Best Buy Ups Q3 Entertainment Revenue 20%, Driven by Video Games

Best Buy Nov. 21 reported a 20.6% increase in entertainment segment revenue for the third fiscal quarter, ended Oct. 28. That was a turnaround from a 4.6% comparable same stores decline in the previous year period.

The segment, which includes products such as DVD and Blu-ray Disc movies, video game hardware and software, books, music CDs, and computer software, saw entertainment up its percentage of the overall revenue mix 1% to $539.7 million (6%) from $490 million (5%) in the prior-year period.

The principle segment revenue driver included video game hardware and software. Best Buy recently disclosed it would cease selling movie DVDs and Blu-ray Discs in 2024.

Overall, the nation’s largest consumer electronics retailer realized declines across most business segments, including an 8.3% drop in computing and mobile phones; a 9.5% drop in legacy consumer electronics, and a 15.1% fall in appliances. Services, which includes the Geek Squad, saw a 6.9% increase in sales from a 0.9% drop in the prior-year period.

“Today we are reporting better-than-expected profitability on slightly softer-than-expected revenue for the third quarter,” CEO Corie Barry said in a statement. “These results demonstrate our ongoing, strong operational execution as we navigate through the near-term sales pressure our industry has been experiencing for the past several quarters.”

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On the fiscal call, Barry offered a more measured projection for the upcoming winter holiday shopping season.

“Based on the sales trends in Q3 and so far in November, we believe it is prudent to lower our annual revenue outlook,” she said.

Cineverse Narrows First-Quarter Loss

Cineverse Aug. 14 reported a first quarter (ended June 30) net loss of $3.6 million, down from a loss of $6.1 million during the previous-year period. Total revenue dropped $600,000 to $13 million, primarily due to a planned wind-down of lower-margin streaming channels to focus resources on higher performing channels and improve margins.

Streaming, digital and podcast revenue increased 5.8% to a record $10.5 million from $9.92 million, primarily driven by growth in the paid subscription streaming business, which was up 44.7%.

Digital distribution revenue rose 105.9% to $3.7 million from $1.79 million, driven by an increase in new release titles and additional library licensing to third-party streaming platforms.

Total subscription revenue increased 44.7% to$3.2 million. Total subscribers in the company’s streaming services approached 1.21 million, up 38% from 877,000 subs, driven by the success of new releases and library acquisitions for the Screambox horror channel and improved performance from documentary streaming service Docurama, which grew subs 42% during the quarter.

Total ad-based revenue was $3.6 million, down 39.3%, from $5.9 million, primarily due to the aforementioned planned wind-down of underperforming channels and related businesses, and a one-time technology migration required by a key platform partner in the quarter. The company anticipates a return to ad-based revenue growth subsequent to the impact of these non-recurring events.

The horror movie hit Terrifier 2, released last fall, continued to drive strong results across home entertainment distribution. The film has generated more than $11.2 million in revenue to date. A late 2023 theatrical reissue of Terrifier 2 has been planned, and the franchise follow-up, Terrifier 3, is targeted for release in late 2024.

“Despite some continued industry headwinds during the quarter, we were pleased to report record revenue in our streaming and digital business despite having fewer channels in our portfolio,” CEO Chris McGurk said in a statement.

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McGurk said quarterly operating costs declined by $2.5 million in the quarter by offshoring back office functions, enabling the company to narrow the operating loss by $1.9 million — a 40.7% improvement from last year.

At the same time, Cineverse is expanding partnerships and revenue opportunities with its Matchpoint platform targeting advertising, ecommerce, retail and technology services.

“All of these initiatives are crucial steps to achieving improved margins, positive free cash flow and sustainable profitability by the end of FY 2024,” said Erick Opeka, president and chief strategy officer.

Corporate Fence Straddling on Hollywood Strike Is Entertaining

NEWS ANALYSIS — With Hollywood writers and actors entering the dog days of their ongoing strike against producers and studios, corporate media executives’ attempts to straddle the fence in a show of support to both sides of the issue is itself entertaining.

Disney CEO Bob Iger last month did himself no favor accusing the unions of not being realistic in their demands (for greater compensation and technology safeguards), calling strikers “quite, frankly, very disruptive.”

On the Aug. 9 fiscal call, Iger appeared to soften his tone. Noting that he had great respect for the creative community, as well as an appreciation for the “extraordinary creative engine” that drives Disney and Hollywood. The executive said he hoped both sides could find solutions to the issues that have kept the industry apart for almost 100 days.

