Reed Hastings: Pandemic Video Trends Not Relevant to Real World

When Netflix failed to meet its own subscriber growth projections in the third quarter, ended Sept. 30, co-CEO Reed Hastings shrugged off the shortcoming as inconsequential “forecast noise.” Speaking Oct. 20 on the fiscal webcast, the co-founder of the SVOD behemoth contends the service’s 195 million global subs is a statistical force to be reckoned with going forward.

“We’ve been doing high 20’s [million net adds per year] for four years,” Hastings said. “And this year on guidance for 34 million, so [we’re] setting all kinds of records.”

Hastings said the pull-through in outsized sub growth in 2020 due to the coronavirus pandemic into 2021 would be relatively modest, around 5-6 million subs. He said factors such as how much the quality of the service and word-of-mouth increases affects sub growth as well.

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“Our growth sort of seesaws around that number depending on the particular conditions going on in that quarter, but year-after-year, it’s fundamentally followed that improvement in the service growth curve,” Hastings said.

The executive downplayed the pandemic significance on OTT video as a one-time phenomena with a “minor background effect” on the distribution channel. Hastings said Netflix competes against a wide range of distractions, including social media, TikTok, YouTube and Fortnite, among others. He said user engagement, subscriber churn and related trends on the service are similar to what management expected a year ago.

“There was temporary learning when there’s no [live] sports, but it’s like, well, it’s not really that interesting finding because it’s just not relevant to the [non-pandemic] world,” Hastings said. “Now we’re back in a world with partial [TV] sports and that’s fine and we’re [still] growing.

“So really, the limiter for us is what’s the quality of our service, how often, how many nights can you say, ‘oh my God, I want to go to Netflix and watch the next show.'”

 

 

Liam Neeson Drama ‘Honest Thief’ Tops Another Quiet Domestic Weekend Box Office

Open Roads Films’ thriller Honest Thief, starring Liam Neeson, finished atop another subdued domestic weekend box office, generating $3.7 million in North American ticket sales. Neeson plays a burglar who turns himself in, only to be double crossed by the FBI.

Last week’s topper, The War With Grandpa, starring Robert De Niro, finished second with $2.5 million. The movie from 101 Studios has generated $7.3 million in 10 days. Warner Bros.’ Tenet, from director Christopher Nolan, ended third on the weekend with $1.6 million, upping its domestic theatrical take to $50.6 million.

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U.S. movie ticket sales continue to be hamstrung by coronavirus pandemic-related theater closures in key markets and social distancing protocols in cinemas operating. In addition, studios continue to push back into 2021 major new tentpole releases living operating theaters with lower profile movies and re-releases.

Indeed, Disney re-releases The Night Before Christmas and Hocus Pocus finished fourth and fifth over the weekend with $1.3 million and $756,000 in ticket sales, respectively.

Analyst: Netflix Facing Increased Sub Growth Decline Due to Content Production Delays

Netflix’s skyrocketing subscriber growth during this pandemic year is expected to come to a screeching halt in the third quarter (ended Sept. 30), and going forward. That’s the consensus from Wedbush Securities media analyst Michael Pachter, who thinks the SVOD giant added just 250,000 domestic subs and 2.3 million internationally in the quarter. Netflix is projecting 2.5 million total sub additions.

While industry scuttlebutt suggests Netflix lost millions of subs due to the Cuties movie controversy, about an 11-year-old Senegalese girl coming of age in 21st century Paris against the backdrop of a religious mother and peer pressure from a group of young female dancers, Pachter thinks increased content demands from housebound subs drove churn.

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The analyst contends that with the increased numbers of consumers still largely limited to home entertainment due to COVID-19, the lack of new original content will increase dissatisfaction.

“The extraordinary level of consumption of Netflix content multiplied by its large subscriber base suggests to us that some meaningful percentage of subscribers will ‘finish’ Netflix before a large quantity of new content can be produced,” Pachter wrote in a note.

