Hulu Posted $920 Million Equity Loss for Corporate Owners in 2017

Hulu, the No. 3 domestic subscription streaming video service with 17 million subscribers, generated $920 million in combined 2017 equity losses for corporate parents Walt Disney Co., Comcast, 21st Century Fox and Time Warner.

The SVOD service, which is 30% owned by Disney, Fox and Comcast, with Time Warner holding a 10% stake, generated equity losses of $531 million during the 2016 fiscal period.

Based on Comcast’s 10K regulatory filing, the media giant recorded an equity loss of $276 million in 2017, up 64.2 % from an equity loss of $168 million loss in 2016, and $106 million loss in 2015.

Comcast said the losses were driven by higher programming and marketing costs.

Indeed, Disney Feb. 6 revealed it expects more than $250 million in equity losses on Hulu in 2018. The revised projection is up from a previously anticipated loss of $100 million. Disney is on the hook for about $450 million in capital contributions to Hulu in 2018, according to a regulatory filing.

Disney, along with other Hulu corporate owners, expect to recoup the losses through content sales delivered by proprietary channels.

Regardless, BTIG Research analyst Rich Greenfield believes Hulu’s fiscal losses could reach $1.7 billion in 2018 – on top of an additional $1.5 billion in combined capital investment.

Greenfield says when Hulu’s relatively low loss to corporate owners was manageable, fiscal bean counters could spin the results. But as the losses deepen, Greenfield – in a blog note – wrote, “We have virtually no disclosure on the positive impact Hulu’s spending is having on its parent companies.”

 

 

 

Fox Bows Anniversary Editions of ‘Planet of the Apes’ and ‘Sandlot’

Twentieth Century Fox Home Entertainment is celebrating milestone anniversaries for 1968’s Planet of the Apes and 1993’s The Sandlot.

Feb. 6 saw the release of Planet of the Apes: 50th Anniversary Edition on Blu-ray, DVD and Digital HD, with special features including a behind the scenes documentary, “Beyond the Forbidden Zone” adventure game, original make-up tests, original on-site footage, and audio commentaries by key actors and cast. The digital versions, available through online retailers and Movies Anywhere, offer an exclusive new 50th anniversary bonus feature.

The Sandlot: 25th Anniversary Collector Edition arrives on Blu-ray March 27. Set in the early 1960s, the film follows a group of friends in a magical summer of baseball and other adventures. The gift set includes 10 custom Topps baseball cards — featuring Scotty Smalls, Benny “The Jet” and the rest of the ragtag roster — created exclusively for the release. It also includes an all-new booklet filled with behind-the-scenes photos from the film director’s personal archive, and an all-new, full-color poster. Extras include a featurette, theatrical trailer and TV spots.

Disney Ups Hulu 2018 Equity Loss to $250 Million

The Walt Disney Co. Feb. 6 revealed it expects more than $250 million in equity losses on Hulu in 2018. The revised projection is up from a previously disclosed loss of $100 million.

Disney co-owns (30%) Hulu, which has about 17 million subscribers, with 21st Century Fox (30%), Comcast (30%) and Time Warner (10%).

Disney would become majority owner of Hulu should its $52.4 billion acquisition of select Fox assets pass regulatory muster.

On the fiscal call, CFO Christine McCarthy said about a third of the loss ($82.5 million) would impact second quarter (ending March 31) financial results.

The executive said the increased losses are due to content licensing between Hulu’s equity owners. As a stake holder, Disney expects to recoup the loss through Disney-ABC Television Group content sales as well as various affiliate network revenue.

Disney is on the hook for about $450 million in capital contributions to Hulu in 2018, according to a regulatory filing.

On the fiscal call, Disney CEO Bob Iger said following the end of Netflix’s exclusive pay-TV distribution of its original Marvel, Pixar and Lucasfilm movies, all titles released in 2019 would be distributed through proprietary digital channels, including possibly Hulu.

“Hulu has an existing output deal with HBO that will last longer by a few years the deal we have with Netflix,” Iger said.

He said it remains Disney’s intention following closure of the Fox deal to grow the global direct-to-consumer business taking advantage of combined studios’ production output.

“We fully hope to expand our production of intellectual property under those [Fox, Disney] umbrellas — studio and television to feed multiple direct-to-consumer businesses that we own,” Iger said.

 

 

Oscar Frontrunner ‘Three Billboards’ Set for February Home Video Release

Acclaimed indie film Three Billboards Outside Ebbing, Missouri is slated to hit digital retail Feb. 13 and packaged media Feb. 27 from 2oth Century Fox Home Entertainment.

