British Telecom Incorporates Amazon Prime Video

Taking a page from Netflix’s playbook, British Telecommunications Company (BT) has inked the first U.K. pay-TV deal with Amazon affording its subscribers direct-access to Prime Video.

Netflix since 2013 has gradually incorporated its service to pay-TV operators with an embedded app that affords users direct-access to the SVOD pioneer with a separate subscription.

London-based BT said the agreement enables subs to stream Amazon original content such as “The Grand Tour,” “The Marvelous Mrs. Maisel,” the U.S. Open Tennis Championship, and Premier League soccer matches.

“Our ambition is to offer an unrivalled choice of TV content for our customers by partnering with the very best providers and, with Prime Video joining a brilliant line-up including BT Sport, Netflix, Now TV, BBC iPlayer,” Tony Singh, content and business development director at BT, said in a statement.

The Prime Video app is included in BT TV set-top boxes, with existing subs receiving the app upgrade beginning June 21.

“We’re delighted to add to that range of devices with Prime Video now available to access via BT TV set top boxes – we think customers are going to love the opportunity to stream their favorite Prime Original shows and Prime exclusive sports on the device,” said Brett Ballbach, business development director for Prime Video Europe.

 

 

Parks: Millennials Love OTT Video

Considering the over-the-top video market was created due to millennials cutting the cord with traditional pay-TV, it’s no surprise the demo covets services such as Netflix, Amazon Prime Video and Hulu.

New data from Parks Associates finds that more than 85% of millennials in U.S. broadband households subscribe to at least one OTT video service.

“Overall penetration of subscription OTT video services among millennials has topped out, suggesting that those households that want such a subscription already have one or more. The more interesting and important question is how many subscriptions they will keep,” Brett Sappington, senior director of research, said in a statement. “More than one-fourth of millennials subscribe to three or more OTT services, and more than 50% subscribe to at least two.”

The trend is also visible, though less pronounced, among the other demos as well. Use of subscription streaming video among Baby Boomers and older generations grew more than 10% from 2016 to 2017.

“For consumers, self-aggregating content is simply part of the entertainment experience, particularly millennial households,” said Hunter Sappington, researcher at Parks. “Their evaluation criteria for services, and brand loyalty, differs from that of previous generations.

The younger Sappington contends pay-TV providers can take advantage of the self-aggregation trend, which can include software-recommended content, social media and mobility.

“Providers need to understand the evaluation criteria consumers use for their OTT services, which can vary from household to household,” he said.

 

MoviePass Eyes Surge Pricing as May Cash Burn Hit $40 Million

Fiscally-challenged MoviePass reportedly plans to introduce new pricing this summer targeting movies with high consumer demand.

In an interview with Business Insider, CEO Mitch Lowe said the concept includes implementing a surcharge (from $2) for blockbuster releases and other movies on opening weekend. The idea is to negate the full ticket price impact MoviePass pays exhibitors for every screening frequented by subscribers.

In its most-recent fiscal filing, parent Helios and Matheson Analytics said MoviePass was burning through an unsustainable $21.5 million monthly in the first quarter reimbursing theaters. That funding ballooned to $40 million in May.

Meanwhile, MoviePass will also enable subscribers to bring a friend and purchase tickets for Imax and Real 3D screenings.

In a statement to Gizmodo.com, MoviePass said it is keeping the $9.95 monthly pricing plan enabling subs access to one daily screening, while launching “new, on-demand options” that include ordering “tickets specifically for certain high-demand showings for a small additional fee.”

The updated pricing comes as HMNY sold 20,000 shares of preferred stock for $164 million

Barnes & Noble Nook Narrows Fiscal Loss

National bookseller Barnes & Noble June 21 reported that its Nook unit generated a fourth-quarter (ended April 28) operating loss of $1.5 million, compared to an operating loss of $7.9 million during the previous-year period. Revenue declined 22% to $25 million from $31.9 million last year.

