2022: How Lessons From the Pandemic Will Guide Home Entertainment Strategies

The uncertainty over the COVID-19 surge triggered by the emergence of the Omicron variant has made any and all predictions for the coming year suspect. Life could go back to normal fairly quickly or we will continue to battle surges and adjust our lives accordingly. Most observers don’t see us going back to the draconian shutdowns and lockdowns of the early days of the virus, but studio executives and exhibitors are understandably nervous about the current and any future surges since theatrical attendance could suffer — which ultimately affects everyone down the food chain.

The home entertainment industry weathered the initial COVID crisis quite well, with streaming growing stronger and transactional video-on-demand (TVOD) winning a premium first-run window. That said, there are several “givens” as 2022 gets underway.

Netflix, Disney+, HBO Max and the other high-profile streamers will continue to battle for dominance, with Netflix doing everything in its power to reduce churn and not lose market share. The second tier of SVOD players, including Paramount+ and Peacock, will make as much noise as possible to win a seat at the table — as evidenced by Peacock’s recent announcement that it will be streaming the winter Olympics in their entirety.

On the transactional side, a lot depends on the fate of movie theaters as this pandemic lumbers on. The early pandemic led to an overall shortening of windows and new-release strategies that ultimately benefited both home entertainment divisions and digital retailers such as Vudu by Fandango, Redbox On Demand, Microsoft and Google Play.

But while TVOD, and physical media, benefit from shorter windows, it is also impacted by studios accelerating, or re-ordering, SVOD windows. A film available as part of an all-you-can-watch subscription streaming service simply isn’t going to sell or rent nearly as well as it would if there was no “free” competition. And that plays into the bigger picture that the more consumers tune in to SVOD services, the less likely they are to purchase or rent something a la carte.

Jim Wuthrich

Jim Wuthrich, president of content distribution for WarnerMedia, says he’s “optimistic that we’ll continue to adapt to the changing nature of COVID and learn to live with it.”

“Although there are many challenges, we’ve learned how to be productive with a distributed workforce, productions are largely back and there’s more consumer choice than ever before — both in amount of content and ways to view,” he says. “It’s a great time to be a fan of linear storytelling. We will continue to improve and expand HBO Max to more markets, while providing a la carte options for fans and collectors. SVOD services will continue to dominate viewing time, with transactional supporting a vital role in discovery, sampling and fandom. Physical media (4K/Blu-ray/DVD) continues to be a meaningful market, with approximately $2 billion in U.S. consumer sales, and largely immune to evolving distribution patterns.”

On the WarnerMedia side, Wuthrich says, “We have a great movie slate, with four DC films coming to theaters and another installment of ‘Fantastic Beasts.’ We also have a number of series releasing, including the new ‘House of the Dragon,’ a ‘Game of Thrones’ prequel. History has shown these franchises to be powerhouses in driving catalog sales so we are looking forward to a great year.”

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“Similarly to 2021, we expect a very healthy home entertainment market in 2022, with strong consumer engagement across multiple business models,” says Michael Bonner, president of Universal Pictures Home Entertainment. “Release patterns will likely continue to fluctuate and vary across studios on a title-by-title basis.

Michael Bonner

“With the theatrical marketplace continuing to strengthen, the growth of PVOD and the expansion of various SVOD services, the distribution landscape is stronger than ever. As we look ahead, studios have more options and outlets to create value and reach consumers which strengthens our ability to continue investing in great content.”

Bonner maintains that Universal, with its slate of anticipated new releases including Jurassic World: Dominion, Minions: The Rise of Gru and Downton Abbey: A New Era, “is perfectly positioned to draw audiences back into theaters and fuel further transactional growth across the varying windows and platforms.”

Paramount Home Entertainment president Bob Buchi says that “as the global hub for transactional home entertainment across ViacomCBS, our division is exceedingly fortunate and singularly focused on delivering an extraordinary 2022 line-up of the company’s theatrical and television content, as well as third-party acquisitions through our extensive partnerships.”

“Our theatrical slate includes new entries in wildly popular franchises, including ‘Scream,’ ‘Top Gun,’ ‘Mission: Impossible,’ ‘Sonic the Hedgehog’ and ‘Jackass,’ which are not only highly anticipated, but also provide excellent opportunities to stoke fan interest in the earlier films and television shows available through home entertainment,” he says.

