Home Entertainment Execs Predict More Turbulence as the ‘Roaring’ ‘20s Get Underway

Coming off a year of momentous change, home entertainment executives expect more turbulence to hit their business in 2020.

Streaming has clearly become the dominant force, with two more high-profile subscription streaming services scheduled to launch in 2020. Comcast/NBC Universal in April will bow Peacock, with more than 15,000 hours of content and a free, ad-supported service as well. A month later, WarnerMedia will debut HBO Max, with a large library of titles from across the media titan’s family — including a curated list of classic movies.

And then there’s Quibi, a mobile-centric, short-form video platform launching in April, the brainchild of ex-Disney and DreamWorks chief Jeffrey Katzenberg.

But home entertainment executives, whose proverbial bread-and-butter has always been the transactional model — in which consumers pay a set fee to either buy or rent a movie, TV series or other filmed content, either digitally or on disc — insist there’s enough of an audience for both aspects of the home entertainment (or at-home, or direct-to-consumer) business.

“With an abundance of exceptional content combined with a plethora of platforms, we can expect a ‘roaring’ start to the ’20s as consumers are met with a mass of entertainment options,” says Bob Buchi, president of Paramount Home Entertainment. “It is now the challenge of the industry to focus on marketing and distribution to hone the messaging and delivery to meet the varied needs of consumers across linear, on-demand, subscription and transactional.

“While SVOD has captured the attention of consumers and created an ‘always on’ expectation, the transactional business continues to offer very unique and important consumer propositions: the first post-theatrical home viewing opportunity, the greatest breadth of selection, the highest quality viewing options, and custom bonus content to extend the entertainment experience. The data continues to show that SVOD and transactional can co-exist and thrive. More than half of viewers are involved in both activities, and despite the availability of catalog titles on SVOD platforms, we at Paramount saw record sales numbers for our catalog in 2019.”

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Jason Spivak, EVP of distribution at Sony Pictures Home Entertainment, is similarly optimistic. “As the business evolves consumers are becoming increasingly aware and comfortable with the ways that various distribution models fit together,” he says. “While SVOD delivers great value for many use occasions and types of content, the benefits of transactional models — recency, collectability and image quality — also continue to be prominent, especially in regard to new release theatrical content, and premier catalog titles.”

“Obviously we have been paying very close attention to growth and adoption of streaming services, and we are constantly evaluating their impact on our physical and digital business,” adds Jim Wuthrich, president of Warner Bros. Home Entertainment & Games. “With Warner Media’s HBO Max coming in 2020 the industry will continue to grow.  And as the business grows, so does access to an ever-increasing new consumer base who are familiarizing themselves with digital transactions and streaming, so it opens doors for us to bring in new audiences for our products and content.”

Ron Schwartz, president of worldwide home entertainment for Lionsgate, says “the transactional home entertainment space remains a very dynamic and robust business for our many types of content.” He touts the success on both digital and physical platforms of John Wick: Chapter 3 and Angel Has Fallen, calling those two films “great examples of the type of content that home entertainment consumers want to own. Overall, multiple steaming platforms and transactional, physical and digital will all continue to coexist as the marketplace continues to evolve.”

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Digital retailers agree. “In 2020, we think transactional and subscription will both continue to grow because they complement one another,” says Cameron Douglas, head of FandangoNow. “Nowadays, digital entertainment is a mainstream business. Every TV is connected and OTT services have become the norm for audiences looking for content at home. The growth bodes well for the future of our industry.”

Even at Disney, where much of the focus is on the much-hyped Disney+ service, there’s room for transactional, according to David Kite, SVP of marketing for Disney Media Distribution.

“With this year’s acquisition of 20th Century Fox, we remain committed to both digital and physical ownership,” Kite says. “We successfully integrated the Fox team into the expansive Disney home entertainment organization and have implemented a unified strategy that includes a more synergistic approach across key lines of business. We’re looking forward to another exciting year across both physical and digital platforms with a wide-range slate of home entertainment releases.”

In the first quarter of 2020, Kite says, “We will be releasing two very promising titles — the critically acclaimed awards contenders Jojo Rabbit and Ford v Ferrari.  We’re also excited about the rollouts of Frozen IIStar Wars: The Rise of Skywalker, Marvel Studios’ Black Widow, Disney-Pixar’s Onward and the live-action Mulan as our customers continue to build their libraries.”

