We must keep in mind, though, that Shrek the Third helped things out in the year-ago period. That makes for a challenging comparison. Plus, there are some positives that shareholders who intend to hold for a while can look to in the release. DreamWorks saw some good contributions from catalog titles, including Over the Hedge and Flushed Away. DreamWorks is building a strong library of products that can continue to generate value for shareholders as it is distributed through various channels, such as broadcast TV and on-demand platforms. Also, operational cash flow increased, helped along by a receivable from DreamWorks' distribution partner, Viacom's (NYSE: VIA) Paramount. Free cash flow decreased, though, since more was spent on capital projects. And the big DVD release of the quarter, Kung Fu Panda, sold over 11 million copies, which, according to this earnings transcript from Seeking Alpha, was a higher number than originally projected.

But, as this article reports, the DVD market is so tough these days, especially given the economy, that maintaining healthy margins is no walk in the park. And the ultimate profitability of Kung Fu Panda has had to be modified. So, the main thing to focus on is that DreamWorks is, like any other business, suffering the painful stabs of a sharp recession. It also is contending with something beyond the recession: namely, the changing media landscape. Digital distribution is affecting physical media, and the DVD industry is not what it once was. Companies like Disney (NYSE: DIS), Time Warner (NYSE: TWX), and News Corp. (NYSE: NWS) are all adjusting.

And then there's the new cartoon waiting in the wings, Monsters vs. Aliens. How well will that 3-D project do? As you can expect, CEO Jeffrey Katzenberg thinks it's a game-changer. It could merely be hype. So far, I don't feel the buzz. I'm sure, though, that DreamWorks will make sure that I do feel it as we get closer to the release date.

Well, as far as the stock goes, I think that, if you already hold it, there's no need to sell on this earnings release. Presumably you've done your diligence and realize that there will be tough comparisons from time to time. DreamWorks, like I say, is constructing a library that can hopefully be exploited over and over again in the years to come. What I hope is that Katzenberg and his crew can figure out the best way to answer the weakening DVD medium. Maybe day-and-date release, the theory that it might be more efficient to release the home-video version of a theatrical project at the same time that the movie hits the screens, should come back to the forefront of the discussion. Whatever happens, I think shareholders must face facts that the recession is going to be a tough, lingering headwind for the stock. Traders should perhaps avoid it for now.

Disclosure: I own Disney; positions can change without notice.