Bob Buchi

On the catalog front, Buchi adds, the division’s most ambitious initiatives are the year-long 50th anniversary salute to The Godfather, “for which we anticipate massive consumer excitement for the film’s return to theaters, new 4K home entertainment releases, and licensed merchandise,” and the first-time-on-4K director’s edition of Star Trek: The Motion Picture, “with fantastic new VFX, which will be released first on Paramount+ and then on home entertainment platforms.”

Cameron Douglas, VP of home entertainment for Fandango, which oversees the Vudu digital retailer, also has high hopes for the new year.

“We expect the TVOD sector to deliver even more value to consumers, as fans sort through a fragmented streaming world, looking for a one-stop-shop entertainment service for movies and TV,” he says. “Because subscription services, by their nature, cater to specific audiences and content offerings, we continue to see consumers utilizing the flexibility, depth and breadth of Vudu’s new-release and catalog offering of over 200,000 titles to complement their monthly entertainment needs.”

Cameron Douglas

At the top of Vudu’s agenda for the coming year, Douglas says, are plans “to innovate new services for our customers and add new platforms and devices to meet the fan demand in an ever-changing marketplace. We also plan to offer deeper integration with our sister sites, Rotten Tomatoes for entertainment discovery, recommendation and curated content, and Fandango for crossover promotional opportunities to help enhance the theatrical experience.”

The big challenge they face in the coming year, home entertainment executives say, is to apply lessons they learned during the pandemic and react quickly to market conditions.

Paramount’s Bob Buchi says that “with two years of experimentation and the expedited evolution of our business, we know we need to remain agile in our windowing and co-promotional strategies as we continue to support the return to theaters and the rapid growth of our streaming service, Paramount+.”

Adam Frank, SVP of global digital sales and distribution at Lionsgate, says what happens at the box office will trickle down into all aspects of home entertainment.

“Our expectation, given the quality and quantity of the theatrical release slate, is that box office sees significant increase and momentum in 2022 vs. 2021,” Frank said. “The old adage of content is king still rings true, and with more product in the marketplace, consumers will ultimately have more choices and more opportunities in the home entertainment space.”

Jed Grossman

Jed Grossman, EVP and GM of worldwide sales and distribution at Lionsgate, adds, “We expect all business segments — transactional digital, packaged media, SVOD and AVOD/FAST — to grow year-over-year driven by five key factors.”

According to Grossman, those factors are:

    • A more robust theatrical release schedule, inclusive of major tentpoles and franchises like ‘Jurassic World,’ ‘Top Gun’ and ‘Black Panther’ that were delayed during the pandemic. Lionsgate has a strong slate that includes Unbearable Weight of Massive Talent, starring Nicolas Cage; Are You There God? It’s Me Margaret; and White Bird, among others;
    • A more viable theatrical marketplace, with theatergoing comfort increasing as vaccine/booster shot rates increase and tentpoles drive attendance;
      The continued unprecedented demand for new-release and library product from SVOD and AVOD/FAST platforms. Lionsgate has achieved record library revenue over the past year;
    • The ability to capitalize on home entertainment consumer behavior, consumer content thirst and technology enhancements — across all offer types — as accelerated by the pandemic lockdowns of 2020 and early 2021; and
    • Continued collaboration with between Lionsgate and its theatrical exhibition partners to release films with dynamic windows to meet demand across all platforms.

 

For independent film distributors, don’t expect much variance in 2022 from established policies of continuing to take aim at the collector and niche markets, particularly on the physical media side.

“For disc sales, MVD and our label partners are focusing on collectible content in deluxe packaging,” says Ed Seaman, COO of MVD Entertainment Group. “We anticipate a similar trajectory for disc sales, which have steadily grown over the last several years. The pandemic certainly gave them a boost, but the resilience and resurgence of disc sales may have more to do with the frustrating customer experience our industry has created in the OTT space. Finding what you want is now very challenging. How many streaming services do you need to subscribe to only to not find the film you want to watch, when you want to watch it? You can more easily find what you want transactionally, but it is still a search. Why not just pay a bit more and own the deluxe-edition disc?”