While disc sales will likely continue to decline in 2020, no one’s giving up on DVD, Blu-ray Disc or, in particular, 4K Ultra HD.

“The 4K UHD physical market will continue to experience growth throughout 2020,” says Eddie Cunningham, president of Universal Pictures Home Entertainment. “We are encouraged by industry forecasts, which anticipate the sales of that format in North America alone will deliver 25% of Blu-ray Disc dollars in 2020.”

“We will continue to release the majority of our new release titles in the highest possible definition and also mine our vast catalog library for worthy and deserving films to be remastered, as we did this year with The Wizard of Oz,” adds Wuthrich. “The desire for classic titles in the ultimate high-definition format is definitely a factor in the continued momentum of 4K UHD.”

Spivak agrees. “As consumer viewing habits evolve, the disc remains a prominent part of the home entertainment market, particularly given the steady growth for 4K Ultra HD,” he says. “With households nationwide regularly upgrading their TVs to 4K UHD there’s every indication that 4K UHD will evolve beyond a niche audience of format enthusiasts. We will continue to put out most of our new releases and select catalog in UHD, while working with retailers to expand placement and experimenting with features that make the product most attractive to consumers.”

Disney’s Kite is similarly optimistic for the disc business. “Physical ownership remains a robust line of business for us, especially among the collectible consumer,” he says. “There continues to be a healthy appetite for the physical format, particularly with premium, and we already have substantial plans in place for 2020.”

Universal’s Cunningham stresses the importance of retail partnerships in maximizing the transactional model’s potential.

“Given that physical and digital transactional consumption rates are remaining steady year over year and that disc purchases are making up more than half of that consumption, there’s no question that movie buyers continue to be vitally important to retail,” he says. “At no other time in our industry has it been more critical to ensure that we work together to retain the loyalty of movie consumers, creating urgency for our products and delivering the utmost value, quality, accessibility and convenience possible.

“It is important for us to continue supporting our retail partners with creative thought leadership and close collaboration to ensure that we collectively continue to capture shopper attention and deliver key, compelling reasons to transact.”

Sony Pictures’ Spivak agrees. “More than ever we must embrace the fact that our retail partnerships are multi-faceted and cross distribution models — from transactional to SVOD and AVOD,” he says. “Ultimately, our mutual objective is maximizing the consumer value proposition and providing the best potential viewer experience.”

Average U.S. Home Streaming Bundle Sweet Spot: $20-$21

With the field of subscription streaming video services growing, new data shows the average U.S. household would spend $20 to $21 monthly for combined platforms — slightly more than 20% of the average pay-TV bundle ($96.18).

Soda.com, in a survey of 1,000 consumers who stream video in the home conducted Nov. 7-9, 2019, found the majority (32%) of respondents would pay $20 or more monthly for combined streaming services, while 30% would prefer not to bundle services and 14% would not pay more than $10 for a bundle.

Notably, 44% of respondents said they use two or more streaming services per week.

With SVOD services ranging from $4.99 for Apple TV+ to $15 for HBO Max, which launches in May, consumers are faced with the challenge of mixing and matching services or prioritizing services based on the user’s favorite content.

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Netflix is projecting 61.2 million domestic subscribers at the end 2019, with actual figures to be released later this month. That’s more than 80% of the combined tally predicted for Hulu (28.5 million), Apple TV+ (10 million), Disney+ (15 million), CBS All Access (8 million), HBO Now (8 million) and ESPN+ (3.5 million), according to CNBC.

In August 2019, there were about 86.5 million traditional pay-TV households — a number that is projected to drop to 73 million by 2023, according to Statista. Most pay-TV subs continue their subscriptions based on habit, premium channels and sports.

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The survey contends Netflix remains the best overall streaming service followed by YouTube TV. Sports fans favored sports-themed fubo TV or ESPN+, whiles families sought Amazon Prime Video (Prime membership and free shipping) and Disney+.

Movie fans chose HBO Now (soon HBO Max) and Hulu, while budget-minded respondents opted for Sling TV and Hoopla.

