Best Buy Q3 Entertainment Revenue Up 17.5%

Best Buy Nov. 24 reported strong third-quarter (ended Oct. 31) sales, driven in part by a near 174% increase in e-commerce revenue and entertainment.

The entertainment segment, which includes products such as DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software, saw same-store sales increase 17.5% compared with a 20.8% decline during the previous-year period. The division generated 5% of domestic revenue, or $542.5 million, compared with $448.2 million last year.

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Internationally, entertainment sales skyrocketed 35.6% to $50 million, compared to a 31.1% drop at $40 million last year.

“Our comparable sales grew a remarkable 23% as we leveraged our unique capabilities, including our supply chain expertise, flexible store operating model and ability to shift quickly to digital, to meet what is clearly elevated demand for products that help customers work, learn, cook, entertain and connect in their homes,” CEO Corie Barry said in a statement.

Barry said the pandemic environment has underscored Best Buy’s purpose to “enrich lives through technology,” and the capabilities the consumer electronics chain is “flexing and strengthening” now would benefit it going forward.

One strategy is e-commerce, which saw revenue explode 173.7% to $3.82 billion, from $1.39 billion last year.

 

First Anniversary of Disney+ Finds Service’s Parent Grappling With Pandemic Fallout

Disney’s high-profile subscription streaming service Disney+ launched a year ago today (Nov. 12). Disney is set to report fourth-quarter financial results at the market close. With much of its businesses such as amusement parks, cruise ships, movie studio and television operations (and ad revenue) either shuttered or operating in limited capacity due to the coronavirus pandemic, streaming video is likely the only positive on what is expected to be a depressed corporate earnings call.

Disney+ had more than 60 million subscribers on the company’s last fiscal call, and CEO Bob Chapek has made it clear over-the-top video is at the core of company  going forward. Indeed, when combining Hulu and ESPN+, Disney’s SVOD subscriber base topped 100 million at the end of the previous quarter.

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The summer rollout of Disney+ Hotstar in India, which is operated by Disney subsidiary Star India, features two paid tiers: a VIP plan offering local language programs and live sports; and a Premium plan showcasing international (i.e. U.S.) movies and TV series from Disney, Showtime and HBO, among others. The service had nearly nearly 9 million subscribers in the last quarter.

“Disney+ has been the one shining star in the Disney empire in 2020,” Trip Miller, a managing partner at Gullane Capital Partners, told CNN Business. “The advent of the Disney+ platform could not have come at a better time.”

Yet, the SVOD platform is not projected to be profitable until 2024. The service could end up losing $2 billion in the just-concluded fiscal year — and even more in 2021.

“I think Disney+, and the rest of their direct-to-consumer assets like Hulu and ESPN+, are the most important units in the eyes of investors,” said analyst Michael Nathanson. “It’s a source of long-term growth and helps offset [pay-TV] cord-cutting and shifts in audience behavior.”

Nathanson, who believes ad-supported VOD is the streaming story in 2020, says Disney’s OTT platforms have the ability to expand with AVOD offerings depending on marketing conditions. Disney plans to launch an ad-supported international OTT service under the Star brand in 2021.

Indeed, growth of free ad-supported streaming TV (“FAST”) is exploding through services such as ViacomCBS’s Pluto TV, Comcast’s Xumo (and Peacock), Fox Corp.’s Tubi, The Roku Channel and IMDb TV, among others. And Disney doesn’t want to be left behind.

“They are really all in [streaming] now,” Nathanson said. “Disney has built a [OTT] lifeboat that gets them through the current storm in traditional media.”

AMC Theatres Posts $905 Million Q3 Fiscal Loss

Fiscally challenged AMC Theatres Nov. 2 revealed the ongoing hardships imposed upon the theatrical industry by the coronavirus pandemic led to the world’s largest exhibitor reporting a $905.8 million third-quarter (ended Sept. 30) loss, compared with a loss of $54.8 million during the previous-year period. Revenue plummeted 91% to $119.5 million, from $1.31 billion a year ago as theaters either remain shuttered in key markets or have limited seating capacity due to social distancing guidelines.

Through nine months of the fiscal year, AMC has lost $3.64 billion, compared with $135 million in 2019. Moviegoer attendance is down nearly 97% to 1.96 million, from 61.1 million a year ago. For the fiscal year-to-date, attendance is down 78% to 41.6 million, from 188 million.