The analyst believes Netflix is facing a potential loss of two million subs per quarter going forward without a significant increase in original content. Indeed, recent data from Nielsen found that among Netflix’s most-popular shows, 50% were network reruns.

“The law of large numbers suggests to us that if the rate of subscriber churn grows by ‘only’ 1%, Netflix could face an uptick loss of subscribers per quarter beginning later this year or early next year,” Pachter wrote. “We suspect that this phenomenon has already begun and led to the company’s lackluster guidance for Q3 net additions.”

Netflix reports third-quarter fiscal results on Oct. 20.

 

 

 

Report: Consumer Confidence Up Entering Winter Holiday Retail Season

Despite the impact that COVID-19 has had on consumers’ lifestyles over the past several months, U.S. consumers are still looking forward to the holiday season – with 64% reporting that they are just as or more excited about the holidays this year compared to last year.

The data comes from a survey of more than 800 U.S. consumers in September by video advertising platforms Unruly and Tremor Video. The study takes a closer look at consumer interest and demand for the first holiday season since the pandemic began. The research reveals how consumers are prioritizing and planning their holiday shopping experiences as the colder months approach.

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Balancing out optimism with the reality of COVID-19, 42% of respondents think holiday ads should reference COVID-19, while 57% want ads to make them feel happy. While planning holiday advertising campaigns, respondents said brands should take special care to celebrate the season while balancing the acknowledgement of the hardships that consumers have faced this year.

The survey found that 75% of respondents plan to do at least half of their holiday shopping online and 53% will increase the frequency of their online shopping. About 53% will be watching TV more frequently and 58% will be browsing the internet more frequently.

Another 41% believe that TV ads are among the most influential media channels in terms of inspiring their holiday purchase decisions, while 50% plan to do the bulk of their holiday shopping in November.

“Online shopping and TV consumption are on the rise this holiday season, and as these channels are increasingly embraced due to continued stay-at-home restrictions,” Terence Scroope, VP of Insights at Unruly and Tremor Video, said in a statement.

Although shopping attitudes and behaviors have shifted considerably since the start of the COVID-19 pandemic, the survey contends brands can find success by learning to reach consumers at their comfort levels and employing nuanced media plans for the holidays.

Indeed, 89% of consumers from households that make over $100,000 per year plan to do at least half of their holiday shopping online, followed by 79% of those from households that make $40K-$100K per year and 67% of those from households that make less than $40K per year.

Nearly 56% do not plan to travel this holiday season (and increases to 77% for consumers aged 55 or above); however, over 25% intend to travel within their state of residence and nearly 15% are planning out of state travel. Around 50% of consumers under 55 believe that COVID-19 should be referenced in ads.

“Brands should seize this opportunity to deliver highly-targeted, personalized ads to consumers across all screens, including CTV, in-app, instream, mobile and desktop,” Scroope said.

European Cinema Operators ‘Shocked’ at Movies Bypassing Theaters for Disney+

Similarly to the situation in the United States, European theater operators are reeling from studios delaying new-release movies due to the coronavirus pandemic. Now the International Union of Cinemas (UNIC), the trade group representing European exhibitors, has lashed out at Walt Disney Studios’ decision to bow Pixar Animation’s Soul on SVOD service Disney+ rather than in theaters.

“Disney’s decision to release Soul directly onto their streaming platform, depriving many audiences across Europe from seeing it on the big screen, has shocked and dismayed all cinema operators,” UNIC said in a statement.

Indeed, Soul represents the third major Disney title (after Artemis Fowl and Mulan) to forgo a theatrical release due to the pandemic. UNIC is upset since control of the pandemic is better in Europe than in the U.S., which has resulted in significantly better box office revenue.

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The vast majority of cinemas across Europe are now open and able to offer a “safe and enjoyable” return for moviegoers, according to UNIC. Like U.S. exhibitors, European operators have invested heavily in social distancing and sanitation protocols in theaters.

“Yet again, however, they find a distributor delivering another blow,” UNIC wrote. “The decision on Soul is doubly frustrating for operators who were counting on the release after the film was previewed at a number of key European film festivals.”