The Nook segment, which includes electronic readers and tablets, in addition to digital content sales, was the lone bright spot for Barnes & Noble. The last-standing national bookstore chain continues to grapple with a changing consumer inundated with online entertainment, books and ecommerce.

Net income ballooned to $21 million on revenue of $786 million. That compared with a loss of $13.4 million and revenue of $821 million last year.

“In fiscal 2018, we developed a long-term strategic turnaround plan, which we continue to execute,” CEO Demos Parneros said in a statement. “Our plan, which includes sales improvements and cost reductions, is expected to yield immediate improvement in fiscal 2019, resulting in [pre-tax earnings] of $175 million to $200 million, and further benefits in the following years.

Indeed, excluding non-recurring or unusual charges in both years, consolidated pre-tax earnings topped $6.7 million in Q4, as compared to $5.6 million a year ago, and $145.4 million in fiscal 2018, as compared to $187.2 million a year ago.

The company reduced expenses by $15 million in the quarter and $52 million for the full year, excluding non-recurring or unusual charges.

“Turnaround plans take time; and while our performance has been somewhat disappointing, we began to make steady progress in fiscal ’18,” said Parneros.

FilmStruck Bows Service in France and Spain

FilmStruck, the online movie subscription streaming service owned by WarnerMedia, has launched operations in France and Spain.

The subscription video on-demand service, which entered the international marketplace with its U.K. launch in February, offers French and Spanish consumers a diverse movie catalogue from the Warner Bros. library and the Criterion Collection library, as well as other global and local content partners.

The service offers a range of critically acclaimed movies across many categories – independent, classic, cult, contemporary and world Cinema – and also features curated themes and exclusive bonus material, including cast interviews, original artwork, Criterion mini-documentaries and hosted introductions.

With a strong emphasis on catering to different audiences with local content, FilmStruck content for each market reflects local curation expertise. The service for France will draw on local content partners Carlotta Films, MK2, RKO and StudioCanal, while the service for Spain will team with local content providers Wanda, Caramel and A Contracorriente Films, among others.

“Rolling FilmStruck out to these additional markets is a significant next step for us,” Aksel van der Wal, EVP, Turner International’s Digital Ventures & Innovation Group, said in a statement. “France and Spain both have a rich heritage in and love for movies, as well as being rapidly developing SVOD markets, which makes them both exciting markets to tap into with what we believe is a fresh and differentiated offering working with fantastic content partners.”

The expansion of the service into France and Spain comes shortly after DV&I and WBDN announced the appointment of Kerensa Samanidis to the role of GM, FilmStruck, International. Samanidis joins from the British Film Institute where she was head of digital products and distribution overseeing BFI’s digital strategy.

MoviePass Owner Initiates $164 Million Bond Sale

NEWS ANALYSIS — The corporate owner of fiscally-challenged movie ticket subscription pioneer MoviePass has thrown another Hail Mary.

Helios and Matheson Analytics, which owns 92% of MoviePass, June 21 said it entered into a securities purchase agreement with institutional investors to issue convertible notes (bonds) worth $164 million and 20,500 shares of preferred stock.

HMNY said it would use the funds for general corporate purposes.

The bond sale comes the day after AMC Theatres — a beneficiary of MoviePass foot traffic — announced it is launching its own $20 monthly subscription service.

MoviePass, which recently topped 3 million subs on its way to a year-end goal of 5 million subs, continues to spend millions of dollars per month more than it collects paying exhibitors for tickets consumed by subscribers.

The loss-leader business model has contributed to HMNY stock languishing below 35 cents per share.

New bond holders have the option to redeem the notes within seven months at a conversion price of $1. The preferred stock is not convertible into common stock. Each share of preferred stock is entitled to 3,205 votes per share on all matters on which holders of common stock are entitled to vote.

E-commerce Takes a Hit as U.S. Supreme Court Rules in Favor of Sales Taxes on Web Merchants

The U.S. Supreme Court June 21 in a 5-4 decision ruled that states can levy a sales tax on products sold by e-commerce merchants regardless of a physical presence in the state. The decision is a multibillion-dollar windfall for states.