“The magnitude of the impact of the global pandemic on the theatrical exhibition industry was again evident in our third quarter results, as theater operations in the U.S. were suspended for nearly two-thirds of the quarter,” CEO Adam Aron said in a statement.

While not high on the list of protected industries during the pandemic, AMC has proactively sought third-party financial lifelines. In March, the chain raised $900 million from new debt and equity capital, secured more than $1 billion of concessions from creditors and landlords, and raised more than $80 million from asset sales in the Baltic region.

Earlier today, AMC announced it would sell 20 million Class A common shares for $47.7 million.

“The liquidity enhancing and leverage reducing actions that we already have taken and will further need to take, combined with our relentless focus on efficiency and cash management, are all crucial to navigating through this storm,” Aron said.

 

Apple Generates Record Quarterly Services Revenue of $14.5 Billion

Apple Oct. 29 reported record quarterly revenue for its services segment, which includes iTunes, the App Store, Mac App Store, Apple Music, Apple Pay, AppleCare, Apple TV+, Apple Arcade and Apple News+, among others. The segment generated $14.5 billion in revenue for the fourth quarter, ended Sept. 26, compared to $12.5 billion in the previous-year period. For the fiscal year, services revenue increased 16% to $53.7 billion from $46.2 billion last year.

The Menlo Park, Calif.-based company posted record September quarter revenue of $64.7 billion, up 1% from $64 billion in the previous-year period. International sales accounted for 59% of the quarter’s revenue.

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“Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive,” CEO Tim Cook said in a statement.

CFO Luca Maestri said the quarter capped off a “remarkable” fiscal year in which Apple set all-time records for revenue, earnings per share, and free cash flow, in spite of a challenging macro environment.

“Our sales results … drove our active installed base of devices to an all-time high in all of our major product categories,” Maestri said.

The results glossed over the fact sales of iPhones fell almost 21% in the quarter to $26.4 billion, from $33.3 billion a year ago.  For the year, iPhones sales declined 3.3% to $137.8 billion, from $142.4 billion a year ago.

Sony Pictures Ups Fiscal Half-Year Home Entertainment Revenue 36%

Sony Pictures Home Entertainment Oct. 28 reported second-quarter (ended Sept. 30) revenue of $171 million, which was up 6.8% from revenue of $160 million during the previous-year period. Through six months of the fiscal year (ending March 31, 2021), home entertainment generated $490 million in revenue, which is 36.1% higher than $360 million generated during the same period last year.

Sony has generated strong packaged-media and digital sales from Jumanji: The Next Level, Bad Boys for Life, Little Women, Bloodshot, Spider-Man: Homecoming and Flatliners, among others.

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As expected, Sony Pictures theatrical revenue nosedived 98.2% to $13 million due to exhibitor shutdowns from the coronavirus pandemic, and Sony’s decision to delay all major box office releases until 2021. The studio generated box office revenue of $715 million in the previous-year period.

The studio released just two new movies into movie theaters in the quarter: The Broken Hearts Gallery ($4 million) and The Last Shift, which generated zero revenue.

By comparison, Sony in the previous-year period released Spider-Man: Far From Home ($1.13 billion); Once Upon a Time in Hollywood ($356 million), The Angry Birds Movie 2 ($125 million) and Overcomer ($33 million).

Sony Pictures Television revenue grew 24.4% to $529 million, from $425 million last year. Ancillary revenue skyrocketed to $145 million from just $6 million last year.

When also factoring in TV productions ($480 million), media networks ($470 million) and intersegment revenue of $4 million, total motion picture revenue totaled $1.81 billion, down about 25% from revenue of $2.42 billion last year.

Pandemic Undermines eOne, Hasbro Q3 Fiscal Results

With much of Hollywood and movie theaters shuttered over the summer, film and TV studio Entertainment One (eOne) and parent Hasbro Oct. 26 reported depressed revenue and operating income for the third quarter (ended Sept. 27).

eOne, which Hasbro acquired for $4 billion in August 2019, saw an operating loss of $25.9 million, compared with operating income of $15.8 million during the previous-year period. Revenue dropped 32% to $193.4 million, from $283.3 million a year earlier. For the nine months of the fiscal year, the operating loss was $64.9 million, compared with $91.3 in operating income in 2019.