Nominated for seven Academy Awards, including Best Picture,  Billboards features Oscar winner Francis McDormand (Fargo) as the defiant mother of murdered girl who erects three local signs with a controversial message seeking justice.

The billboards and McDormand soon come into conflict with local cop (Sam Rockwell) and the chief of police (Woody Harrelson).

Written and directed by Martin McDonagh, Three Billboards won four Golden Globes Awards, including Best Picture, Best Actress (McDormand) and Best Supporting Actor (Rockwell).

In addition to being available on Digital HD through Movies Anywhere and other digital retailers, the movie will be available on Blu-ray, DVD and 4K Ultra HD Blu-ray.

Bonus material includes featurette “Crucify ‘Em: The Making of Three Billboards” and short film Six Shooter.

The disc release comes the week before the March 4 Oscars ceremony.

SVOD, Studios Ready Super Bowl LII Ads

Amazon Studios will showcase its first Super Bowl ad for a TV show or movie when it airs a trailer for episodic series, “Tom Clancy’s Jack Ryan,” starring John Krasinski (“The Office”) – the fifth actor to play the title character after Alec Baldwin in The Hunt for Red October in 1990.

Amazon will also run a humorous ad for voice-controlled Alexa losing her voice, with baffled CEO Jeff Bezos asking, “How is that even possible?”

“People are aware of Prime video, but they’re not always aware that they get this award-winning programming as part of the membership,” Mike Benson, head of marketing for Amazon Studios, told The Los Angeles Times.

The Big Game, which boasts a domestic TV audience of 100 million, again promises to be a showcase for Hollywood studios and subscription streaming video mainstays spending upwards millions per spot.

Few studio ads have been confirmed, but online speculation is rampant.

Paramount Pictures has myriad options, including spots for Krasinski’s horror thriller, A Quiet Place, in addition to Tom Cruise’s Mission: Impossible – Fallout, among others.  Universal Pictures has spots for Jurassic World: Fallen Kingdom, Dwayne Johnson’s Skyscraper and Fifty Shades Freed.

Walt Disney Studios could run ads for Black Panther and Avengers: Infinity Wars, among others. Warner Bros., Sony Pictures and 20th Century Fox reportedly are not airing ads.

Hulu, which aired a 2017 Super Bowl ad for original series, “The Handmaid’s Tale,” undoubtedly will run another spot considering corporate co-owner Comcast (NBC Sports) is broadcasting the game.

Netflix might air an ad for a Cloverfield sequel. The third installment in the franchise originally was set to be distributed by Paramount, until it wasn’t. Scuttlebutt at the Sundance Film Festival had Netflix acquiring global rights.

Vice Chairman: Lionsgate ‘Very Interested’ in Third-Party Merger

Lionsgate is shopping – itself.

With AT&T’s $85.4 billion acquisition of Time Warner in regulatory limbo, and Walt Disney’s $52.4 billion acquisition of select 21st Century Fox assets, including 20th Century Fox, pending, big media mergers are on the mind of Michael Burns, vice chairman of Lionsgate.

With a $7 billion market cap, Burns says Lionsgate is a “pint-sized bite” for potential suitors compared to “800-pound” gorillas like AT&T. Speaking on CNBC, Burns reiterated the usual “enhancing shareholder value” mantra driving publicly-traded companies like Lionsgate to acquire or be acquired.

Burns was quizzed about the likelihood of Lionsgate merging with Verizon, Comcast, Amazon or possible reunified Viacom/CBS.

He said merging with a telecom such as Verizon could be a big deal, provided the telecom decided what businesses it wants to be in. Burns was alluding to Verizon CEO Lowell McAdam, who, on the fiscal call, said the telecom wasn’t looking at any M&A activity in the short-term.

Burns said he is very interested in the outcome of the DOJ’s antitrust lawsuit against the AT&T/Time Warner merger. The executive called Comcast’s $30 billion acquisition of NBC Universal in 2011 the deal of the century.

“Again, you have to show organic growth or you have to make acquisitions, like us, which would be a bolt-on acquisition for [Comcast],” Burns said.

He said Lionsgate is talking to other media companies “all the time to see if a deal makes sense.”

Merging with Amazon would seem realistic given the ecommerce behemoth’s 70 million Prime members and ongoing content deals between the two companies, including movies The Big Sick and Oscar winner Manchester by the Sea.

“We’re a customer of Amazon and we are doing a lot of business with them,” Burns said. “We think there is more and more to do with them.”

