Home Entertainment 2024 — Transactional: PVOD, Collectors and Launch Parties

A growing number of studio executives and other industry observers say they believe transactional home entertainment — the traditional, a la carte method of bringing a movie or show into the home, either to watch or to own — may be in the early stages of a resurgence.

The realization that subscription streaming is not sustainable on its own has prompted studios to take a second look at what was once the primary “second window” for movies fresh off their theatrical runs, and the result is that more and more films are being released for digital or physical purchase or rental before they are handed off to the streaming services.

SEE ALSO: Home Entertainment 2024, Part 1 – Streaming: Bundling, Ads, Reruns and Live Sports

Through much of 2022, as the world was still grappling with fallout from the COVID-19 pandemic, Warner, Disney and Paramount were still releasing the majority of their films to their streaming services on the same day as their traditional home entertainment release. Today, all three studios have brought back windows. New theatrical movies are typically available transactionally several weeks before their subscription streaming debuts.

Bob Buchi

“It’s about maximizing the content life cycle through windowing, just as it’s always been,” said Bob Buchi, president of Paramount Home Entertainment,

At Universal Pictures Home Entertainment, division president Michael Bonner notes that both The Super Mario Bros. Movie and Oppenheimer “yielded new benchmarks in digital and physical, demonstrating some of the highest transactional performance levels across the business that we have seen this year. The performance of The Super Mario Bros. Movie was especially standout, earning more digital revenue than any other theatrically released Universal movie ever. Results for Oppenheimer’s 4K Ultra HD release were equally notable, currently tracking in its debut window to be Universal’s biggest-selling 4K title of all time.”

David Decker, president of content sales at Warner Bros. Discovery, also said his division “had a successful 2023, driven by Barbie‘s ‘pink wave’ and the health of the WBD catalog, and punctuated by our ‘WB 100th Anniversary’ promotion. We are finishing the year with digital sales up over pre-pandemic levels.”

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Digital Deluge

Given the higher margins of digital releases — and fewer headaches because there are no manufacturing or shipping costs, not to mention returns — studios in 2023 began focusing on making films available for digital sale or rental much sooner than in the past, often at a premium price. This past year has seen a significant uptick in premium video-on-demand, or PVOD, releases, with films fresh from their theatrical runs becoming available to rent or buy at higher prices as early as 18 days after their big-screen debuts before the price is lowered to the standard transactional price of $5.99 for a rental and $19.99 for a sale. Universal Pictures Home Entertainment’s Trolls Band Together, for example, was released Dec. 19 — just one month after its theatrical debut — at a rental price of $19.99 and a purchase price of $29.99. Six days earlier, Taylor Swift: The Eras Tour was released for digital rental only at $19.89, also by UPHE, about 60 days after it opened in theaters — still much shorter than the traditional 90-day window.

Michael Bonner

Even Apple allowed its high-profile film Killers of the Flower Moon, directed by Martin Scorsese, to be released via PVOD prior to its debut on Apple TV+.

UPHE’s Bonner said 2023 “reinforced our view of the importance of the home entertainment category, led by some impressive title successes across both premium and traditional windows. When studios release titles under a compressed window framework that includes an exclusive home entertainment offering, consumer engagement for transactional formats is very strong.”

Taking Aim at Collectors

The disc business, meanwhile, continues to decline, kept alive by a growing reliance on the collector market and a hope among some for a vinyl-like resurgence.

“Initially, the disc market was driven by families with kids,” said one insider. “Now, the business is being driven by collectors, as evidenced by continued year-over-year growth in 4K Ultra HD Blu-ray sales.”

Still, 2023 was a tough year for the disc business, with total consumer spending this year expected to come at less than $2 billion — less than 10% of what consumers spent on DVDs and Blu-ray Discs in the peak year of 2006.

In early September, Ingram Entertainment, once the largest distributor of physical home entertainment product, announced it is getting out of the DVD and Blu-ray Disc business. “Expenses are exceeding sales [so it’s] time to exit,” chairman and CEO David Ingram told Media Play News. Later that month, Netflix shut its legacy disc-rental business and let customers keep whatever discs they had out. And in October, the Best Buy retail chain announced it would exit the DVD and Blu-ray Disc business beginning in the first quarter of 2024.

But things may be looking up for the disc, which once was such a crucial revenue stream that DVD sales projections were factored into the movie greenlighting process.

The streaming services’ content purge may prompt more consumers to consider a la carte options, studio insiders say. And the tendency of digital purchases to sometimes disappear from consumer libraries — a hurdle in getting more people to shell out $20 for a digital movie — may also drive disc purchases.

Critics contend a primary reason disc sales are in a protracted slump is studio indifference. They say the number of theatrical catalog releases has plummeted in recent years, paving the way for pirates. And while fresh new theatrical films continue to be released on DVD, Blu-ray Disc and 4K Ultra HD, special features are becoming increasingly scarce while quality issues abound.

“The studios have checked out,” said industry analyst Ralph Tribbey, who has been tracking discs sales through his DVD & Blu-ray Disc Release Report since DVD was launched in 1997.

But that’s not entirely true. Paramount continues to create collectible disc offerings for a wide array of titles in its vast and storied library, such as a deluxe anniversary package with hours of bonus content for Titanic, new additions to its acclaimed Paramount Presents line such as Terms of Endearment, and newly remastered 4K Ultra HD releases of classics from Roman Holiday to The Truman Show.

Demand for the 4K Ultra HD Blu-ray release of Oppenheimer was so great that retailers were running out of copies, prompting Universal Pictures Home Entertainment to issue a statement promising to “replenish those retailers quickly so fans can watch the film at home in the best picture quality possible.” Meanwhile, retail-exclusive editions of the film commanded big prices on the secondary market, with Best Buy’s 4K Steelbook edition of the film listed on eBay at an average asking price of well over $100.

And then there’s Walt Disney Studios Home Entertainment, the latest name for The Walt Disney Co.’s home entertainment operation. The division made headlines in August when it announced it is exiting the disc business in Australia. But just days later, Disney announced plans to roll out several of its popular Disney+ series, including “The Mandalorian,” “WandaVision” and “Loki,” as “Collector’s Edition” 4K Ultra HD and Blu-ray Discs in Steelbook packaging.

Since then, Disney has packaged 100 of its animated films into a massive Blu-ray Disc boxed set retailing for $1,500 and issued Snow White and the Seven Dwarfs, the first of its iconic animated classics, on 4K Ultra HD.

David Decker

WBD’s David Decker says the physical business “continues to represent a meaningful portion of our transactional revenue, and WBD remains committed to the category. We will keep reaching casual consumers and avid fans where and how they want our content: from best-in-class 4K Blu-rays to remastered and re-released films on 4K UHD from our 100-year library of titles.”

Independent film distributors such as Ed Seaman, CEO of MVD Entertainment Group, also see opportunity ahead.

“In disc sales, as studios and brick-and-mortar retailers continue to bail, the opportunity grows for both independent distribution and retail/e-commerce,” Seaman said. “Savvy dealers will pick up more and more great movies and shows and feed the strong demand for the end user, who has a huge appetite for collectible content.”

Keeping the Party Going

Studios have also resumed a practice that subsided years ago when streaming became the dominant form of home entertainment consumption: gala release parties celebrating the disc debut of high-profile new theatrical films.