On the digital front, Seaman says “AVOD/FAST will continue to grow dramatically as consumers clearly embrace and enjoy that model. TVOD is tricky; considering Amazon’s tight curation of nonfiction, we expect some other platforms to step up and become more dominant in that space. There is a real opportunity for platforms focusing on nonfiction to deliver to fans what they want when they want it.”

Mark Fisher, president and CEO of OTT.X, a streaming industry trade group, believes 2022 “will be a year that portends the future of our industries — a future that, enabled by OTT distribution, is more egalitarian, more global and more diverse,” Fisher says. “While Hollywood continues to make great movies and TV shows, smaller distributors and independent producers from all over the world are making a lot of great content, too — enabling the consumer to be less reliant and dependent on content from the big studios and on domestic-produced content. And, while the big ‘Pluses’ and ‘Maxes’ continue to grow, consumers are finding plenty of additional content on indie and niche channels, both FAST and on demand.”

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The shadow of COVID-19 continued to hang over 2021, despite rosy predictions the previous summer that the worst would soon be over.

By mid-year, with a vaccine rollout in full swing, most restrictions were lifted and theaters were welcoming back moviegoers, particularly after studios once again stepped up movie production. This theatrical recovery continued, unchecked, through the emergence of the summer Delta variant and the beginning of the winter Omicron surge. Indeed, the December 2021 theatrical opening of Spider-Man: No Way Home generated $260 million in domestic ticket sales, the second-highest North American box office opening weekend of all time. Domestic box office revenue for 2021 is estimated at $4.5 billion, more than twice what it generated in 2020 but still down 61% from 2019, the last year before the virus hit.

The entertainment world in 2021 was rocked by two major announcements: Amazon bought a movie studio, MGM, for $8.45 billion, and AT&T announced plans to spin-off WarnerMedia through a merger with Discovery, resulting in a new media powerhouse, Warner Bros. Discovery, under Discovery Inc.’s CEO David Zaslav. The deal is expected to be completed in mid-2022, pending Discovery shareholder and federal regulatory approval.

The year also saw the vindication of WarnerMedia’s controversial plan, announced at the end of the prior year, to release its entire theatrical slate simultaneously on its HBO Max streaming service. Initially railed against as a death blow to the movie business, the strategy in retrospect kept the business alive, providing a steady stream of high-profile new product to movie theaters hungry for fresh films, even if they no longer would be exclusive to the big screen.

“2021 marked the first anniversary of HBO Max and, with it, a whole new distribution pattern for movies,” said WarnerMedia’s Jim Wuthrich.

On the home entertainment front, 2021 was the proverbial mixed bag for the industry’s two segments, subscription streaming and transactional/physical.

As the winter surge of the virus delayed the reopening of movie theaters well into the spring, studios held back their big releases until their opening strategy — theaters, PVOD or both — could be determined. Streaming, however, continued to flourish at the accelerated pace that had begun in 2020 with the onset of the pandemic. Consumer spending on subscription video-on-demand services soared more than 20% in the first half of 2021, according to DEG: The Digital Entertainment Group estimates.

Amy Jo Smith

“The growth in subscription streaming in 2021 can be attributed to consumers who continued to spend time at home, increasing their engagement with content offered through an abundance of new direct-to-consumer subscription services, including Disney+, HBO Max, Paramount+, Peacock, AMC+ and many others,” said Amy Jo Smith, DEG president and CEO. “These services provide consumers premium content with convenience and value.”

Disc and digital sales of movies in the first half of 2021, meanwhile, were off by more than 25% from the prior year, while combined disc and digital rental (TVOD) revenue suffered a first-half decline of more than 30%, according to the DEG.

As the year progressed, subscription streaming continued to dominate home entertainment, while the transactional side of the business began to recover in the wake of theatrical reopenings that remained on track despite the summer emergence of the more-contagious Delta variant. By the third quarter, disc and digital sales had trimmed their quarterly decline to 12% while rentals were off just 14%.

“2021 certainly had its challenges, but there were some high notes as well,” noted Jason Spivak, EVP of distribution for North American Television & Home Entertainment at Sony Pictures Entertainment. “Early in the year, we were blown away by the tremendous success of Monster Hunter on both physical and digital formats. We achieved strong PVOD results on The Father and Don’t Breathe 2. And throughout the year we saw consistent strength in our digital catalog, particularly our drafting efforts around the ‘Spider-Man’ franchise.

