Home Entertainment: Studio Fiscal Lifeline During Pandemic

NEWS ANALYSIS — Throughout the ongoing coronavirus pandemic, much has been reported about home entertainment’s fiscal resurgence as increasing numbers of consumers purchase or rent video entertainment in the home rather than frequent (now shuttered) movie theaters.

Last week the proof was in the pudding as the last of the major studios reported quarterly fiscal results for the three-month period that ended June 30 — and began April 1, two weeks after theaters closed.

Excluding Warner Bros., five studios (Sony Pictures, Paramount Pictures, Lionsgate, Disney and Universal Pictures) reported combined theatrical revenue of $68.3 million.

By comparison, home entertainment segments of the aforementioned studios generated a combined $1.35 billion in revenue. That’s more than Warner’s outlying $1 billion in theatrical revenue. Studios’ theatrical segments remain under siege as the coronavirus pandemic keeps movie theaters largely closed and production idle.

Indeed, home entertainment results topped the previous-year period by 13.4%, when the five studios collectively generated $1.19 billion in Q2 revenue.

That means consumers actually spent more money on transactional home entertainment (from those five studios) during the second quarter of 2020 than they did in Q2 of 2019, when there was plenty of high-profile theatrical product available — including Aquaman, How to Train Your Dragon: The Hidden World, Bumblebee and Spider-Man: Into the Spider-Verse.

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“As long as people are literally stuck in neutral at home, they are going to be consuming a much-greater-than-average number of over-the-top transactional rentals and sales because the [theatrical] options are so limited,” Paul Dergarabedian, analyst with Comscore, said in a statement.

Indeed, the second-quarter domestic box office ended down 99.9% year-over-year to $3.69 million, as most domestic screens remained closed throughout the quarter.

“Theatrical revenue was immaterial in the quarter,” Bob Bakish, CEO of ViacomCBS, said on his company’s fiscal call.

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Wedbush Securities media analyst Michael Pachter expects the 2020 box office to end significantly lower than the last two years as theater re-openings sputter and several tentpole movie releases were moved to 2021 or removed from the theatrical release slate indefinitely.

Following AMC Theatres and Universal Pictures’ landmark agreement to partner on premium video-on-demand releases in the home just 17 days after a movie’s theatrical debut, home entertainment is expected to get an additional, if not limited, boost going forward.

Pachter thinks the AMC/Universal deal is a band-aid for a mortal wound, trying to capture some revenue in an environment where theatrical exhibition is unlikely for the next six months.

“When the results are in, the other studios will adopt the model if successful, and will criticize Universal if not,” he wrote in a note. “I don’t expect it to succeed.”

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