He said media companies, particularly in the tech space, have to decide whether they want to “build it” or “buy it” when determining how far ahead the competition is in the streaming and subscription business.

“We’re very interested in the consolidation space,” Burns said. “Obviously that’s very important to us.”

U.K. Regulator Rules Against Fox/Sky Merger

Rupert Murdoch’s quest to acquire outright control of British satellite operator Sky Jan. 23 suffered a setback after a government regulator found the $15 billion acquisition by 21st Century Fox would not be in the public interest. Fox currently owns 39% of Sky.

Following referral from the Secretary of State for Digital, Culture, Media and Sport, the Competition and Markets Authority (CMA) had been tasked with investigating the deal’s media plurality and commitment to broadcasting standards.

Specifically, the CMA found media plurality concerns for viewers on a Fox-owned Sky, including access to a wide range of political viewpoints.

The group found that due to its control of News Corp, the Murdoch family has significant influence over public opinion. Full ownership of Sky by Fox would strengthen this even further.

The watchdog said media plurality goes to the heart of the U.K.’s democratic process and as such is given legal protection.

CMA said the ruling did not involve a lack of a “genuine commitment” by Fox/Sky meeting broadcasting standards in the U.K.

“Our in-depth investigation also considered whether the deal would be against the public interest regarding broadcasting standards,” Anne Lambert, chair of CMA, said in a statement. “Due to their existing track record in the U.K., and the range of policies and procedures the companies involved have in place to ensure broadcasting standards are met, we did not find public interest concerns in this regard.”

Notably, should U.S. regulators okay Walt Disney’s $50 billion acquisition of 20th Century Fox, Disney would assume control of Fox’s stake in Sky.

The CMA will present a final report to Matthew Hancock, secretary of state for digital, culture, media and sport, by May 1. Hancock will make the final decision on the proposed deal.

 

Verizon Eyes 5G Future as Fios TV Ups Sub Losses

Verizon Jan. 23 announced it plans to roll out 5G wireless functionality in upwards of five major cities in the second half of this year – the first wireless carrier to do so.

The technology should dramatically increase streaming video speeds, with 5G download speeds up to 10 gigabits-per-second compared to one gigabit-per-second for 4G LTE. The higher speed could result in downloading a HD movie in seconds.

Verizon aims to harness 5G technology with its new Oath platform, whose content brands include Yahoo, HuffPost, AOL, Tech Crunch and Engadget, among others.

The telecom, which recently inked license deals with the NBA and NFL, added 47,000 Fios high-speed Internet customers to end the fourth quarter (ended Dec. 31, 2017) with 5.9 million subs.

“The next industrial revolution will be on Verizon’s [5G] network and will positively impact society like no technology we have seen before,” CEO Lowell McAdam boasted on the fiscal call.

Meanwhile, Verizon’s pay-TV platform, Fios video, lost 29,000 subs in the quarter, to end the year down 75,000 subs at 4.6 million.

When asked whether Verizon would follow in the footsteps of AT&T and Walt Disney seeking to acquire a media company, McAdam punted. The executive admitted Disney’s acquisition of 20th Century Fox underscores the value of scale in the market place.

McAdam said the jury is out regarding the merits of Verizon acting as an independent distributor of content compared to owning and creating content.

“I think until all of this media consolidation [AT&T/Time Warner, Disney/Fox] shakes out, you really can’t determine whether that’s a path we would be interested in,” he said. “But I can say unequivocally there is nothing going on right now without considering a large media play [involved].”

“In fact, if you look at our actions like the NBA and the NFL announcement … we think being able to monetize through advertising and being independent is a very good place to play for us right now.”

Wall Street remains on the fence regarding Verizon’s first-mover 5G strategy.

“5G is going to be a hundred times faster than your typical Internet service, so not only is it going to be faster, it’s going to have better margins and give Verizon a ton of opportunity for new customer growth,” Michelle McKinnon, analyst with Payne Capital Management, told CNBC.

Jonathan Chaplin, analyst with New Street Research, said that while 5G enables Verizon to bridge technology divides in the market, doing so comes at a major fiscal cost.

“We’ve pegged it at least at $35 billion dollars,” Chaplin said. “That’s going to [more than] absorb the gains [Verizon is] going to get in tax reform savings over the next four or five years — which I don’t think the market is anticipating.”

 

 

 

 

Lionsgate Stock Jumps on Acquisition Scuttlebutt

Lionsgate’s stock took a mid-morning bounce Jan. 18 following media reports the studio/distributor is in the M&A crosshairs of media giants Amazon, Verizon, CBS and Viacom.