Jason Spivak

“The biggest highlight for our business, however, has been the fourth-quarter theatrical performances of Venom: Let There Be Carnage, Ghostbusters: Afterlife and, of course, the worldwide phenomenon that is Spider-Man: No Way Home. These films demonstrate that consumers are excited to return to theaters and that they crave the communal experience that can only be achieved in a movie theater.”

WarnerMedia’s Wuthrich said his company’s strategy of releasing its news films to theaters and streaming on the same day “did add an element of unpredictability to [traditional, transactional] home entertainment in forecasting demand, as it was unique to have streaming as the first window.” Ultimately, he said, “we found that there is robust demand for transactional (EST/TVOD/physical), despite the change in windowing.”

Paramount’s Bob Buchi said that while 2021 “certainly did not go as planned, consumers again turned to home entertainment options in record numbers. Throughout the year’s unprecedented circumstances, Paramount continued to experiment with new-release windowing, maximized the power of our exceptional library, and supported the ongoing growth of Paramount+.”

With very different release strategies, Buchi added, A Quiet Place Part II, Snake Eyes and Paw Patrol: The Movie “delivered tremendous results across each studio window thanks to the cumulative marketing muscle and cross-company promotional efforts, which bodes well for the ongoing coexistence of every platform.”

Paramount also saw consumer spending on catalog titles remain strong, “representing nearly 60% of annual revenue and holding steady to slightly up compared to the extraordinary sales in 2020 across physical and digital worldwide,” Buchi said. “Digital sales, in particular, have been exceptionally strong during the pandemic, with a compounded annual growth rate of over 25% compared to pre-pandemic 2019 levels globally.”

Universal’s Michael Bonner said his studio’s “new-release home entertainment business remained very strong in 2021 as we saw with F9, The Croods: A New Age, Let Him Go, Promising Young Woman and several others, with a significant contribution coming from our new PVOD window and followed by our traditional home entertainment offering,” Bonner said. “On top of that, similar to 2020, we saw our library business reaching historical levels.”

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On the physical side of the business, Sony Pictures Home Entertainment and Lionsgate in February 2021 announced a multiyear agreement in which Sony, beginning in July, handles distribution of Lionsgate’s DVD/Blu-ray Disc releases in the United States and Canada. Lionsgate’s North American packaged-media distribution had been handled by the former 20th Century Fox Home Entertainment, which was acquired in 2019 by Disney.

Lionsgate continues to maintain its own independent sales and marketing teams, but is leveraging SPHE’s supply chain and distribution services.

Two months after the Sony-Lionsgate deal was announced came the official launch of Studio Distribution Services (SDS), a joint venture between Warner Bros. Home Entertainment and Universal Pictures Home Entertainment to distribute packaged media in the United States and Canada.

“Starting any business in a pandemic is challenging, but one that relies on delivering physical goods to stores across two countries during a supply chain upheaval is not for the faint of heart,” WarnerMedia’s Wuthrich said. “The SDS team, along with the studios, did a great job managing through a challenging time,” he added, referring to the supply chain crisis that led to distribution challenges toward the end of the year.

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As of the end of the third quarter, streaming accounted for nearly 80% of total consumer spending this year on home entertainment, or $18.6 billion. Total consumer spending on disc and digital sales and rentals in the first nine months of the year was just $5 billion.

And yet subscription streaming did face several challenges, including consumer fatigue — stemming largely from the rising costs of subscribing to multiple services — and rapid gains in free ad-supported platforms such as Pluto and Tubi. In professional consultancy Deloitte’s 2021 Digital Media Survey, more than half of the respondents said they are re-evaluating multiple streaming subscriptions, and 40% said they planned on terminating at least one subscription. Adriana Waterston, SVP of insights and strategy at Horowitz, told Media Play News in November that streaming consumers are feeling overwhelmed by the proliferation of services, with many struggling to figure out what to watch, and where.

The OTT.X’s Mark Fisher said free ad-supported streaming is just one more option that is leading to continued growth for the overall home entertainment business.