Disney in January 2023 threw a release party for journalists and social-media influencers to promote the Blu-ray Disc release of the thriller The Menu. The party was held at the Blockbuster pop-up on trendy Melrose Avenue in Los Angeles and included as guests stars Aimee Carrero, Arturo Castro and Mark St. Cyr. Guests enjoyed drinks that they could order by presenting bartenders with an appropriately labeled Blockbuster videocassette box and “well-made” cheeseburgers from Irv’s Burgers, the historic West Hollywood burger stand.

In September, Disney hosted a dance party at the California Science Center in Los Angeles to celebrate the digital and disc release that day of the live-action feature The Little Mermaid.

And November saw two disc release parties. To promote the DVD, Blu-ray Disc and 4K Ultra HD release of Oppenheimer, Universal Pictures Home Entertainment held a screening of a making-of documentary, introduced by director Christopher Nolan, at the Linwood Dunn Theater at the Academy of Motion Picture Arts and Sciences’ Pickford Center for Motion Picture Study in Hollywood. And over in Venice Beach, Disney held a “Haunting in Venice … Beach!” party for A Haunting in Venice, highlighted by trivia for Agatha Christie and murder mystery fans, typewriter poets who wrote on-the-spot personalized poems for partygoers, and sessions with medium Christina Engelhardt.

Lastly, Paramount Home Entertainment in December held a party at Pizzeria Mozza to celebrate the 4K and Blu-ray Disc release of Teenage Mutant Ninja Turtles: Mutant Mayhem. Guests included filmmakers Seth Rogan, Evan Goldberg, James Weaver and Jeff Rowe.

Distribution Issues

One big development on the disc front that occurred in 2023 is word that Walmart, the biggest physical retailer of DVD and Blu-ray Disc with a market share of 45%, is looking to consolidate distribution through Studio Distribution Services (SDS), the joint venture formed by Universal Pictures and Warner Bros. back in April 2021 to sell and distribute DVDs, Blu-ray Discs and 4K Ultra HD Blu-ray discs in North America. The venture is headed by Eddie Cunningham, a former president of UPHE, a steadfast champion of physical media.

Eddie Cunningham

Cunningham is calling for the elimination of the window — typically two weeks — between a film’s digital release and its physical release, a practice instituted more than a decade ago by the studios in the hopes of jump-starting the electronic sellthrough, or EST, business.

“I do think it is time to closely align disc and EST release dates,” Cunningham said. “While it was clearly the right decision to give EST a short window in the early formative, and massive growth, stages of that developing business, both EST and disc are now mature businesses. I would now let the consumer decide how they want to view content in home entertainment. I believe many of studio our partners are looking at this issue objectively and that we will see some significant movement in that direction in 2024.”

Speaking privately, studio executives say the key obstacle to such a move is one of logistics. Since so many new films are being released through PVOD, there simply isn’t enough time to prepare a disc release on the same day. Traditionally, films come to home entertainment about three months after their theatrical bow; with PVOD, the window can be as short as 18 days.

But Cunningham maintains that at the very least the window should be eliminated between a film’s disc and standard digital release, “where materials can be prepared early enough to work through the much more complex compression and authoring, manufacturing, and distribution challenges unique to the disc business.”

Prospects for 2024

Looking ahead, studio executives are looking at the transactional business with guarded optimism for 2024, particularly on the PVOD front.

 “We expect that extended studio and retailer support of early availability, in addition to strong consumer demand for accelerated theatrical-to-home releases, will continue to fuel meaningful growth of the premium window, offsetting the decline of physical and delivering significant value to the home entertainment ecosystem,” said UPHE’s Bonner.

Adam Frank

“We are seeing strong growth in the transactional marketplace across new releases as well as the weekly and monthly catalog run rate for our own business,” said Adam Frank, EVP of global partner management, sales and distribution for Lionsgate. “The industry is moving away from release-strategy fragmentation as studios prioritize a healthy ‘free-and-clear’ transactional window post-theatrical. This trend should lead to higher engagement from our core transactional audience and an influx of new consumers.”

Paramount’s Bob Buchi agrees. “We know that fans still love to own and collect their favorite films and television shows, which is why we continue to support the physical disc business,” he said. “At the same time, we live in an increasingly digital world so we are exploring some enticing and novel ways to augment both the collectability and gift-ability of digital content. There are exciting developments on the horizon, and just as the home entertainment industry has always done, we will continue to evolve and adapt to changing technologies and consumer behavior.”

Warner Bros. Discovery’s David Decker said that in 2024, WBD is looking to build “on our 2023 momentum. We have exciting new releases coming with titles such as Dune 2, Furiosa (the “Mad Max” prequel) and Beetlejuice 2.”

Decker added that he believes windowing of new releases “is finding its footing. Barbie had one of the biggest premium windows of the year, and the release strategy also helped the film’s historic box office success. We will evolve our strategy in 2024 with more data-driven analysis, working closely with our colleagues at WB Pictures and Max on each individual title. We are relentlessly focused on getting these incredible movies in front of as many people as possible, through the best possible viewing experiences, and at price points that satisfy consumer demands. For us, Barbie said it best: ‘It is the best day ever. So was yesterday, and so is tomorrow and every day from now until forever.’”

Looking Ahead: 2023 Home Entertainment Opportunities Centering On Synergies

NEWS ANALYSIS — The dawning of a new year brings to the home entertainment sector, both streaming and transactional, a host of challenges and questions — and a few opportunities.

Challenges include a nation that once again is on the threshold of a recession, prompting a rash of recent layoffs and cutbacks at most of the big studios as well as streamers. Compounding the cloudy economic outlook is the fact that Hollywood is in the midst of serious self-examination, at the center of which is the question of streaming’s sustainability as a business model, given the escalating cost of content and limited returns under cheap all-you-can-watch subscription plans.

Questions include: How will recent moves into even lower-priced advertising-supported subscription plans play out for Netflix and Disney+?  What will the merger of HBO Max and Discovery+ look like, particularly given the late-2022 bloodletting of content from Max? Will there be more consolidation among the big streaming services? And what of the shrinking transactional market, in which consumers rent or buy specific movies, TV shows and other content either digitally or on DVD or Blu-ray Disc?

And yet there are still opportunities. In conversations with industry leaders, the word we hear most is synergies, since except for Netflix the leading streamers are all part of big media companies that also include theatrical and traditional, transactional home entertainment businesses.

The theatrical business, which has traditionally been the launching pad for movies, has been torn apart by streamers buying and even producing their own content — and studios owned by media companies giving their streaming sisters preferential treatment.

Gower Street Analytics projects the 2023 worldwide box office will improve to a projected $29 billion in ticket sales from an estimated 2022 total of $25.8 billion, but that’s still a good 30% below pre-pandemic 2019 box office revenue of $42.3 billion. Part of the reason is fewer movies being released to theaters, which then also hurts transactional home entertainment, which used to be the critical “second window” studios looked for to prop up theatrical underperformers while boosting the overall bottom line.

Bob Buchi

And yet Bob Buchi, president of worldwide home media for Paramount Pictures, is optimistic for the transactional side of the business heading into 2023, citing a rash of high-profile theatrical releases slated for next year and maintaining quality is more important than quantity.