“I am personally committed to working to achieve this result,” Iger said.

Minutes later, interim CFO Kevin Lansberry revealed that Disney had generated $1.6 billion of free cash flow in the quarter — an amount no doubt elevated by Iger’s ongoing personnel cuts across the company, in addition to lower spending on content due to the strike.

The week before, Warner Bros. Discovery CFO Gunnar Widenfels told investors the media giant that includes Warner Bros. Pictures, had saved millions in spending due the labor shutdown.

“While we are hoping for a fast resolution … should the strikes run through the end of the year, I would expect several $100 million upside to our free cash flow guidance,” Wiedenfels said.

The company is projected to generate about $4.5 billion in free cash flow for the full fiscal year, aided by a lower usage of working capital, according to analyst Gimme Credit.

Free cash flow is the amount of money a company has (or doesn’t have) after covering all of its operating costs. The metric is what Wall Street covets in the form of dividends and stock repurchases. The kind of activity that can jumpstart a company’s share price, to which many senior executives’ compensation is tied.

While Paramount Global CEO Bob Bakish may be “saddened” the industry couldn’t have avoided the labor unrest with a new agreement, the result, in the short term, is more money on the bottom line.

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Indeed, CFO Naveen Chopra said the company saw $210 million in free cash flow in the quarter, which included a “modest impact” from the strikes.

“We anticipate continued delays in production for the duration of the strikes. And as such, we estimate free cash flow in the back half of the year will be significantly higher than previously expected,” Chopra said.

Analyst Michael Pachter with Wedbush Securities in Los Angeles contends media companies genuinely believe they are making the right business decision in not settling with writers and actors.

“But they are wrong,” he said. “Writers/actors create the content that media sells, and without them, media will starve.”

Pachter said CEOs are being penny-wise and pound-foolish, but added that they can “still have sympathy for the actors and writers.”

‘John Wick: Chapter 4’ Home Entertainment Sales Help Up Lionsgate Q1 Motion Picture Revenue 46%

Home entertainment sales of actioner John Wick: Chapter 4 helped Lionsgate’s motion picture segment increase revenue for its first quarter ended June 30 to $406.5 million, up 46% from revenue of $278.8 million in the prior-year quarter. Segment profit increased by 37% to $69.2 million compared to $50.5 million in the prior year quarter.

Motion Picture revenue and segment profit growth were driven by strength in the box office and home entertainment performance of John Wick: Chapter 4, successful multiplatform releases and strong library home entertainment sales.

The overall studio business, which includes the motion picture and television production segments, reported revenue of $625 million, a decrease of 12% from $711.1 million in the prior-year quarter. Segment profit of $92.1 million increased 31% from $70.1 million in the prior year quarter.

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“I’m pleased to report a strong financial quarter with another record library performance,” CEO Jon Feltheimer said in a statement.

Cinedigm Posts Q3 Profit, Revenue and Subscriber Increases

Home entertainment distributor/streaming technology company Cinedigm Feb. 14 announced a fiscal home run. The Los Angeles-based company reported third-quarter (ended Dec. 31, 2022) net income of nearly $5 million on revenue of almost $28 million. That compared with a loss of $404,000 on revenue of $14 million during the previous-year period.

“Our strong momentum continued in the fiscal third quarter with our business firing on all cylinders as we close in on our goal of sustainable profitability and positive cash flow,” CEO Chris McGurk said in a statement.

Cinedigm posted record revenue in its streaming business with advertising-supported and subscription streaming revenue growth of 79% and 38%, respectively, over the prior-year quarter and growth of 258% and 189%, respectively, on a two-year basis.

The company’s SVOD platforms, which include Screambox, Dove Channel, CONtv and Docurama, in addition to 30 separate free ad-supported streaming platforms, ended the quarter with more than 1.22 million paid subscribers from 953,000 subscribers during the previous-year period.

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The company’s distribution business saw a 72% jump in revenue led by the box office sleeper Terrifier 2 ($14.7 million in global ticket sales) across theatrical, TVOD and streaming. Cinedigm expects the horror genre to over-index in the coming months, with continued strong incremental revenue from the Terrifier sequel, and the recent release of The Outwaters.

Total streaming revenue increased 63% to $8.9 million from $5.46 million in the previous-year period, driven by a 79% increase in ad-supported revenue and a 38% increase in subscription revenue.