“Internet-based delivery today gives the consumer so many more opportunities and more choices to enjoy great content — both on demand and linear,” he said. “Some prefer long-form, some short-form; some prefer to watch without ads, while others watch ads to avoid paying; some like to watch what they want, when they want, while others like the sit-back FAST experience; some want to build their cloud-based collections and others just want to watch once; some like to watch big-budget spectacles and others enjoy good indie-produced stories; and many are adding the diversity of international content and niche content and channels. Opportunity and choice benefit everybody.”

In some cases, the two sectors of the business, streaming and transactional, are converging.

One of best examples of this is that while Redbox’s legacy disc-rental kiosks remain the company’s cash cow, a massive digital transformation — fueled by the company going public in October 2021 — is expanding the Redbox brand into digital, with a particular emphasis on streaming. Redbox Free Live TV, an ad-supported streaming service that launched in February 2020, has grown to more than 100 channels offering viewers free access to movies and television shows, news, and lifestyle and sports entertainment programming. In December 2021, Redbox began advertising its digital products on its kiosks.

Galen Smith

CEO Galen Smith said that on the kiosk and TVOD side, Redbox in 2021 “continued to see a significant impact on the quantity of new-release movies due to production being paused as a result of COVID, with fewer movies in 2021 than 2020. The good news is we anticipate the number of new theatrical movies releasing in 2022 should be back to levels not seen since 2019.”

As for streaming, he said, “2021 was a growth year for us — as we rapidly scaled both our AVOD service and FAST channels.”

Redbox going public, Smith noted, “provided us with additional capital to invest in the ongoing digital transformation of Redbox, as we built on our transactional video-on-demand service with growth in AVOD (more than 5,000 titles on demand) and FAST (more than 125 linear channels including five that are Redbox branded) and a subscription channels business coming in 2022.”

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Independent film distributors, meanwhile, in 2021 found the plethora of streaming services a whole new market for their films, augmenting their traditional TVOD and physical release.

“It’s always a good thing when new channels appear where we can license our films,” said Joe Amodei, president and CEO of Virgil Films & Entertainment. “The major accounts still rule in this area, but as they have dwindled down their buying in favor of original films and series, we’ve enjoyed doing business with this new group of folks.”

Indies also say they are finding their disc businesses remarkably resilient. MVD’s Ed Seaman said 4K Ultra HD Blu-ray “continues to surprise us. Sales are really strong, possibly because there aren’t a ton of products in this space, but mainly because our trade partners/content providers are choosing excellent content and do a great job lovingly restoring and filling these editions with great bells and whistles.”

John Rotella

John Rotella, SVP for Shout! Factory, said the company saw “unbelievable growth in catalog and new-release sales” during the pandemic year of 2020, “and that swell carried forward into 2021.”

Shout! Factory, he said, “saw one of our best years ever on gross shipments and an equally impressive net business. We also saw growth in [point-of-sale] revenue in 2021. The DVD and Steelbook/4K business grew again as Blu-ray sales stayed even compared to 2020. New-release and catalog as a whole all improved from a surprising and productive year, led by our new Western, Old Henry, and 4K ‘Halloween’ releases.”

Some of this success, Rotella said, “can also be attributed to a less-competitive new-release marketplace, upgraded and repackaged catalog, developing more-valuable collectible products at a higher price, and managing the right genre that works for mass [merchants]. Walmart and Amazon continue to offer new-release and catalog opportunities, and we saw an e-commerce surge in business. Looking back, 2021 unexpectedly managed to match 2020 in [point-of-sale] and shipments, and remained far superior to 2019 in every area.”

On the downside, the supply chain crisis has compounded ongoing problems with limited replication opportunities, resulting in delays in bringing product to market.

“We were hugely affected by inbound transportation challenges, mostly from the U.K. and Europe, where many of our top clients reside,” MVD’s Seaman said, noting that the situation improved toward the end of the year.

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Another home entertainment trend that continued in 2021 was the consolidation of theatrical and home entertainment teams. Warner Bros., Sony Pictures and Lionsgate went through their respective integrations in 2020; Paramount Pictures followed in March 2021 with a restructuring that led to the exit of 23 home entertainment marketing and distribution personnel, including marketing chief Vincent Marcais, publicity head Brenda Ciccone, and Dina Marovich, SVP of worldwide media and interactive marketing.