“In 2023 the theatrical slate across the industry promises to be even more robust and consistent than it was in 2022, and we at Paramount are especially enthusiastic about the sales and drafting opportunities we’ll have with the return of key franchises like ‘Mission: Impossible,’ ‘Transformers,’ ‘Scream,’ ‘Teenage Mutant Ninja Turtles’ and ‘Paw Patrol,’” Buchi says.

“Home entertainment remains very important to collectors and cinephiles who appreciate the best-possible quality audio and video presentation and the compelling bonus features, while general audiences appreciate the broad selection and flexibility to access their favorite films whenever they want.”

Michael Bonner

Universal Pictures Home Entertainment president Michael Bonner agrees.

“The market will likely remain very fragmented with different release strategies across the studios,” he says. “But Universal is very optimistic, given our strategy, and is excited about the opportunity in 2023 to drive further growth across the category with our exceptionally diverse slate, including Fast X, The Super Mario Bros. Movie and Oppenheimer.”

Adam Frank, SVP of global digital sales and distribution at Lionsgate, also takes pride in his studio’s slate of theatrical releases, the success of which he expects to trickle down to traditional home entertainment.

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“We have a robust slate in 2023 that includes John Wick: Chapter 4The Hunger Games: The Ballad of Songbirds and SnakesExpendables 4; Judy Blume’s timeless Are You There God? It’s Me Margaret; The Blackening; a new installment in the billion-dollar ‘Saw’ franchise; and a new Dirty Dancing sequel starring and produced by Jennifer Grey, among many others,” he says. “With this lineup, we expect to see continued acceleration in the transactional space.”

Jason Spivak

Transactional and subscription video-on-demand (SVOD) should not be seen as mutually exclusive, particularly if smart windowing leads to synergies between the two entertainment consumption models, says Jason Spivak, EVP of distribution for North America television and home entertainment at Sony Pictures Entertainment.

Indeed, Sony, which has no proprietary standalone streaming service, in 2021 signed separate distribution deals with Netflix and Disney+ worth a reported combined $3 billion for exclusive Pay 1 TV (streaming) access to its theatrical releases through 2026. Those movies used to go to Starz, HBO, Epix, FX and Showtime. Netflix paid big for the first rights, with Disney+ getting access after Netflix’s 12- to 18-month window.

“This deal establishes a new source of first-run films for Netflix movie lovers,” Scott Stubler, Netflix’s head of original films, said in a statement.

Sony’s Spivak says transactional and streaming can happily co-exist and service consumers in different ways at different moments. Transactional affords consumers the benefits of movie collection building while streaming appeals to consumers when they may be more casual in their movie consumption interests.

“As such, we do not look at it as an either-or type of choice for our audiences,” he says.

On the TV series side, Spivak says, “We have seen streaming become a primary platform for audiences to enjoy our new and classic shows, offering convenience for consumers to discover and binge.

“With that said, for certain shows transactional remains [the best] way to access and collect the latest seasons and episodes, as evidenced by the performance of ‘Better Call Saul,’ which is our best-performing season ever in terms of digital sellthrough in the first six months of release.”

Paramount’s Bob Buchi agrees. “The industry will continue to experiment market by market with windowing, pricing and release strategies,” he says. “At Paramount, we are working more collaboratively than ever with our colleagues in theatrical and at Paramount+ to leverage our joint consumer messaging and maximize our marketing spend in the most effective way possible.”

In 2022, he says, “We launched Orphan: First Kill simultaneously in a limited theatrical run, on PVOD/PEST, and on Paramount+, allowing consumers to decide their viewing preference. We found that the combined messaging and collective effort caused all boats to rise and the film was successful across all platforms.

“That strategy is contrasted with Top Gun: Maverick, which obviously had one of the most unprecedented theatrical runs in recent history. After generating nearly $1.5 billion at the global box office, the film became a massive success across home entertainment platforms and the No. 1 best-selling digital release of all time, all based on a more traditional windowing pattern.

“Every film requires careful consideration to determine the best release strategy to serve the consumer and maximize revenue across all platforms.”

Partnering with retailers also is key, Buchi says. “I admire how our leading retailers continue to strive for innovation, new growth opportunities, efficiencies, and paradigm shifts, all of which can lead to exciting developments we’ll see tested in 2023 and beyond,” he says. “We plan to explore a reimagining of headless commerce (a separation of the front end and back end of an e-commerce application) for both physical and digital retailers, the evolution of NFT-bundling with premium products and experience for the super fan, and podcast product extensions for our beloved franchises.”

Retailers believe consumers will become increasingly value-conscious amid the cloudy economic forecast.

“There will continue to be multiple modes of entertainment consumption in 2023,” says Cameron Douglas, VP of home entertainment for Vudu and Fandango. “However, we expect that consumers will be more value-conscious. Do we still need this subscription service, or should I upgrade/downgrade/eliminate? Can we tolerate a few ads in this casual viewing experience? Should we buy this, or should we just rent it? Should we splurge on a family night out at the movie theater or wait and watch the film at home in the premium window? Tools like Rotten Tomatoes will become even more valuable, not only to validate fans’ entertainment choices, but to help people find value in what to watch next.” 

Garson Foos

Garson Foos, CEO of Shout! Factory, a leading independent film distributor, says 2023 “looks to continue Shout’s growth in the transactional space with theatrical new releases, major new anime features and name-brand catalog coming to market. We’re extremely happy that the transactional business has remained so strong. We continue to make numerous deals for physical and TVOD rights — physical with studios and indies, and TVOD with indies. The 4K format is creating a lot of opportunity as we continue to find new ways to engage passionate fans. As there are more strong titles available to stream, it puts pressure on the transactional business. But there’s always the customer that will pay to have the best version of something, and to stream it without commercials, or own it digitally.”

The subscription streaming side of the business, which according to the latest estimates from DEG: The Digital Entertainment Group now accounts for nearly 85% of consumer home entertainment, is expected to see continued turbulence in 2023, thanks to such obstacles as high content prices, fierce competition among services, a maturing market and, until just recently, a reliance solely on consumer subscriptions for revenue.

Bill Rouhana

“SVOD will continue its challenges as consumers cancel subscriptions or move to lower-cost ad-supported tiers, which may exacerbate the hemorrhaging of cash,” says Bill Rouhana, CEO of Chicken Soup for the Soul Entertainment. “You’ll see a consolidation of the industry as smaller SVOD players fade, and even larger players begin looking to be sold or merged.”

Veteran ad-supported streaming services such as Chicken Soup, Rouhana maintains, are in the right place at the right time.

“AVOD is soaring because consumers are growing tired of paying for so many SVODs,” he says. “Given the state of the economy and uncertain times, they are cutting back. To supplement their streaming diet, they’re seeking free options, and AVOD services are benefiting from this. I think you’ll see even greater growth in 2023.”

As for his own company, Rouhana says Chicken Soup for the Soul Entertainment “will continue to scale across AVOD, FAST and our Screen Media original content studio. It will be a big year for AVOD and FAST as consumers continue to discover the amazing content available for free — especially as the economy continues in a recession.

“I also see more companies getting into AVOD — which further reinforces our strategy and what we already know. As Netflix and Disney ramp up their ad-supported tiers, they will begin charging higher CPMs which will benefit us. That will also help our ad rep business as we help smaller AVODs sell their ad inventory — something they can’t do on their own at the same level of success.”