The trade group argues that there is compelling evidence that where moviegoers have returned, their experience was both safe and enjoyable. It also stressed that without major new releases, consumers won’t return to the big screen. Indeed, across Europe, many cinemas have since re-opening screened countless local releases, underlining the fact that first-run titles are now more important than ever.

UNIC said decisions to postpone titles, bypassing cinemas and the value they create, are extremely disappointing — and concerning — and will only delay the day that the whole industry is able to put crisis behind it.

“It is no exaggeration to say that by the time some studios decide that the moment is right to release their films, it may be too late for many European cinemas,” read the statement.

Futuresource: Consumers Embracing SVOD Catalogs, Transactional VOD as Pandemic Continues

As the coronavirus pandemic continues, resulting in disruptions to traditional entertainment distribution such as movie theaters, subscription video-on-demand has solidified its position as a clear consumer favorite in the entertainment landscape, according to new data from Futuresource Consulting.

Based on surveys with more than 20,000 respondents across the U.S., Canada, U.K., Germany, France, Italy, Spain, Sweden, Australia and Japan, London-based Futuresource found a marked increase in transactional digital video-on-demand purchases of movies as well.

“There’s no doubt that recently launched services like Disney+ have boosted both SVOD usage and uptake,” principal analyst David Sidebottom said in a statement. “However, it is the growth of sector stalwarts Netflix and Amazon Prime Video which are driving the overall reach of SVOD.”

The report suggests a 3% to 4% increase SVOD viewing as a proportion of total video consumption in 2020 compared to 2019. In the U.S., SVOD now accounts for over one in every four viewing hours — largely driven by those under 45 years of age. In addition to SVOD, many European markets have also witnessed an increase in free live TV consumption, accentuating its continued importance, particularly during times of uncertainty.

That said, Netflix, Prime Video and Disney+ continue to be the trendsetters, with the latter helping drive new levels of OTT video service stacking.

“Our research shows that over 90% of Disney+ subscribers are existing Netflix users, adding a new layer of growth to the SVOD environment,” Sidebottom said.

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Meanwhile, purchases and rental of digital movies and TV shows continues to see increased traction. In the U.S., almost 33% of respondents had bought or rented a digital movie or TV show from mid-March through July. The results show that VOD rentals are back in focus, with three quarters of respondents renting a digital movie.

Notably, Futuresource found that upwards of 20% of respondents buying or renting digital movies and TV shows were new consumers, in addition to those revisiting transactional VOD for the first time in a while.

“This re-emphasizes how much consumer behavior has changed due to prevailing market conditions, helping to broaden the reach of these categories,” Sidebottom wrote.

Indeed, with few new releases in movie theaters or on home video, consumers are embracing library titles. Month-on-month catalog sales continue to advance, and more than 80% of digital movie rental transactions involved a title that was more than six months old. Survey results suggest that catalog digital movie sales and rentals were typically driven by emotive impulses, such as wanting to watch an old-time favorite or a feel-good movie, either to provide escapism or just for pure nostalgia.

“The industry must now turn to strategies that keep consumers engaged across both SVOD and transactional digital video,” Sidebottom said. “From here on into 2021, it’s all about maintaining the momentum that has been born from lockdown and social distancing measures.”

AMC Theatres Warns It Will Be Out of Cash by the End of the Year

With a delayed release slate and moviegoers wary of COVID-19, AMC Entertainment, parent to the world’s largest theatrical chain, said it will be out of cash by the end of the year or early 2021 without a renewed external infusion of funds.

Cash burn, or monthly use of cash to fund operations, is impacted by, among other things, the timing of resumption of theater operations, the timing of movie releases and the slate of future releases, theater attendance levels, landlord negotiations and minimum lease payments, costs associated with the enhanced safety and sanitation protocols, and food and beverage receipts.

“To meet its obligations as they become due, the company will require additional sources of liquidity or increases in attendance levels,” CFO Sean Goodman wrote in the Oct. 13 filing. “The required amounts of additional liquidity are expected to be material.”

