Variety is reporting that Dreamworks has already started working on Shrek 3 some four months before the theatrical debut of Shrek 2 on May 21.  This represents something of a risk, since the Shrek films are not cheap -- Variety estimates that Shrek 2 will cost between $60 and 80 million.  Still, the original Shrek film made $261 at the domestic box office and may have even surpassed that total on video, so Dreamworks realizes Shrek is a franchise with a big potential payoff.

Proceeding on a sequel to Shark Tale, which doesn't debut until October, however, is a riskier proposition.  The Dreamworks studio brass must be happy with what they have seen of both Shrek 2 and Shark Tale to invest so aggressively in sequels, but given the two-year timeline for most animated features, studios have to act quickly or face a loss of momentum caused by a long gap between the original film and its sequel.

As for the track record of animated sequels -- Pixar's Toy Story 2 did very well, outgrossing its predecessor by some $50 million, but other animated features such as the Pokemon films and Rugrats series from Paramount have suffered precipitous drop-offs from original to sequel.