Stefan Van Engen

Stefan Van Engen, SVOD of content programming and partnerships at Xumo, a premium FAST (free ad-supported television) service, shares Rouhana’s optimism.

“For Xumo, we will continue to scale and deliver premium experiences across our FAST platform, Xumo Play, and the roll out of new Xumo devices,” he says. “The industry as a whole will continue to innovate around engagement, programming and more personalized experiences.

“I believe entertainment is supposed to be easy.  With the amount of amazing choices across SVOD services, the fatigue is not in streaming, it’s in choosing and cost. AVOD and FAST continues to soar because it takes the economic risk out of just watching something, without having to think about where and what you are choosing to watch.”

Amy Jo Smith, president and CEO of trade association DEG: The Digital Entertainment Group, says that in the coming year, “it will be more apparent than ever how much consumers value choice and a seamless user experience. Viewers will continue to seek a wider breadth of content, including sports and live events, delivered through major and specialty services, and they will look for cost-efficient, customized, and easily navigable bundles of entertainment options, including experiences that are transactional, subscription, ad-supported and possibly even theatrical, social and immersive.”

“Short lived will be the days where consumer entertainment is primarily developed and distributed by a community of monolithic giants centered in Hollywood run and operated by people who look like me,” adds Mark Fisher, president and CEO of OTT.X, the streaming trade association. “We will continue to move forward toward a more egalitarian, global and diverse ecosystem.”

Looking Back at 2022: Streamers Stumble and Turn to Ads as Hollywood Bemoans Erosion of Traditional ‘Second Window’

NEWS ANALYSIS — As the nation slowly emerged from the COVID-19 pandemic, home entertainment faced a whole new set of challenges and concerns in 2022.

Subscription streaming, the golden child of the pandemic era, began showing cracks, beginning with Netflix posting significant subscriber losses in the first and second quarters of the year, which sent the streamer’s stock price tumbling. Then came the Walt Disney Co.’s sacking of Bob Chapek from the CEO slot, in part due to the high costs of Disney+, a key factor in the company’s sinking stock price. And HBO Max, after an April merger between Warner Bros. and Discovery, ended the year with a rash of film and series getting dumped to cut costs and prep the service for a union next year with Discovery+.

“2022 definitely felt like a roller coaster of recalibrated expectations for our business on Wall Street, with M&A, growth amid higher churn for direct-to-consumer subscription services, and escalating costs for content production and acquisition,” observes Amy Jo Smith, president and CEO of DEG: The Digital Entertainment Group, the digital entertainment trade association. “Even when the ride was bumpy, though, there were a lot of bright spots, including the growth of ad-supported streaming services (AVOD and FAST) and a wider range of subscription services, the return of in-person events to foster cross-industry collaboration, and, most importantly, consumers’ deep and abiding engagement with premium content across distribution models including transactional, subscription and ad-supported.”

“2022 was another growth year for the OTT business, with SVOD still the leading revenue contributor, but with AVOD and FAST growing rapidly and changing the way that consumers access and enjoy motion picture and episodic content in the home,” adds Mark Fisher, president and CEO of OTT.X, the streaming trade association. “And TVOD remains the primary way that consumers conveniently access new releases and catalog content, much of which is only available via VOD.”

Subscription streaming remains the dominant way in which consumers enjoy entertainment at home or on the go, and in fact grew its overall market share to nearly 85% of all consumer spending on home entertainment, according to the latest DEG numbers.

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But the King Midas touch first felt during the heyday of the pandemic, when theaters were closed and people were asked to stay home, is clearly gone — as evidenced by the launch late in 2022 of cheaper, advertising-supported subscription plans by both Disney+ and Netflix in an effort to boost revenues.

The jury is still out on whether the gambit will succeed, although early reports suggest Netflix, at least, is running into a little trouble. Research house Antenna in December reported that the $6.99 “Basic With Ads” plan nabbed just 9% of new Netflix domestic subscription sign-ups during its first month of availability, while only 0.1% of Netflix’s existing U.S. subscribers switched to the ad-supported option. At the same time, Reelgood found hundreds of movies and TV shows are missing on the ad-supported tier.

Bill Rouhana

“For SVOD services, the major development for 2022 was the sobering reality that their business models, as currently constructed, are not sustainable — as subscriber growth has slowed and content costs have continued to escalate,” observes Bill Rouhana, CEO of Chicken Soup for the Soul Entertainment, a leading provider of free streaming content. “SVODs were spending heavily on original content to differentiate their services and ultimately ran up huge debts. That, combined with an economy that’s in a recession, and consumers cutting back on paying for multiple SVOD services, makes for a challenging future, with maybe one or two winners.”

Not surprisingly, then, the biggest success story for home entertainment in 2022 is the proliferation of completely free streaming content, both on-demand (ad-supported video-on-demand, or AVOD) and linear (free ad-supported streaming television, or FAST).

In this part of the business, one of the biggest developments of 2022 was the August acquisition of Redbox by Chicken Soup for the Soul Entertainment, which gave the combined company more than 145 FAST channels on top of its already strong presence in the AVOD market with Crackle and other services.

“Chicken Soup for the Soul Entertainment massively scaled for the future in 2022 with the acquisition of Redbox,” Rouhana said. “We’ve been working to integrate the companies and are close to finishing that.”

Stefan Van Engen, SVOD of content programming and partnerships at Xumo, a premium FAST service, maintains that “FAST has become an industry darling in the past year.  From independent content owners to major media companies, everyone wants to participate.”

Meanwhile, the fallout from home entertainment’s “streaming uber alles” philosophy has had a pronounced effect on Hollywood, as the financial realities of producing content for primary consumption on all-you-can-watch streaming services led to a dearth of theatrical feature films, particularly after the year’s midpoint. According to Comscore, just 22 films opened theatrically over the summer, half as many as in 2019, the last pre-pandemic year. Not surprisingly, box office revenues for the year are expected by Gower Analytics to clock in at $25.8 billion, up 21% from 2021 but a significant drop from the $42.3 billion generated in 2019, the last pre-pandemic year.

Further impacting Hollywood’s bottom line in 2022 was the continued erosion of what was once the biggest post-theatrical revenue-generator, disc (DVD and Blu-ray) and, to a lesser extent, a la carte digital sales and rentals (known as TVOD, for “transactional video-on-demand”).

“In the rush to feed the big streaming services, many of them under the same corporate ownership, the big studios have effectively turned their back on what has traditionally been their biggest post-theatrical revenue generator,” says one veteran industry observer. “Without this critical component of the movie food chain, billions of dollars are being flushed away.”

Indeed — movies rarely generate enough money from the box office to turn a profit. In the not-too-distant past, even films that lost money at the box office more than made up the difference through robust packaged-media sales, which for a time even exceeded theatrical revenues, as well as foreign licensing rights. Projected disc sales even became a factor in studio decisions on whether to greenlight movies or not.

But as subscription streaming became the dominant form of home entertainment consumption, Hollywood seemed to lose interest in this once-crucial second window. Sure, the studios tried getting people to buy movies digitally, but consumers weren’t biting, particularly since they could get a whole month’s worth of entertainment from Netflix and the other streamers at roughly the same cost of a single digital movie.  Discs, meanwhile, were all of a sudden seen as yesterday’s technology. In 2006, the year Blu-ray Disc was launched, disc sales brought in nearly $17 billion in consumer spending. In 2021, the latest full year for which figures are available, the total was less than $2 billion.