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AMC said it has generated about $40 million to date selling new shares of stock, in addition to lopping off hundreds of millions of dollars owed on long-term debt.

The filing revealed what most observers already knew: The exhibition business is facing extinction if pandemic conditions remain the same and liquidity issues aren’t further addressed. And even if they are, the business realities facing theaters is dire.

“There can be no assurance that the assumptions used to estimate our liquidity requirements and future cash burn will be correct, or that we will be able to achieve more-normalized levels of attendance described above, which are materially higher than our current attendance levels, and our ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic,” Goodman wrote.

The filing stands in contrast to the confidence CEO Adam Aron has been projecting in recent weeks, including boasts that AMC, unlike rival Regal Cinemas, could remain open in the current business climate due in part to its groundbreaking distribution agreement with Universal Pictures. That deal allows Universal to significantly shrink the theatrical window in exchange for sharing revenue from early transactional VOD and premium VOD releases in the home.

As of Oct. 9, AMC had resumed operations at 494 of its 598 U.S. theaters, with limited seating capacities of between 20% and 40%, representing approximately 83% of the U.S. theaters and 77% of 2019 U.S. same-theater revenue.

Since the resumption of operations in its U.S. markets, AMC said it has seen more than 2.2 million moviegoers frequent theaters, representing a same-theater attendance decline of approximately 85% compared to the same period a year ago.

The remaining 17% of the U.S. theaters left to reopen are primarily located in California, Maryland, New York, North Carolina and the state of Washington, and include some of the chain’s most productive locations, representing approximately 23% of 2019 U.S. revenue.

Twenty-five theaters in North Carolina and Washington State are scheduled to reopen Oct. 16. AMC says it has an “active dialogue” with local and state government officials in the remaining states, however, there is “limited visibility” around the timing for resumption of theatre operations in these locales.

Meanwhile, AMC’s fiscal situation not only affects employees and shareholders, but landlords as well. The company said it had resumed operations at 308 leased and partnership international theaters. This represents about 86% of its international screens and approximately 90% of 2019 international same-theater revenue. Since the resumption of operations in its International markets June 3, AMC has seen more than 5.2 million consumers return, representing a same-theater attendance decline of approximately 74% compared with the same period a year ago.

“It is very difficult to estimate our liquidity requirements and future cash burn rates, and depending on the assumptions used regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly,” Goodman wrote.

Micheal Pachter, media analyst with Wedbush Securities in Los Angeles, doesn’t expect attendance levels to begin to normalize until mid-2021. He said that with 30% of moviegoers in the 50+ age group and another 30% between 30 and 50 (according to MPAA, 2018), a significant portion of moviegoers are not going to be bold enough to return to theaters without a virus vaccine. Losing a substantial portion of this demographic, and especially their children, is driving studios to delay theatrical releases.

“We think the relatively lackluster domestic box office for Tenet, juxtaposed with the seemingly tepid response to Mulan as a PVOD release, have made film releases seem like a risky business in the current environment,” Pachter wrote in a note.

‘The War With Grandpa’ Supplants ‘Tenet’ Atop Stagnant Domestic Weekend Box Office

The Robert De Niro comedy The War With Grandpa from 201 Studios wrested the top spot from Warner Bros.’ Tenet at the domestic weekend box office with a projected $3.6 million in ticket sales in its theatrical debut, according to industry reports. Tenet generated $2.1 million in its seventh week of release. The Christopher Nolan espionage thriller has generated $48.3 million in the United States and $323.3 million globally.

Despite 86% of U.S. screens operating, albeit under strict social distancing and public health safeguards, the exhibition business continues to be devastated by the ongoing coronavirus pandemic, wary consumers and theaters closures in major markets such as New York, Los Angeles and San Francisco. Just seven Regal Cinemas locations remained open after the No. 2 exhibitor re-shuttered all North American operations indefinitely Oct. 8, citing a lack of major studio new releases.