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For Hasbro, whose entertainment brands include Transformers, G.I. Joe and Power Rangers, among others, saw entertainment, licensing and digital segment revenue decline, which included the Bumblebee film revenue (with Paramount Pictures), partially offset by growth in digital gaming.

Operating profit increased due to a favorable mix of growth in licensed digital gaming, lower advertising costs, and lower development expenses due to the closure of Backflip Studios in late 2019.

“Live-action entertainment production is returning, and we are set to improve deliveries in the fourth quarter with some moving into 2021,” Brian Goldner, CEO of Hasbro, said in a statement. “Demand for stories and content as well as viewership remain high. The teams have a robust development slate of over 150 active television and film projects, including more than 30 Hasbro properties.”

Netflix Misses Q3 Sub Growth Projection By 300,000; Stock Drops

As expected, Netflix subscriber growth cooled in the third quarter that ended Sept. 30, with the SVOD leader adding 2.2 million subs worldwide — lower than a company projection of 2.5 million. Wall Street had projected 3.26 million net sub additions. Netflix added just 180,000 net subs in North America, down from more than 600,000 subs in the previous-year period.

The streamer, which added 6.77 million subs in the previous-year period, ended Q3 with 195.1 million subs worldwide.

“We think this is primarily due to our record first-half results and the pull-forward effect,” co-CEOs Reed Hasting and Ted Sarandos wrote in the shareholder letter.

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The executives made no mention of the controversial French-language movie Cuties, which resulted in a social media backlash and legal fallout after a Texas grand jury indicted Netflix on criminal charges, alleging that the service streamed “lewd material of children” in the movie. Analysts contend Netflix lost upwards of one million subs due to the issue.

Still, Netflix remains ahead of 2019 through three quarters with 28.1 million new subs in 2020 compared to 27.8 million new subs in 2019. The streamer is projected to add 6 million new subs in the current quarter ending Dec. 31, down from 8.76 million new subs in the previous-year period.

Revenue increased 22.7% in the third quarter to $6.43 billion, from $5.24 billion in the previous-year period. Net income reached $790 million, from $665 million last year. Regardless, investors were quick to respond, sending Netflix shares down around 6% in aftermarket trading.

GameStop Bounces Back With $21 Million Q4 Profit

No wonder GameStop tried to call itself an “essential business” and didn’t want to shutter stores during the coronavirus pandemic.

The world’s largest video game retail chain March 26 reported a fourth-quarter (ended Feb. 1) profit of $21 million, compared with a loss of $188 million during the previous-year period. Revenue dropped 28% to $2.2 billion from $3 billion as the industry grapples with a lack of new-generation video game consoles slated to launch later this year.

For the fiscal year, GameStop, which operates about 5,400 stores, narrowed its net loss about 30% to $471 million from $673 million last year. Notably, the chain’s collectables segment saw a 10% decline to $245 million from $270 million.

“We delivered profitability, on an adjusted basis, ahead of our updated expectations, marking progress on our strategy to evolve our operating model and position GameStop for long-term profitable growth,” CEO George Sherman said in a statement. “We accomplished this, despite industry challenges that led to an expected significant decline in sales.”

Sherman said the chain improved efficiency and effectiveness across the company, including a $130 million reduction in adjusted SG&A expense, reductions in inventory, accounts payable and debt.

“We accelerated our digital capabilities by elevating our web platform and further optimizing our retail footprint through market de-densification, while setting up a laboratory in our Tulsa, Okla., market to test experiential elements in 12 stores with promising initial results.”

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GameStop also spent $199 million repurchasing shares. Wall Street approved, sending the stock up 9% in after-market trading. Shares finished up nearly 6% to close at $4.41 per share.

Regardless, GameStop has shuttered most stores to foottraffic, with sales limited to curbside pick-up and ecommerce. GameStop has temporarily halted in-store game trades and sales.

Notwithstanding the Q4 results and upcoming console launches, GameStop finds itself one of many victims of the global COVID-19 pandemic, according to media analyst Michael Pachter with Wedbush Securities in Los Angeles.

“We expect the pandemic to have largely passed by the end of July, and have not adjusted our models materially for periods after the second quarter,” Pachter wrote in a March 27 note. “While we are quite optimistic that the company will return to profitability in the fall, the effects of the pandemic may linger beyond the time frame we have modeled, putting our estimates at risk.”