In the first nine months of this year, according to DEG estimates, 84% of the total consumer spend on home entertainment, or $22.3 billion, went to subscription streaming services. Consumers spent just $4.7 billion on physical and digital purchases and rentals. Combined purchase and rental spending on DVDs and Blu-ray Discs slipped 15% to an estimated $1.6 billion, while digital sellthrough and VOD revenues fell less than 3% to $3.16 billion.

The physical media side of the business received a jolt in the fall when Walmart, still the No. 1 retailer of DVDs and Blu-ray Discs, seemingly implemented a 20% reduction in floor space in its electronics department for discs.

And yet home entertainment executives are adamant that the traditional, transactional home entertainment model, including discs, still has plenty of life left in it.

Bob Buchi

“Thanks to consumer demand, creative efforts from the studios, and the ongoing support from digital and physical retailers, the transactional business continues to be remarkably resilient despite the challenges of the last few years,” says Bob Buchi, president of worldwide home media for Paramount Pictures. “In 2022, the industry and consumers benefited from the very welcome return of theatrical new releases, sales of which were up 69% across the industry through October, while also providing the longer-term benefit of refreshing the catalog business for years to come.”

Buchi says Paramount Home Entertainment in 2022 “enjoyed a 200%+ spike in the theatrical new release business thanks particularly to Top Gun: Maverick and its record-setting digital sales at over 4.5 million transactions inception-to-date in the domestic market alone and equally impressive results from around the world.

“Meanwhile, consumers continue to show up for both digital and physical releases of special catalog titles. Our 50th anniversary celebration of The Godfather this year generated over $25 million in consumer spend. We’ve also seen a strong consumer response to 4K debuts of titles like Planes, Trains, and Automobiles and Pulp Fiction. In television, the ‘Yellowstone’ franchise continues to dominate, generating more than $125 million in consumer spend this year, which has helped spur the expansion of the Taylor Sheridan universe to ‘1883,’ ‘1923’ and ‘Tulsa King.’”

Buchi maintains that traditional home entertainment “remains very important to collectors and cinephiles who appreciate the best-possible quality audio and video presentation and the compelling bonus features, while general audiences appreciate the broad selection and the flexibility to access their favorite films whenever they want.”

Michael Bonner

Universal Pictures Home Entertainment president Michael Bonner also had a very good year. “From premium windows through to catalog, Universal’s transactional business remains very strong, with robust consumer demand for content across windows and formats,” he says. “Our premium window continues to generate meaningful engagement with audiences and material value to our home entertainment business with titles like Sing 2Jurassic World Dominion and Black Phone leading the way. Providing consumers with broader choice and flexibility in how and where they see our movies is working to further fuel adoption and engagement.”

Jason Spivak, EVP of distribution for North America Television & Home Entertainment at Sony Pictures Entertainment, says the transactional business “continues to thrive, particularly from a digital point of view. Even with the rapid increase of SVOD options and other new-release patterns over the past few years, transactional digital continues to be a core business, satisfying the ongoing consumer need to curate a purchased virtual collection of latest hits and library favorites. Over the past year we were extremely pleased with the digital performance of many of our films, including Ghostbusters: AfterlifeSpider-Man: No Way Home and Uncharted.”

Jason Spivak

Adam Frank, SVP of global digital sales and distribution at Lionsgate, said digital movies sales were one of the company’s bright spots in 2022.

“We have seen new releases continue to perform extremely well via electronic sellthrough, in some cases ahead of pre-COVID levels across the entire box office spectrum,” he says. “Consumers are eager for new content no matter how they access it — transactionally or via SVOD or AVOD — with theatrical-first product proving to be the most valuable from a downstream monetization standpoint.”

For independents, the rise of AVOD presents another potentially lucrative sales opportunity, coming at a time when sales to SVOD providers is increasingly hit-or-miss as the subscription streamers vacillate between producing their own content or buying it from third parties.

“AVOD has become a fantastic category for us — both our own FAST channels, and distribution on a myriad of platforms,” says Garson Foos, CEO of independent film distributor Shout! Factory. “We see that continuing to grow. It’s the emergence of the long-tail into visual content — as we’ve seen with streaming services for music.”

As for the traditional transactional end of the business, that’s still the indies’ core.

“2022 was another strong year for transactional, with a strong new-release slate — Belle, Operation Sea Wolf and JFK: Destiny Betrayed — paired with strong catalog pickups (Laika Studios, Ferngully, the ‘Halo’ catalog),” Foos says.

Garson Foos

The gift market remains a bright spot for independents, almost exclusively on the physical side of the business.

“Our impression is that it’s largely physical,” Foos says. “We don’t have a lot of evidence that the gift purchase has transitioned to digital. We still see good sales from holiday gift-card giving in late December and early January. And our complete-series TV sets, deluxe film sets like ‘Friday the 13th,’ ‘Halloween’ and our deluxe Steelbook packages always see big spikes around the holidays. Nothing says Happy Hanukah like our new Carrie 4K UHD Steelbook release.”

“People like tangible gifts, and discs are still a great tangible gift,” adds Ed Seaman, chief operating officer of the MVD Entertainment Group, another leading indie.

“Similar to the vinyl collector’s marketplace, deluxe Blu-rays and UHDs are coveted, and not just for the superior quality,” he continues. “Nobody predicted that vinyl would continue to grow since its resurgence 15 years ago, yet each year it is reaching new heights.  The video market shall likely follow for the collector’s market. Digital gift giving seems less and less relevant with the market trending more and more to AVOD.”

Overall, though, “for independent product and catalog, transactional can be challenging,” Seaman maintains.

“Getting placement on the biggest and best platforms can be a struggle, but when something does get placed the results are still very good,” he says. “Inclusive digital platforms for film remains the biggest challenge — and opportunity — in our industry.  There is no consistent place to find virtually any film you’d like to see. Everyone is fatigued by the need to subscribe to multiple services to see what you want to see. Compared to the music industry, there is no Spotify in the video business where you can reliably find virtually anything you’d like to watch.

“There is an opportunity to build or aggregate the various sources of entertainment into one easy-to-use, all-you-can-eat service.  The fragmentation and frustration in finding what you want is also an opportunity for disc sales, which is now the most reliable way to find what you want.”

Looking Ahead: Lessons From the Pandemic to Guide 2022 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 business 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.

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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.

Jim Wuthrich

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, 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.”

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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.”

Michael Bonner

“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.   

“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.”

Bob Buchi

“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.

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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

Douglas says Vudu “is working hard to expand our catalog every day. It’s both a challenge and an opportunity, as we continue to secure new and previously unavailable titles. There’s a variety of titles where digital rights were originally unsecured, but with the demand increasing, there’s more pressure than ever to make these films available for fans to stream at home. We pride ourselves on providing the best quality of experience and we are always working to create a bigger, better home entertainment experience for our customers. We want to be that place where fans can find every beloved movie and show they desire.”

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. With our entertainment lifecycle marketing strategy, we look forward to helping new and returning partners more effectively and efficiently reach high-value entertainment audiences at scale.”