Shares increased 5% the day after a Deadline.com report – citing sources familiar with the situation – said the Santa Monica, Calif.-based company was in active merger discussions. Lionsgate shares have increased 20% in value since last November.

Lionsgate, which is headed by CEO Jon Feltheimer, has a box office hit in Wonder, which has generated $120 million at the box office since Thanksgiving. The studio ranks fourth in nascent domestic box office.

With Disney’s pending $52.4 billion acquisition of 20th Century Fox, consolidation within the media industry has renewed interest as online powers Netflix and Amazon expand their entertainment prowess globally.

Lionsgate, which has a robust home entertainment business, in addition to multiple digital ventures, is also a major producer of television content. The company’s $4.4 billion purchase of Starz in 2016 underscoring further its presence in premium television.

The company has also expressed interest in ancillary revenue streams, including a theme park in South Korea and live theatrical productions – ventures that require significant capital investment.

Last August, Reuters reported merger negotiations between Lionsgate and Hasbro ended following an impasse on the price.

Michael Burns, vice chairman of Lionsgate, last month told CNBC the Disney/Fox pact was good news since it eliminates one competitor from the market, while further validating the value of content.

“I think Lionsgate actually thrives in chaos. You’re in a place right now where you are going to see serious consolidation out there,” Burns said.

Lionsgate reports third quarter results Feb. 8.

CES 2018 Mission: Improving the Home Entertainment Experience

More than 4,000 companies have arrived in Las Vegas for CES 2018, the world’s largest tech show, with many hoping to improve the home entertainment experience.

In addition to omnipresent television makers touting larger skinnier 4K UHD displays, CES promises myriad smart home enhancements – many featuring voice-activation.

With research firm Gartner predicting that, by 2019, at least 25% of households in developed economies would rely on digital assistants, competition to help people more easily consume anything from pizza to a movie from the comfort of the sofa has become fierce.

“Innovations such as voice control have increased consumer interest in solutions that enhance the entertainment experience,” said Elizabeth Parks, SVP at Parks Associates.

Google, for example, is coming to CES hoping to up its 25% market share of the smart speaker market, according to Strategy Analytics. Amazon Echo currently commands a 67% market share.

Both companies (and Apple) sell digital movies and TV shows, including 2014 sci-fi hit Ex Machina. Seems natural to order the Oscar-winner by voice-command.

“You should have the same assistant helping you across all the contexts of your life,” Scott Huffman, VP for Google Assistant, told The Washington Post, whose founder/CEO Jeff Bezos owns Amazon.

But what good is virtual assistance if you can’t live forever, looking like George Clooney?

Netflix has a solution, showcasing the pending original series “Altered Carbon,” which launches globally Feb. 2. The streaming giant “partnered” with PsychaSec, the fictional company whose tech underscores the cyberpunk sci-fi series about technological advances that allow one to extend life indefinitely – without arguably selling your soul to the Devil, a.k.a., “The Picture of Dorian Gray.”

Twentieth Century Fox, Panasonic and Samsung will present updates for HDR10+, the open-source High Dynamic Range platform Samsung began pushing last year to avoid paying HDR royalties to Dolby Vision.

Amazon Prime Video has already incorporated the enhanced 4K UHD format for original content “Tom Clancy’s Jack Ryan,” comedy “Jean-Claude Van Johnson,” and “The Tick,” among others.

Chinese TV manufacturer TCL Jan. 8 will announce plans to join Roku’s “Whole Home Entertainment Licensing Program,” a new platform enabling OEM brands to incorporate voice-activated Roku Connect software as a home entertainment network. TCL manufactures Roku-branded TVs.

“Consumers will love the benefits of … having more affordable options – using their voice, having a simplified set up and Wi-Fi connectivity, and holding just one remote control,” said Roku founder/CEO Anthony Wood.

Seeking to make sense of it all, Hulu CEO Randy Freer joins Turner CEO John Martin Jan. 10 on a keynote panel titled “Reimagining Television.” Freer and Martin are slated to discuss how technology companies are moving into content creation, while content companies are expanding digital distribution. The panel takes place at Monte Carlo’s Park Theater.

Finally, leave it to French furniture maker Miliboo to feature a smart sofa allowing users to wirelessly charge cell phones and related portable devices while watching TV.

Even smarter: The sofa tracks how long you’ve been a couch potato, while monitoring the effects on your body’s posture.