The ruling overturned a 1992 decision that held the Constitution barred states from collecting taxes on businesses with no physical presence within their borders.

That ’92 decision helped spawn e-commerce, which, spearheaded by Amazon and others, has hamstrung a brick-and-mortar retail ecosystem that is required to collect sales tax.

But in 2015, Justice Anthony Kennedy questioned the decision involving a North Dakota business. South Dakota responded by imposing a tax on all merchants that had more than $100,000 in annual sales or more than 200 individual transactions in the state.

The state then sued online retailers Wayfair, Overstock.com and Newegg for violating the rule. The case ultimately wound its way to the U.S. Supreme Court.

The decision is seen as major hit to e-commerce behemoth Amazon, which charges sales tax on items it sells directly, but not on those sold by third-party retailers. In 2017, Amazon reportedly generated nearly $32 billion in revenue from third-party sellers — more than it generates from Amazon Web Services.

 

Sony to Operate Home Entertainment Under Territorial Management Structure

Sony Pictures Television has revamped internal operations to combine networks, distribution and home entertainment into single business units operating under separate territorial management and reporting to Keith Le Goy, president of worldwide TV distribution at Sony Pictures Entertainment. Le Goy is also president of Sony Pictures Home Entertainment, a position he assumed in February, when he was tapped to replace Man Jit Singh, who had helmed the home entertainment business unit for four years.

Tin addition to the U.S., Sony territories include Europe, headed by Mark Young, SVP, distribution & sales U.K., Ireland, Africa and Iberia, and John Rossiter, GM Central Europe; Asia-Pacifc, headed by Ken Lo, SVP, international distribution; and Latin America and Canada, headed by Alex Marin, EVP of international distribution; and

In a June 20 employee memo, SPT chairman Mike Hopkins, former CEO of Hulu, said Sony is also ramping up over-the-top video initiatives (including Crackle.com) to be headed by chief digital officer Eric Berger.

Changes affecting home entertainment include a centralized “consumer insights and innovation unit” focusing on sales strategy, data and process engineering led by Kim Overall, EVP of the consumer strategy group at Sony Pictures Home Entertainment.

Lexine Wong, EVP of worldwide marketing at SPHE, will continue to spearhead home entertainment marketing.

Jason Spivak,  EVP of worldwide digital distribution at SPHE, will oversee management of domestic home entertainment, pay-TV and SVOD sales, while Paul Littmann,  EVP of worldwide distribution at Sony Pictures, will continue to oversee global deals and emerging clients across the distribution, home entertainment and networks businesses.

“Broadly speaking, the new territory management model brings together, under a single local leader, businesses that have been historically separate,” Hopkins wrote in the memo as reported by Deadline.com. “With this approach, we gain a more efficient structure giving regional leaders, along with their direct reports in each country, the ability to make smart, strategic business decisions, while keeping local consumers at the core of what we do.”

Home entertainment reported third-quarter revenue of $331 million, which was up $3 million from revenue of $328 million during the previous-year period. Through nine months of the fiscal year, revenue topped $692 million compared to $764 million during the previous-year period.

Top 10 titles released in the quarter included Baby Driver, Spider-Man: Homecoming, The Emoji Movie, The Dark Tower, Jungle,  All Saints and Flatliners.

Iger: Disney Has Smoother Path Than Comcast Closing Fox Acquisition

NEWS ANALYSIS — When it comes to mega corporate mergers, regulatory muster is just as important as money.

Speaking (along with CFO Christine McCarthy) June 20 on the analysts call to discuss Disney’s enhanced $71.3 billion offer for 20th Century Fox Film, CEO Bob Iger said he believes his company has more insight with federal regulators than rival Comcast, which has a competing $61 billion offer on the table for Fox and British satellite TV operator Sky Plc., among other assets.