The big challenge for home entertainment executives in the coming year 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

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, 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:

    • 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 theater-going 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 our theatrical exhibition partners to release films with dynamic windows to meet demand across all platforms.”
Jed Grossman

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 non-fiction, we expect some other platforms to step up and become more dominant in that space. There is a real opportunity for platforms focusing on non-fiction to deliver to fans what they want when they want it.”

At MVD, Seaman notes, “we’ve just added Zach Fischel to our leadership team; Zach is a veteran in the entertainment industry and is leading our label management team and marketing department. We’ve additionally moved longtime MVD staffer Chris Callahan to lead our digital sales and operations team. Chris has been with MVD since 1999 and has served in sales management, label management and international licensing. Both of these leaders are committed to improving their areas of responsibility; they have great ideas particularly in digital marketing, an area of overlapped responsibility. We are really excited about 2022!”

So is Mark Fisher, president and CEO of OTT.X, a streaming industry trade group.

“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.”

Looking Back at 2021: Home Entertainment Struggles to Find the New Normal

NEWS ANALYSIS — 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 began stepping 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. 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.

Meanwhile, 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, approved by the European Commission in December, is expected to be completed in mid-2022, pending Discovery shareholder and federal regulatory approval.

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Sadly, the year ended on a down note, with Omicron leading to theater closures in Europe and the cancellation or postponement of several key entertainment-industry events, including The Critics Choice Awards, the National Board of Review’s annual gala, the Palm Springs Film Festival, and BAFTA Los Angeles’ annual tea party for the awards season.

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.

Jim Wuthrich

“2021 marked the first anniversary of HBO Max and, with it, a whole new distribution pattern for movies,” said Jim Wuthrich, president of content distribution for WarnerMedia. “Due to the pandemic and uncertainty of closures, WarnerMedia made all of its movies available on HBO Max and in theaters at the same time. This was great for movie fans, as they could watch movies such as Wonder Woman 1984 or Godzilla vs. Kong at home or in theaters.”

Mixed Results

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

The first few months of 2021 were clouded in uncertainty, 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, not surprisingly, continued to flourish at the accelerated pace that began a year earlier with the onset of the pandemic. Consumer spending on subscription video-on-demand services soared more than 20% in the first half, according to DEG: The Digital Entertainment Group estimates — and those numbers don’t include Amazon Prime Video, which is considered in the same league as Netflix.

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 estimates prepared by DEG: The Digital Entertainment Group.

TVOD Recovers

As the year progressed, subscription streaming continued to clearly dominate home entertainment, even as 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. Final year-end DEG numbers are not yet in, but by the third quarter disc and digital sales had trimmed their quarterly decline to 12% while rentals were off just 14%.

“Factors limiting transactional growth in 2021 include few new theatrical releases, which are historically a key driver of home entertainment spending,” Smith said. ”This was particularly true early in the year. Spending on library titles, however, has been notably strong throughout the pandemic, and with theatrical new releases restarting mid-year, we saw spending on home purchases of new releases beginning to pick up in the third quarter. We expect to see this trend continuing when the full year is tallied.”

“Looking back at the year, 2021 certainly had its challenges, but there were some high notes as well for our business,” notes Jason Spivak, EVP of distribution for North American Television & Home Entertainment at Sony Pictures Entertainment.

Jason Spivak

“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.

“The biggest highlight for our business, however, has been the fourth-quarter theatrical performances of Venom: Let There Be CarnageGhostbusters: 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 Jim 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.”

Bob Buchi

Bob Buchi, president of Paramount Home Entertainment, 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.”

Paramount also scored with the 40th anniversary of the “Indiana Jones” franchise with the first 4K Ultra HD release of the films on both disc and digital platforms, Buchi noted. “And on the television front, home entertainment consumers continue to flock to ‘Yellowstone,’ with nearly 3 million digital transactions for season four, which launched in November.”

Michael Bonner

Universal Pictures Home Entertainment president Michael Bonner said that while 2021 “remained unpredictable and challenging on several fronts … consumers’ engagement with content has never been stronger. During these unprecedented times, the studios have served audiences well by embracing unconventional release patterns and new business models giving consumers more ways to access and enjoy movies.”

Bonner added that “engagement is up, and it’s happening across various services and business models. For Universal, our 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.  On top of that, similar to 2020, we saw our library business reaching historical levels.”

Distribution Deals

On the physical side of the business, Sony Pictures Home Entertainment and Lionsgate in February 2021 announced a multiyear agreement in which Sony will handle distribution of Lionsgate’s DVD/Blu-ray Disc releases in the U.S. and Canada beginning in July. 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. At the time Sony’s Jason Spivak said, “By working together, we can identify and leverage efficiencies in the supply chain that will benefit not only our respective studios, but also retailers and, ultimately, the millions of consumers who enjoy Sony Pictures and Lionsgate feature films and TV programs in the 4K UHD, Blu-ray and DVD formats.”

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.”

Eddie Cunningham, the former Universal Pictures Home Entertainment president who was tapped to run SDS, told Media Play News earlier in the year, “We, with our many supply chain partners in manufacturing, distribution and freight, are doing everything in our power to mitigate those pressure points.

“Sometimes meeting delivery dates and keeping retail on-shelf availability at our usual high industry standards has been difficult. It is a huge focus across our company and everything in supply chain that we used to check weekly is now daily, and everything we did daily is almost hourly, as we constantly re-assess priorities.”

Streaming Fatigue and the Rise of AVOD

While disc sales continue to be a priority for the big Hollywood studios, along with digital movie sales and rentals, streaming clearly remains the dominant force in home entertainment. 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 streamers are feeling overwhelmed by the proliferation of services, with many struggling to figure out what to watch, and where.

In December, a TVision survey found that time spent on subscription video-on-demand platforms decreased 8.6% from the first quarter to the third quarter of 2021, while time spent on ad-supported VOD increased 9.3%. It should be noted that the SVOD decline may be due, at least in part, to the vaccine rollout and people once again venturing out into the world, while AVOD growth includes not just SVOD dropouts but also linear TV audiences. Regardless, speaking in December at an OTT.X conference, Colin Dixon of nScreenMedia said the FAST/AVOD business is projected to reach $4 billion by 2024.

Mark Fisher

Mark Fisher, president and CEO of OTT.X, the trade association for streamers, 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 other enjoy good indie-produced stories; and many are adding the diversity of international content and niche content and channels. Opportunity and choice benefit everybody.”

He’s got a point. Overall, the home entertainment business is on track for another record year. The DEG’s estimate of $23.6 billion in total consumer spending in the first nine months of this year is up 6.3% from the spending total at this same point in 2020.

Converging Businesses

And 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 — 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, now has more than 100 channels offering viewers free access to movies and television shows, news, and lifestyle and sports entertainment programming. In December, Redbox began advertising its digital products on its kiosks.

Galen Smith

Asked how Redbox fared in 2021, CEO Galen Smith said that on the kiosk and TVOD side, “ We 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.”

On the Indie Front

Independent film distributors, meanwhile, are finding 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. It’s great.”

Indies also say they are finding their disc businesses remarkably resilient. Ed Seaman, COO of MVD Entertainment, 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.