Amazon Hits a Fiscal Grand Slam With 2019 Surge

Amazon had a “prime” fourth quarter and fiscal year (ended Dec. 31, 2019) across all its business units, including subscription services. The segment, which includes annual and monthly fees associated with Prime memberships, as well as audiobook, digital video, digital music, e-book, and other non-AWS subscription services, generated more than $5.2 billion in revenue. That was up 32% from services revenue of $3.95 billion during the previous-year period.

On the home entertainment front, Amazon Original series “Hunters” will premiere on Feb. 21. Produced by Academy Award-winner Jordan Peele and starring Academy Award-winner Al Pacino, “Hunters” follows a diverse band of Nazi hunters living in 1977 New York City.

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In the quarter, Prime Video debuted several Original series and movies, including The Report, The Aeronauts, “The Kacey Musgraves Christmas Special,” The Expanse, as well as the return of “The Marvelous Mrs. Maisel,” “Tom Clancy’s Jack Ryan,” and the final season of “The Man in the High Castle.”

Amazon Studios received eight Golden Globe Award nominations, with “Fleabag” winning Best Television Series, Musical or Comedy, as well as Best Performance by an Actress in a Television Series, Musical or Comedy, for Phoebe WallerBridge.

Amazon Music topped more than 55 million customers worldwide in the quarter. Collectively, in the U.S., U.K., Germany, and Japan, Amazon Music customers have grown nearly 50% year-over-year; and in newer marketplaces France, Italy, Spain, and Mexico, Amazon Music customers more than doubled in 2019. Additionally, Amazon Music Unlimited subscribers grew more than 50% in 2019. •

On the streaming media device front, Fire TV now has more than 40 million active users worldwide. Amazon announced the new Fire TV Edition at CES 2020, which includes a set of tools, features, and services that make it even easier for developers, operators, device makers, and manufacturers to integrate Fire TV into their products. BMW and Fiat Chrysler Automobiles are among the first automakers to introduce Fire TV in their future vehicles.

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Founder/CEO Jeff Bezos lauded the results and company for the fourth quarter and fiscal-year results.

Indeed, Amazon hit it out of the park in the quarter and fiscal year. Net sales increased 21% to $87.4 billion in the quarter, compared with $72.4 billion in fourth quarter 2018. Excluding the $120 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 21% compared with fourth quarter 2018.

Operating income increased to $3.9 billion in the quarter, compared with operating income of $3.8 billion in fourth quarter 2018. Net income increased to $3.3 billion in the quarter, compared with net income of $3 billion in fourth quarter 2018.

For 2019, net sales increased 20% to $280.5 billion, compared with $232.9 billion in 2018. Excluding the $2.6 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 22% compared with 2018.

Operating income increased to $14.5 billion, compared with operating income of $12.4 billion in 2018. Net income increased to $11.6 billion, or $23.01 per diluted share, compared with net income of $10.1 billion, or $20.14 per diluted share, in 2018.

“Prime members watched double the hours of original movies and TV shows on Prime Video this quarter compared to last year, and Amazon Originals received a record 88 nominations and 26 wins at major awards shows,” Bezos said in a statement. “A huge thank you to teams across Amazon for their dedicated work to build, innovate, and deliver for customers this [winter] holiday.”

Aggressive Marketing Drives Barnes & Noble’s Upbeat Winter Holiday Sales

Books can be a big seller if marketed correctly — especially during the winter holidays. Barnes & Noble apparently got the memo.

The national bookseller March 7 reported third-quarter (ended Jan. 26) net income of $66.9 million, marking a significant fiscal turnaround for the chain, which posted a loss of $63.5 million during the previous-year period. Revenue was flat at $1.23 billion.

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Meanwhile, the Nook segment, which includes electronic readers and tablets, in addition to digital content (movies, TV shows, music), saw revenue decline 22% to $24.3 million from $30.9 million last year. The operating loss increased 330% to $4.3 million from a loss of $1.3 million.

“In fiscal 2019, we have been focused on growing the top line, which contributed to our best holiday in years,” Len Riggio, founder and chairman, said in a statement. “Sales benefited from our new ad campaign, increased marketing and promotions, and an improved omni-channel experience for our customers. We believe these efforts are laying the foundation for sustained growth.”