Content and entertainment revenue shot up 72% to $20.7 million, driven by user growth, movie performances, increasing market demand for Cinedigm’s extensive Connected TV ad inventory, and the impact of new streaming channels versus the prior year.

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Erick Opeka, chief strategy officer and president, said the September launch of streaming platform Cineverse, included the relaunch of Screambox, Fandor and Dove Channel, enabled the company to scale and generate record subscriber growth in the quarter.

“Our omni-channel approach to advertising across web, mobile, AVOD, FAST, audio and social media drove heavy demand from advertisers during the quarter,” Opeka said.

Streaming minutes in the quarter rose to approximately 2.14 billion, up 60% from 1.34 billion during the prior-year quarter. The ad-supported streaming audience, including web, mobile, social and connected TVs, increased to about 82.9 million average monthly viewers, up 151% from 54.9 million average monthly viewers in the same quarter of the previous year.

Netflix Generated $1.54 Billion in U.K. Revenue in 2021

Netflix generated more than $1.54 billion (£1.4 billion) in revenue in the United Kingdom in 2021, from 13.8 million subscribers, according to first-time data disclosed by the subscription streaming VOD pioneer. Netflix, which launched service in the United Kingdom in 2012, previously combined U.K. revenue with other European territories through its Dutch headquarters to reduce its tax burden.

By separately filing revenue in the United Kingdom, Netflix saw its pre-tax income triple to $30.7 million (£27.9 million), and the tax paid on that income nearly doubled to $7.7 million (£7 million).

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Netflix spent more than $1 billion on U.K. film and TV show productions in 2021, employing thousands of people in the region — up 44% from 2020.

“The U.K. has one of the world’s leading film and TV industries, that’s why we invest more in production here than anywhere outside North America,” Netflix said in a statement. “We’re committed to investing in the U.K.’s creative community bridging the skills gap and creating high-quality jobs on some of our biggest global hits such as ‘Bridgerton,’ ‘The Witcher,’ and ‘Three-Body Problem,’ among others.”

Netflix reports third-quarter (ended Sept. 30) fiscal results Oct. 18.

Redbox Reports Poor Q4 Results, Stock Plummets

Redbox Entertainment said its fourth-quarter results (ended Dec. 31, 2021) were negatively impacted by the ongoing pandemic that saw the kiosk vendor have access to fewer new-release titles than expected. The news sent shares of the company plummeting more than 50% in premarket trading.

In a Feb. 2 regulatory filing, Redbox said it received 24 new titles in the quarter, far below management expectations.

“Redbox rentals have not recovered to the extent expected and, notwithstanding the year-over-year increase in new releases, were lower than the fourth quarter of 2020,” the company said in the filing.

Redbox has expanded its business model in recent years. In addition to offering consumers DVD/Blu-ray Disc rentals at kiosks, the company offers content through PVOD/EST, ad-supported streaming and SVOD. 

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Redbox reported an increase in marketing and on-demand expenditures. Costs also increased as Redbox purchased more digital content. During that period, increased costs have not been offset by an increase in revenue. Redbox also reported that its business has experienced an increase in competition from new and existing competitors.

The company reported that on Jan. 28 it borrowed the remaining availability under its revolving credit facility.

Redbox’s primary sources of liquidity are cash on hand, cash flow generated from operations, and amounts available under its revolving credit facility. Management is actively taking steps to decrease monthly costs, delay capital expenditures and increase revenues, according to the filing. Redbox is also evaluating a variety of strategic alternatives.

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, said he believes Redbox can turn its fiscal condition around as it gets access to more packaged-media content.

“As its members return to the kiosk more regularly, that will give Redbox the opportunity to upsell its 39 million loyalty members to its digital products,” Pachter wrote in a Feb. 3 note. “Its members are late technology adopters, and some may opt for Redbox’s simple and inexpensive transition to streaming.”

Netflix: ‘We Slightly Over-Forecasted’ Q4 Sub Growth, Missed Projection by 200,000

Netflix Jan. 20 said it added 8.3 million subscribers worldwide in the fourth quarter, ended Dec. 31, 2021. The tally was off less than 3% (200,000 subs) from the streamer’s projection of 8.5 million net paid additions, but enough of a miss to send the streamer’s stock tumbling. Netflix ended the quarter with 222 million subs globally.