“Compared to last year, 2021 was far more stable. We knew we were in a pandemic and we didn’t have the fear of the unknown like last year, where we didn’t know what impact a lockdown would have on our business and our customers. We learned in 2020 that when everyone is stuck at home during a pandemic, home entertainment products and services are pretty popular. We were able to execute our plans with greater confidence in 2021 that the market was not going to fall apart, and we had a really strong year as a result.”

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 POS 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 collectable 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 POS 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. The situation improved toward the end of the year, he said. “I doubt the Omicron strain will cause lockdowns again, and I’m keeping my fingers are crossed that the labor challenges at the border are mostly conquered,” he said.

New Ways of Doing Things

Another home entertainment trend that continued in 2021 is 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, respected 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.”

Paramount Rolls Out Catalog Promotion, Aimed at Home Audiences, for ‘Top Gun’, Other Cruise Films

Paramount Pictures April 28 announced that the 1986 Tom Cruise classic Top Gun will become available for the first time on 4K Ultra HD Digital on May 13 — which fans branded as “Top Gun Day” more than a decade ago — with a 4K Ultra HD Blu-ray Disc release following on May 19.

The film, directed by Tony Scott, was a huge box office hit, earning $356 million — the equivalent of $840.2 million in today’s dollars. The U.S. Library of Congress in 2015 selected the film for preservation in the National Film Registry, finding it “culturally, historically, or aesthetically significant.”

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A sequel, Top Gun: Maverick, is scheduled for theatrical release on December 23, 2020. The release date was pushed back from June 24 due to the coronavirus pandemic, which led to the mid-March closure of movie theaters.

Top Gun has been newly remastered for its home release in 4K Ultra HD. Home releases also will include a brand-new featurette that explores the film’s legacy and continued popularity through new interviews with Cruise, producer Jerry Bruckheimer and members of the cast of Top Gun: Maverick, including John Hamm, Miles Teller, Glen Powell and more.

The home release also includes a retrospective segment from 2016 looking back at 30 years of Top Gun. Additional previously released bonus content on the disc includes commentary by Bruckheimer, director Scott, co-screenwriter Jack Epps Jr. and naval experts; “Danger Zone: The Making of Top Gun”; a look inside the real Top Gun; original theatrical promotional material; music videos; and more.

Paramount is also debuting on 4K Ultra HD two other Tom Cruise films on May 13 (digital) and May 19 (disc): Days of Thunder (1990) and War of the Worlds (2005).

Days of Thunder reteams Cruise with director Scott and producer Bruckheimer. Known for its spectacular racing action, the movie further cemented Cruise’s star status.  The new 4K Ultra HD release includes a brand-new featurette looking back on the production with Bruckheimer.

The Steven Spielberg-helmed War of the Worlds is a retelling of the H.G. Wells classic, which shot into notoriety in 1938 when a radio drama panicked listeners who thought it was real.

The film earned more than $600 million worldwide, the equivalent of nearly $800 million in today’s dollars.

The new 4K UHD/Blu-ray Combo Pack includes access to a digital copy of the film, along with over an hour of previously released bonus content, including multiple behind-the-scenes featurettes, production diaries, a look at the characters, and more.

Honoring Eddie — and Hollywood

Eddie Cunningham, in the spirit of Teddy Roosevelt, speaks softly and carries a big stick.

Honored with Media Play News’ third annual Fast Toward Award, Cunningham is the consummate gentleman, both inside and outside of the workplace. Without exception, his employees say he’s a remarkable boss, even-tempered and empowering, encouraging them to do their best and making them want to do their best.

He’s instilled in them a belief that what they do each day in the office truly matters, that they are an essential cog in the wheel, so to speak. Leading by example, you get the feeling that Eddie Cunningham truly loves our industry as well as his company, and that loyalty and reliability are two of his most important traits.

The last time we met for lunch, at the Grill on the Universal Studios lot, he brought a bag of toys for my year-old granddaughter.

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A while back, at CES, we happened to share an elevator. Eddie Cunningham was the last person out, holding the door for nearly a dozen other people.

Now that he’s been tapped to lead a joint venture between Universal Pictures and Warner Bros. that, pending regulatory approval, will market and distribute Blu-ray Discs, DVDs and 4K Ultra HD discs in the United States and Canada from both studios, beginning in early 2021, Cunningham also is leading the charge to ensure the continued viability, and profitability, of the physical disc.

It’s a big opportunity, and a big challenge, as well. Disc sales have been declining, and with the whole world so enamored with streaming, we as an industry need to do what we can to prop up the transactional business – which despite impressive growth rates on the digital side remains tethered to physical media.

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As Cunningham says in this month’s feature, “Discs, alongside electronic sellthrough, are usually the first opportunity to own a film after its run in theaters, with the movie often not being available on SVOD for years. [And] if you want the highest quality picture and sound, disc is still the best way to get that in the home.”

The physical disc is not only the primary into-the-home distribution mechanism for new movies fresh off their theatrical runs. It also remains the best way to preserve, honor and capitalize on Hollywood’s rich cinematic history.

The proliferating streaming services are so focused on original content that older films are hard to find. The theatrical catalog titles we used to enjoy, and which formed the basis for DVD collecting two decades ago, are pretty much out of everyone’s consciousness.

I know from my own experience that whereas in the past I would regularly watch an old classic or two each week, for the last few years I have been so consumed by Netflix series such as “Ozark,” “Orange is the New Black” and “House of Cards” that I didn’t have time for much more than the latest theatrical hit.

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Only since my holiday from streaming began last December have I been watching old movies again on Blu-ray Disc.

That’s why I applaud Paramount Home Entertainment’s launch of a new “Paramount Presents” label to recognize and celebrate films from the studio’s library. As division president Bob Buchi said, “Paramount’s library represents over a century of filmmaking and includes some of the greatest films in cinematic history. We look forward to opening the vault and sharing some of our most treasured films with fans.”

 

DEG: The Digital Entertainment Group CES 2020 Event

DEG: The Digital Entertainment Group held its annual CES party for home entertainment executives at the Cosmopolitan in Las Vegas on Jan. 7. The event drew a wide range of guests, including home video presidents from the major studios and leading consumer electronics executives such as John Taylor of LG Electronics.

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.”

Oh, What a Year — With Transformational Changes, Home Entertainment in 2019 Got Smaller — and Bigger

The phrase “transformational change” has been used so much it’s become a cliché — and yet there really is no better way to describe what happened in not just home entertainment, but also the entertainment industry overall, in 2019.

The completion in March of the Walt Disney Co.’s purchase of 20th Century Fox saw the number of major studios drop to five from six. Some of the home entertainment sector’s most familiar faces were suddenly gone, including Mike Dunn, the longtime leader of Fox’s home entertainment unit, and Danny Kaye, the visionary behind Fox Innovation Labs. Later, in the summer, Janice Marinelli, Disney’s home entertainment chief, also exited in a surprise move, given that she had opened an office on the Fox studio lot and was reportedly screening staffers.

In November, two new streaming giants emerged to take on longtime leader Netflix, Apple TV+ and, most significantly, Disney+.

Meanwhile, a new flavor of streaming gathered momentum: free to consumers, paid for by advertisers. Among the heavyweights jumping into what’s known as “AVOD” are ViacomCBS, with its Pluto TV acquisition, and Comcast Corp., which in December was reported to be in advanced talks to acquire Xumo TV, which boasts more than 140 digital channels of programming across 12 genres, including sports, news, kids and family entertainment.