“We have a much better opportunity in terms of approval and the timing of that approval than Comcast does in this case,” said Iger. “We are confident that we have a clear and timely path to approval.”

Iger cites the six months already invested by Disney with Fox involving the media company’s initial $52 billion bid for the Rupert Murdoch-owned media giant. He also downplayed Comcast’s concerns that control of entertainment content was at the heart of government’s failed antitrust lawsuit in the recently completed AT&T/Time Warner deal.

“It’s simply an apples to oranges comparison to what the Justice Department was considering when considering the AT&T acquisition of Time Warner,” Iger said. “We have a much greater appreciation for the potential that these assets represent to us, to our strategy today and to the strategy we intend to deploy long-term. We’ve been extremely impressed with the talent we’ve been engaging with at Fox.”

Iger said internal management changes (upping Kevin Mayer and Bob Chapek’s duties) at Disney were done in part to absorb Fox and Sky — the latter Europe’s largest satellite operator with more than 10 million subscribers — while greenlighting over-the-top video initiatives.

“Direct-to-consumer distribution has become an even more compelling proposition in the six months since we announced the [initial Fox] deal,” Iger said. “Clearly the consumer is voting, loudly, that these new platforms are very compelling from a consumer experience and consumer value perspective.”

CFO McCarthy projects $2 billion in cost synergies (i.e. job cuts) and lower debt with the transactions by 2021.

“We’re very comfortable with this level of [debt-to-earnings] leverage,” said McCarthy. “We’ve always said we would be willing to deploy our balance sheet to advance our strategic objectives.”

 

Disney Sweetens Fox Offer to $71.3 Billion

The Walt Disney Co. June 20 announced it signed an amended acquisition agreement with 21st Century Fox, agreeing to pay $71.3 billion for 20th Century Fox Film, which includes British satellite TV operator Sky Plc., and 20th Century Fox Home Entertainment, among other properties.

The $38 per share in cash and stock offer ups Disney’s existing $52 billion bid and bests Comcast’s rival $65 billion offer. Disney said it would acquire Fox immediately following the spin-off of the businesses comprising “New Fox” as previously announced.

Fox businesses to be acquired by Disney remain the same as under the original agreement. Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements.

“The acquisition of Fox will bring significant financial value to the shareholders of both companies, and after six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” Disney CEO Bob Iger said in a statement.

Iger said that at a time of “dynamic change” in the entertainment industry, combining Disney and Fox’s businesses and franchises would translate into more “appealing high-quality content,” while expanding Disney’s ambitious direct-to-consumer offerings and international presence.

Indeed, the acquisition would significantly increase Disney’s international footprint and expand its over-the-top video offerings, which include ESPN+; a Disney-branded streaming video-on-demand service launching in late 2019 that will feature Disney, Pixar, Marvel and “Star Wars” films along with a host of exclusive original content and library titles; and its ownership stake in Hulu. As a result of the acquisition, Disney would hold a controlling stake in Hulu.

Transaction Details

The deal allows Fox shareholders to choose either Disney stock or cash for their shares. Disney is expected to pay a total of approximately $35.7 billion in cash and issue approximately 343 million new shares to Fox shareholders, representing about a 19% stake in Disney on a pro forma basis.

Disney would assume about $13.8 billion of net debt of Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition.

As announced in the original acquisition agreement, the businesses to be acquired by Disney include Fox’s film production businesses, including 20th Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units, 20th Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Sports Regional Networks; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc, and Tata Sky.

The acquisition would occur immediately after the spin-off by 21st Century Fox of the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company referred to as New Fox.

If 21st Century Fox completes its acquisition of the 61% of Sky it doesn’t already own prior to closing of the Disney acquisition, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing.

Disney believes the transaction has a clear path to regulatory approval. Both companies have spent the past six months working toward meeting all conditions necessary for closing. In the amended agreement, Disney has increased the scope of its commitment to take actions required to secure regulatory approval.

The amended agreement has been approved by the boards of directors of Disney and 21st Century Fox.