Last November, DreamWorks Animation Chief Executive Jeffrey Katzenberg power-talked his way through the flashy Beverly Hills eatery Spago at an event to promote the DVD release of his company's hit "Shrek 2." Flanked by the animated film's superstar voices, Mike Myers and Eddie Murphy, Mr. Katzenberg was on a mission to make "Shrek 2" as big a smash on DVD as it had been in theaters.
It worked -- for a while. The "Shrek 2" DVD made a killing over the holiday season, and DreamWorks put out a statement about the records it had broken in the important DVD market, now the most profitable piece of the movie business.
But Mr. Katzenberg's enthusiasm ran ahead of itself. Earlier this year, DreamWorks got a shock as retailers started returning millions of unsold copies of the DVD. The Glendale, Calif.-based animation studio dropped a bombshell on May 10 when it disclosed the news. In just its second quarter since becoming a public company, DreamWorks fell short of earnings forecasts by 25 percent and its stock tumbled as Wall Street wondered why the mistake wasn't disclosed sooner.