The overall impact of all these developments on home entertainment: It got smaller — and bigger.

Smaller, because the traditional transactional business model that has defined home entertainment since its birth more than 40 years ago has increasingly come under fire, with subscription streaming, in particular, gobbling up more and more consumer attention — and dollars — that previously would have gone toward buying or renting movies, either on disc or through digital retailers.

But also bigger, because streaming, in its various incarnations, is now widely accepted as being part of home entertainment — which is now broadly defined as people watching what they want, on demand. There’s even a new name for all of this — direct-to-consumer — which was first adopted by Disney and is now used interchangeably with “home entertainment.”

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Bob Buchi, president of Paramount Home Entertainment, says 2019 “was the year of transition.”

“From media mergers and changing consumer viewing habits to the explosion of streaming services, the landscape has shifted dramatically,” he says.

The Nov. 1 launch of Apple TV+ marked the tech giant’s entry into the content business, with nine original series. One of them, “The Morning Show,” picked up several Golden Globe nominations from the Hollywood Foreign Press Association (HFPA), a first for a new streaming service.

Less than two weeks later, Disney launched its much-ballyhooed Disney+, with a full menu of in-demand movies and series — including the “Star Wars” spinoff “The Mandalorian.” Disney said more than 10 million people signed up for the service in the first 24 hours. By the end of November, the service had 24 million subscribers, according to estimates from Wall Street firm Cowen & Co. (Netflix as of October had more than 60 million domestic subs.)

“It’s an exciting time and we believe we have a unique and significant role to play,” Ricky Strauss, president of content and marketing for Disney+, told Media Play News on the eve of the service’s launch. “Disney+ will compete based on the unparalleled strength of our brands, the quality of our intellectual property, and expertise in high-quality video streaming.”

And yet industry insiders insist that despite streaming’s growth, there’s room for transactional — largely because new theatrical films, particularly the blockbusters, aren’t available on SVOD services. This distinction has prompted FandangoNow, one of the big digital retailers, to boldly proclaim on its home page, “New releases not on Netflix, Amazon Prime or Hulu subscriptions.”

“Because we’re the first point of entry for fans to see movies in theaters, and first at home, we’ve seen a significant growth among consumers who are excited to own movies as soon as they’re available digitally,” says Cameron Douglas, head of FandangoNow. “Fans looking for high-quality content right out of theaters, including 4K HDR movies, don’t have to wait until they arrive later on subscription services, and innovative deals like rental binge bundles and the availability on new platforms keep them coming back to transactional digital services like our own.”

“New movie releases continue to be sought out by consumers during the first window in the home amidst the frenzied buzz around new streaming services,” adds Michael Bonner, EVP of digital distribution for Universal Pictures Home Entertainment. “While there’s no denying the landscape is becoming more competitive, this business has successfully co-existed with abundant availability of non-transactional content for a long time and we expect it to continue to do so.”

“There is space — and demand — for both transactional content as well as streaming — just as there is consumer interest in both digital and physical,” says Amy Jo Smith, president and CEO of trade association DEG: The Digital Entertainment Group.

Beyond new releases, streamers have a limited selection of older films and TV shows, particularly with their increased focus on original content.

“For many consumers, their streaming options are good enough,” says Mark Fisher, president and CEO of home entertainment trade association the Entertainment Merchants Association (EMA). “But just like the days when the first video rental stores opened and made it easy for the consumer to watch anything they wanted to watch when they wanted to watch it, online VOD retailers offer that same opportunity to the consumer. I know that every time I see a montage of old movie clips, I’m driven to watch titles that aren’t new releases — and these are titles not readily (or easily) found on the streaming services.”

Sales of digital movies, in particular, were a bright spot, with consumer spending up nearly 7% in the first nine months of 2019, according to trade association DEG: The Digital Entertainment Group.

“We’ve continued to see growth in EST (electronic sellthrough) — both in our new releases and in our catalog,” says Jason Spivak, EVP of distribution, for Sony Pictures Home Entertainment. “Certainly the enhanced consumer experience enabled by Movies Anywhere is part of that, as is increasing consumer connectivity in their homes. EST continues to gain prominence in our marketing planning, release data scheduling, and retailer partnerships.”

Ron Schwartz, president of Lionsgate Home Entertainment, says Lionsgate EST revenue grew 30% this year, “four to five times faster than the overall industry. With increased collaboration between studios and retailers, and more offerings such as dynamic bundling, customers are starting to build their lockers up to 10-plus titles. Recent data shows that once a customer gets to between 10 and 12 titles in their locker, their EST purchasing behavior doubles.”

In addition to selling movies, digital retailers also offer them for a la carte streaming, the digital equivalent of a physical movie rental. Redbox remains the only retailer to offer both digital and physical rentals, the former through an e-commerce site and the latter, through a network of more than 40,000 kiosks situated outside (or inside) large retailers like Walmart, convenience and drug stores, and other retailers.

“Redbox owns the transactional space with more transactions across physical and digital formats — for rental and purchase — than any other transactional provider,” says Redbox CEO Galen Smith.

In 2019, he said, Redbox expanded its offering of 4K Ultra HD discs into new markets, and stepped up promotions as well, with its Back to the Movies campaign and a joint Dinner & A Movie offering with meal delivery service DoorDash.

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In addition, Redbox Entertainment, a new content acquisition and production division, has further transformed Redbox into a multi-channel content provider and programmer. Launched in October, the new division is headed by Marc Danon, who spent eights at Lionsgate, most recently as SVP of acquisitions and business development.

Disc sales in 2019 continued to decline in the low double digits, with DEG reporting that in the first nine months of the year, combined 4K Ultra HD, Blu-ray Disc, and DVD revenues were down 18.5% to an estimated $2.3 billion — exactly half what they amounted to five years ago, in 2014.

But studios continued to support the disc. And while a trend among smaller titles is to release them only on DVD and digital, bypassing Blu-ray Disc, major new releases are still getting significant marketing campaigns behind them, particularly for the 4K Ultra HD editions. The UHD disc also made headlines last August when the UHD Alliance, along with leaders in consumer electronics, the Hollywood studios and members of the filmmaking community, announced collaboration on a new viewing mode for watching movies called “Filmmaker Mode,” designed to reproduce the content in the way the creator intended. Filmmaker Mode, bowing next year, will allow viewers to enjoy a more cinematic experience on their UHD TVs when watching movies by disabling all post-processing (e.g. motion smoothing, etc.) so the movie or television show is displayed as it was intended by the filmmaker, preserving the correct aspect ratios, colors and frame rates.

“For the time being, 4K UHD is still the gold standard for at-home content,” says Jim Wuthrich, president of Warner Bros. Home Entertainment & Games. “With hardware costs dropping and television functionality such as Filmmaker Mode being made available next year, there is still a great value proposition in owning content in 4K UHD, both physically and digitally, as is still represents the best home-viewing experience.”

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“As evidenced by the exceptional growth of 4K UHD to date, it is clear that there is a sizable appetite for premium high-definition products, and that format plays a meaningful role in boosting retail traffic,” says Eddie Cunningham, president of Universal Pictures Home Entertainment.

Retail partnerships are key, Cunningham adds. “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.”