 

Trade Groups Court Streamers, But Remain Focused on Transactional Side of the Business

The home entertainment industry’s two trade groups are aggressively courting streamers, but they remain focused on the transactional side of the business, as well.

Both Amy Jo Smith, president and CEO of DEG: The Digital Entertainment Group, and Mark Fisher, president and CEO of the Entertainment Merchants Association (EMA), believe both branches of the home entertainment industry can thrive.

“We know that 4K Ultra HD Blu-ray is the premium choice for viewing content at its best,” Smith says. “And buying content allows fans to collect their favorites and watch at any time.  SVOD and AVOD services offer an exciting way to access all types of content, from award-winning originals to genre specific catalog titles to episodic television series.”

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“There are some movies that consumers are waiting impatiently to see on their home screen,” Fisher adds. “These movies generally won’t be available on subscription streaming services until much later.  Consumers may not fully appreciate the benefit of this window and that titles are available much earlier.”

Looking ahead at 2020, Smith says, “DEG will continue to support transactional businesses for content while also looking to support DTC services. We will support the studios in their work with retail partners to bring content front and center.  For DTC, our work involves aligning messaging so that consumers understand the opportunities for them in the burgeoning DTC environment.  We also want to make sure the experience of discovery and viewing is optimized.  It’s a very exciting time for both consumers as well as the industry providing and delivering content.

Fisher said the EMA in 2020 will “formally, fully embrace the broad spectrum of OTT delivery, including SVOD and AVOD, while continuing to support TVOD. We plan to contribute significantly to supporting the ecosystem surrounding OTT including platforms, channels, content providers and service providers by expanding many of our already successful programs as well as launching new ones. This includes connecting companies for efficient business negotiations in events like our popular OTT.X business exchange, gathering and sharing valuable business insights and industry research in our conference sessions and facilitating the development, evangelization and education of industry best practices such as the digital supply chain work we’ve been doing over the last decade.

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“We’re also excited to be launching our Leadership Development Foundation, dedicated to supporting recent entrants into the home entertainment workforce and providing professional development opportunities for women and underrepresented minorities.”

What’s in store in 2020 on the transactional side of the business?

“We’re still digesting the learnings from the industry-wide Ultimate Media Weekend promotion that we coordinated last year, anticipating another round this year,” Fisher says. “We’ll be examining every aspect of the program from timing to whether the program should be price-point based or not, to whether it should focus on VOD or EST or both.”

“Obviously,” Fisher adds, “this is the year that consumers will be navigating direct-to-consumer options. More consumers than ever before will cut their relationships with their cable TV providers and use OTT services.  Consumers will want to append their costly DTC SVOD services with less-costly SVOD specialty channels and especially with ‘free’ AVOD channels and platforms to supplement their viewing selection.

“The challenges will be to get noticed above the loud noise of the larger studios and existing leading services, and to make the consumer experience as friendly, reliable, and easy as we’ve gotten used to with our cable TV experience — both in functionality and in search and discovery of content.”

Fisher says he’s got “one more point for next year and the future — any launch of a new format or window needs to be coordinated across industries — physical and digital retailers and services/content providers/consumer electronics companies.  Lack of consistency in timing, in promotion, and in terminology have confused the consumer and slowed adoption.  We can do better, and we’re looking forward to supporting the industry as it continues innovating.”

Disney+ Bows YouTube Clip Showcasing 2020 Content

SVOD service Disney+ Jan. 1 launched a social media blitz offering a sneak peak into coming content in 2020.

“New year, new stories — and some familiar ones!,” the service tweeted. From Toy Story 4 and Aladdin to “Lizzie McGuire” and Marvel Studios’ WandaVision, here’s a look at the blockbusters and originals coming to #DisneyPlus in 2020.

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The service launched on Nov. 12 reportedly has more than 15 million registered users — many of whom using third-party promotions such as 12 months free service to any Verizon subscriber.

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Disney+ includes content from Disney, Pixar, Marvel, Star Wars, and National Geographic.

The promotion for new programming comes as the service hopes to retain subscribers following the end of the first season of “The Mandalorian.” Several “Star Wars” fans took to Twitter the final week of the year vowing to cancel their service until the second season debuts in the fall.

