CGI producers by developing its own 3D software and getting major networks – including ABC, CBS, NBC, HBO and MTV – to outsource the production of broadcast graphics to the fledgling company. It differentiated itself from competing CGI houses by eschewing expensive mainframes and supercomputers and instead using cheaper, commodity hardware. The strategy paid off by keeping overhead low and giving animators the flexibility to tweak the environment as they saw fit. It was a model later adopted by other animation houses like Pixar.

PDI’s work on The Last Halloween television special in 1991 netted an Emmy for Outstanding Individual Achievement in Special Visual Effects, and put the company on Hollywood producers’ radar just as new computer technologies were beginning to drive CGI into the filmmaking mainstream. Followup CGI partnerships with Warner Brothers (Daffy Duck) and Fox (an animated Homer and Bart in 1995’s Simpsons Halloween episode) vaulted PDI squarely into the big leagues, and by 1995 DreamWorks SKG signed a deal with PDI to produce Antz, its first feature-length computer-animated film.

Making Its Movie Mark

In 1996, DreamWorks bought a 40% stake in PDI. Antz hit theatres in 1998, and two years later, DreamWorks bought out the rest of the company and renamed it PDI/DreamWorks. By then the team was deep into production of Shrek, which made its debut in 2001. It also contributed groundbreaking CGI work in Terminator 2 and Batman Forever.

While it contributed to both movies in the How to Train Your Dragon franchise, it was not the lead production unit for either. How to Train Your Dragon 2 recently won top animation honors at the Golden Globe Awards, and was nominated in the animation category for next month’s Oscars.

PDI/DreamWorks currently employs about 450 people, and is scheduled to go dark by the end of this year. While parent company DreamWorks has been mum about specific numbers, it has confirmed that some of them will be able to transfer to jobs at the DreamWorks studio in Glendale, California.

A Stretch Too Far

In announcing the restructuring, DreamWorks CEO Jeffrey Katzenberg said the parent company simply tried to do too much.

“Making three films a year was too ambitious,” he told analysts as he announced the cutbacks. “I don’t think we ever attained the creative capacity to maintain the highest level of quality while we went for the quantity. We achieved the production capacity but not the creative capacity to do it. We have fallen short on the creative side of it.”

DWA has reduced its film pipeline to two full-length animation movies per year – one original and one sequel – and is taking steps to cap the budgets for each project from the $145 million to $150 million of recent projects to $120 million.

String of Failures

PDI’s fate was sealed after its two most recent projects, Mr. Peabody & Sherman and Penguins of Madagascar, tanked at the box office. Coupled with tepid audience response to earlier projects like Turbo and Rise of the Guardians, PDI-related films were responsible for $290 million in writedowns.

Katzenberg tried to put a positive spin on the shrunken animation house’s future prospects.

“The No. 1 priority for DreamWorks Animation’s core film business is to deliver consistent creative and financial success,” he said. “I am confident that this strategic plan will deliver great films, better box office results and growing profitability across our complementary businesses.”

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