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Without a COVID-19 vaccine and major blockbuster titles, moviegoers in the U.S. seem cautious about returning to the cineplex.

“People aren’t dying to see movies,” Michael Pachter, media analyst at Wedbush Securities, said in an email.

AMC Theatres to Open 87% of Domestic Screens by Oct. 16

With its fiscal future on the line, AMC Entertainment, the largest theatrical exhibitor in the world, Oct. 8 announced that 14 AMC Theatres in the state of Washington will resume operations on Oct. 16. Washington is among 45 U.S. states in which AMC Theatres will have screens open for moviegoers.

Following re-openings in California, Michigan and North Carolina, AMC expects to have more than 520 of its approximately 600 theaters operating within eight days.

In areas where theaters are not yet able to open, AMC said it would continue to have discussions with local authorities about resuming operations. AMC will reopen its remaining theatrical footprint once authorized to do so by state and local officials.

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CEO Adam Aron, in a statement, reiterated the sanitation safety protocols AMC has embraced to assure moviegoers are safe as possible during the coronavirus pandemic.

“The feedback we’ve received from our guests indicate that our policies and protocols are working exactly as intended,” Aron said. “We’re seeing record-high guest scores for the cleanliness of our theaters, far exceeding the marks we’ve received in the decades we’ve been tracking guest feedback.”

With studios pushing releases of most major titles until 2021 or beyond, how long exhibitors can ride out the COVID-19 storm remains to be seen. Regal Cinemas, the No. 2 chain in the country, is set to re-shutter all U.S. and U.K. screens for the foreseeable future, beginning today.

Director Patty Jenkins, whose $200 million production Wonder Woman 1984 is still set to release on Christmas Day — following three previous delays — contends the exhibition business model is facing extinction.

“This will not be a reversible process. We could lose movie theater-going forever,” Jenkins told Reuters.

Meanwhile, returning AMC moviegoers can expect to see new releases such as The War With Grandpa, starring Robert De Niro, and Yellow Rose, which open Oct. 9 in the United States. Other pending titles include Honest Thief and 2 Hearts on Oct. 16, The Empty Man on Oct. 23, Come Play on Oct. 30, Let Him Go on Nov. 6, Freaky and The Comeback Trail on Nov. 13, Soul on Nov. 20, and The Croods: A New Age and Happiest Season on Nov. 25, as well as local-language films in certain countries outside the United States.

Ventura County, Calif., Authorizes Re-Opening Movie Theaters on Oct. 9

Movie theaters may still be a no-go in Los Angeles County, but elsewhere the re-opening of select screens throughout California continues, albeit slowly. Ventura County, just north of Los Angeles County, is the latest county in the state to approve the reopening of movie theaters.

AMC Theatres Oct. 7 announced that following recent approval by Ventura County officials, the exhibitor will reopen AMC Dine-In Thousand Oaks 14 on Oct. 9. In addition to reserved seating, moviegoers can place food orders from an expanded menu in the lobby, and then head into their auditorium where their food is delivered to their recliner seats.

During the first three Fridays in October, AMC plans to resume operations at approximately 40 locations in California, North Carolina and Michigan. Beginning Oct. 16, more than 500 AMC locations will be serving guests.

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In areas where theaters are not yet able to open, AMC said it continues to have discussions with local authorities about resuming operations. AMC will reopen all remaining theaters once authorized to do so by state and local officials.

New titles coming to theaters include The War With Grandpa, starring Robert De Niro, and Yellow Rose, which open Oct. 9 in the U.S. Other pending titles include Honest Thief and 2 Hearts on Oct. 16, The Empty Man on Oct. 23, Come Play on Oct. 30, Let Him Go on Nov. 6, Freaky and The Comeback Trail on Nov. 13, Soul on Nov. 20 and The Croods: A New Age and Happiest Season on Nov. 25, as well as local-language films in certain countries outside the U.S.

“It’s encouraging that we continue to make progress opening theaters in California and in the key Los Angeles area market,” AMC CEO Adam Aron said in a statement. “We continue to reopen responsibly.”