A new way of doing things sometimes finds home entertainment executives branching out beyond their wheelhouses.

“Somewhat out of the traditional course of business, our team successfully managed the launch of Virtual Reality experiences at the new Harry Potter store in New York City,” Warner’s Wuthrich said. “These two experiences allow Potter fans the ultimate experience of visiting Hogwarts or flying high above London on broomsticks while battling Death Eaters. The experiences have sold out since launching this summer and have been garnering rave reviews. We look forward to expanding the number of locations in 2022 so more Potter fans will have a chance to live the experience.”

‘House of the Dragon’ Most Anticipated New Show, ‘Doctor Strange in the Multiverse’ Most Anticipated Movie of 2022

HBO Max’s “House of the Dragon” is the most anticipated new show and Disney’s Doctor Strange in the Multiverse of Madness is the most anticipated movie of 2022, according to data from Whip Media’s TV Time App.

“House of the Dragon” follows the story of the Targaryen civil war that took place about 300 years before the events portrayed in “Game of Thrones.”

The Marvel Comics-based Doctor Strange in the Multiverse of Madness follows the further adventures of Dr. Stephen Strange and his research on the Time Stone.

TV Time, owned by Whip Media, is a free TV viewership tracking app that tracks consumers’ viewing habits worldwide and is visited by more than 1 million consumers every day, according to the company. TV Time’s anticipation ranking is based on data from those users.

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Most Anticipated New TV Shows of 2022

  1. “House of the Dragon” (HBO Max) — TBA
  2. “She-Hulk” (Disney+) — TBA
  3. “Ms. Marvel” (Disney+) — TBA
  4. “The Lord of the Rings” (Amazon Prime Video) — Sept. 2
  5. “Moon Knight” (Disney+) — TBA
  6. “Obi-Wan Kenobi” (Disney+) — TBA
  7. “Secret Invasion” (Disney+) — TBA
  8. “Vikings: Valhalla” (Netflix) — Feb. 25
  9. “The Sandman” (Netflix) — TBA
  10. “Peacemaker” (HBO Max) — Jan. 13
  11. “The Witcher: Blood Origin” (Netflix) — TBA
  12. “Andor” (Disney+) — TBA
  13. “I Am Groot” (Disney+) — TBA
  14. “Power Book IV: Force” (Starz) — Feb. 6
  15. “The Last of Us” (HBO Max) — TBA
  16. “Resident Evil” (Netflix) — TBA
  17. “Star Trek: Strange New Worlds” (Paramount+) — TBA
  18. “The Gilded Age” (HBO Max) — Jan. 24
  19. “Reacher” (Amazon Prime Video) — Feb. 4
  20. “How I Met Your Father” (Hulu) — Jan. 18 

 

Most Anticipated Movies of 2022

  1. Doctor Strange in the Multiverse of Madness (Disney) — May 6
  2. Black Panther: Wakanda Forever (Disney) — Nov. 11
  3. Thor: Love and Thunder (Disney) — July 8
  4. The Batman (Warner Bros.) — March 4, 2022
  5. Jurassic World: Dominion (Universal) —June 10
  6. Uncharted (Sony) — Feb. 18
  7. Morbius (Sony) — April 1
  8. Spider-Man: Across the Spider-Verse Part One (Sony) — Oct. 7
  9. Fantastic Beasts: The Secrets of Dumbledore (Warner Bros) — April 15
  10. The Flash (Warner Bros.) — Nov. 4
  11. Top Gun: Maverick (Paramount) —May 27
  12. Hotel Transylvania: Transformia (Amazon) — Jan. 14
  13. Black Adam (Warner Bros.) — July 29
  14. Scream (Paramount) — Jan. 14
  15. Aquaman and the Lost Kingdom (Warner Bros.) — Dec. 16
  16. Avatar 2 (Disney) — Dec. 16
  17. Death on the Nile (Disney) — Feb. 11
  18. Mission: Impossible 7 (Paramount) — Sep. 30
  19. Minions: The Rise of Gru (Universal) — July 1
  20. Lightyear (Disney) — June 17