‘Rambo: Last Blood’ Keeps No. 1 Spot on Redbox Charts

Lionsgate’s Rambo: Last Blood remained at No. 1 on Redbox’s kiosk disc rental and On Demand charts the week ended Dec. 29.

The Redbox disc rental chart tracks DVD and Blu-ray Disc rentals at the company’s more than 40,000 red kiosks. The Redbox On Demand chart tracks digital transactions, including both electronic sellthrough and streaming rentals.

Universal’s Abominable kept the No. 2 spot on the disc rental chart and rose to No. 3 on the On Demand chart.

STX Films’ Hustlers, distributed by Universal Pictures, was No. 3 on the rental chart and No. 2 on the On Demand chart.

Sony Pictures’ Once Upon a Time in Hollywood rose to No. 4 on the disc rental chart.

Fox’s Ad Astra, was No. 5 on the disc chart and No. 7 on the digital chart.

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Rounding out the On Demand top five were Lionsgate’s Angel Has Fallen at No. 4 and Warner’s It: Chapter Two at No. 5, which were No. 7 and No. 6 on the disc charts, respectively.

Top DVD and Blu-ray Disc Rentals, Redbox Kiosks, Week Ended Dec. 29:

  1. Rambo: Last Blood — Lionsgate
  2. Abominable — Universal
  3. Hustlers — Universal
  4. Once Upon a Time in Hollywood — Sony Pictures
  5. Ad Astra — Fox
  6. It: Chapter Two — Warner
  7. Angel Has Fallen — Lionsgate
  8. Fast & Furious Presents: Hobbs & Shaw — Universal
  9. Good Boys — Universal
  10. Overcomer — Sony Pictures

 

Top Digital, Redbox On Demand, Week Ended Dec. 29:

  1. Rambo: Last Blood — Lionsgate
  2. Hustlers — STX
  3. Abominable — Universal
  4. Angel Has Fallen — Lionsgate
  5. It: Chapter Two — Warner
  6. Good Boys — Universal
  7. Ad Astra — Fox
  8. Jumanji: Welcome to the Jungle — Sony Pictures
  9. Fast & Furious Presents: Hobbs & Shaw — Universal
  10. Ready or Not — Fox

 

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‘Friends’ No More: Netflix Loses Key Content to Start 2020

New Year’s Day 2020 started ominously for Netflix as it officially no longer can stream ongoing syndication hit “Friends,” the former NBC sitcom that introduced Rachel, Monica, Ross, Chandler, Joey and Phoebe to American living rooms and made household names of Jennifer Aniston and others.

The 26-year-old series stopped airing on primetime television 16 years ago, but has remained a lucrative product on syndication, packaged media and streaming.

Netflix lost exclusive “Friends” streaming rights to WarnerMedia’s pending streaming service HBO Max, which paid $425 million over five years to snag all 236 episodes of the series. “Friends” reportedly was the second-most-popular series on Netflix in 2018, according to Nielsen.

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HBO Max reportedly spent billions more to secure exclusive streaming rights to “South Park” and “The Big Bang Theory”.

“How [‘Friends’ exit] impacts [Netflix] in terms of subscribers … will really depend on what else they have coming up that we’re not focused on,” Courtney Williams, Europe regional director for Parrot Analytics, told Vanity Fair.

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Indeed, Netflix original series “Stranger Things” and “The Witcher” continue to congregate atop weekly Parrot Analytics charts tracking the most on-demand programming.

“I don’t think any specific content matters at all to Netflix,” Michael Pachter, media analyst at Wedbush Securities, said in an email. The analyst contends the bigger threat to Netflix is when other content creators collectively divert content toward proprietary services.

With Netflix increasingly losing Disney/Fox, NBC Universal and Warner Bros. content, consumers will feel compelled to try new services offering recognizable programming and/or favorite shows, according to Pachter.

The analyst believes Netflix will lose around two-thirds of its content (measured in viewing hours) and will have a tough time replacing that with content of similarly perceived quality. At the same time, Pachter says competitors such as HBO Max will take awhile to gain traction with consumers.

“We expect the [Netflix No. 1] status quo to be largely maintained until the end of 2021,” he said. “For now, Netflix provides tremendous value for its subscribers.”