“We slightly over-forecasted paid net adds in Q4,” Netflix co-CEOs Reed Hastings, Ted Sarandos and CFO Spence Neumann co-wrote in the shareholder newsletter. “While retention and engagement remain
healthy, acquisition growth has not yet re-accelerated to pre-Covid levels. We think this may be due to several factors including the ongoing Covid overhang and macro-economic hardship in several parts of the world like Latin America.”

Indeed, the streamer added 200,000 fewer subs (1 million) in South America than in the previous-year period at 1.2 million, for more than 39.9 million total subs at the end of 2021.

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The SVOD pioneer added 1.2 million subs in North America, its biggest domestic sub growth in the region since the early days of COVID-19 in 2020. The region ended the quarter with 75.2 million subs.

In the Asia Pacific region, Netflix increased paid memberships by 2.6 million (up from 2 million in the year ago quarter) with strong growth in both Japan and India — to end the year with 32.6 million.

In Europe, Middle East and Africa, Netflix added 3.5 million subs vs. 4.5 million in the prior year period. The region, which ended 2021 with 74 million subs, delivered record quarterly revenue, exceeding $2.5 billion for the first time.

For the year, Netflix added 18 million vs. 37 million in 2020 during the height of the pandemic.

Meanwhile, the streamer had a strong quarter with new releases, including a new season of “The Witcher” (484 million hours viewed), “You” (468 million hours viewed), “Emily in Paris” (287 million hours viewed) and on Dec. 31, 2021, a new season of “Cobra Kai” (274 million hours viewed), as well as the critically acclaimed limited series “Maid” (469 million hours viewed).

Netflix later this year will launch a Korean adaptation of its popular Spanish “La Casa de Papel” aka “Money Heist” (6.7 billion hours viewed over its lifetime). The new series, “Money Heist: Korea — Joint Economic Area,” aims to expand the LCDP universe outside of Europe.

“Over the years, we’ve learned that big hits can come from anywhere in the world (with great subtitles and dubbing) … but our goal with non-English originals is to first and foremost thrill audiences in their home country,” wrote Hastings, Sarandos and Neumann.

Cinemark Narrows Q3 Fiscal Loss to $78 Million

Moviegoers may be returning to the box office, but the fiscal impact remains a mixed bag.

Cinemark Nov. 5 reported a third-quarter (ended Sept. 30) loss of $78 million on revenue of $435 million. That compares with a loss of $148 million on revenue of $35 million in the previous-year period when most U.S. theaters were shuttered or operating under limited seating capacity due to the pandemic.

Cinemark, along with AMC Theatres and Regal, ranks among the largest exhibitors in the world. It operates 5,872 screens across 42 states and several international markets.

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“We are highly encouraged by sustained positive trends in escalating consumer demand for theatrical moviegoing and growing momentum at the box office,” CEO Mark Zoradi said in a statement.

Zoradi said the chain saw a 61% quarter-over-quarter growth in worldwide attendance, which he said helped decrease the net loss by $64.7 million dollars from the second quarter (ended June 30).

“We expect a continued ramp-up in box office performance over the course of the coming months, and October already delivered the best monthly box office results since the onset of COVID-19,” he said. “As the pandemic further subsides, we remain confident in the future of theatrical moviegoing based on a robust content lineup in the fourth quarter.”

HBO, HBO Max Near 70M Global Subs, Despite Estimated 5M Sub Loss Due to Amazon Channels Exit

AT&T Oct. 21 announced that WarnerMedia’s branded HBO property had 69.4 million HBO Max and HBO combined subscribers globally at the end of the third  quarter (ended Sept. 30). That tally is up 12.5 million subs from the previous-year period of 56.9 million. Domestic subs topped 45.2 million, up 7.1 million, from 38.1 million a year ago.

Notably, AT&T said Max subs increased 1.9 million from the second quarter (ended June 30), but were offset by an estimated 5 million sub loss due to Max’s departure from the Amazon Channels platform affording Prime members direct access to third-party SVOD apps. AT&T made the decision to withdraw due to Amazon’s margins on Max subs, among other issues. Other high-profile SVOD exits from Amazon Channels include Netflix and Disney+.

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AT&T said the average revenue per HBO/HBO Max sub is $11.82 monthly, with total WarnerMedia revenue up 14.2% to $8.4 billion. Overall direct-to-consumer subscription revenue is up about 25%.

WarnerMedia assets include Warner Bros. Pictures, HBO and Turner.

“We continue to execute well in growing customer relationships, and we’re on track to meet our guidance for the year,” John Stankey, CEO of AT&T, said in a statement.