Galen Smith, the former Redbox CEO who engineered his company’s sale to Chicken Soup for the Soul Entertainment last August, is resigning his post as executive vice chair of Chicken Soup, effective Jan. 2.
“Over the past 13-and-a-half years, Galen has helped turn Redbox into an incredible company with a talented team; I appreciate all he has done to lay the foundation for the future ahead in our journey to create the entertainment destination for value-conscious consumers,” said Bill Rouhana, CEO of Chicken Soup for the Soul Entertainment. “On a personal note, I want to thank Galen for all he has done for our company and me personally. Over the past several years, as we talked about bringing the companies together, we built a friendship that I am sure will continue. I tried to get Galen to stay, but he is rightfully determined to run another company as CEO. I will miss having him part of our daily lives.”
“It’s been an amazing journey leading Redbox for so many years and I know the company is in great hands with Bill,” Smith said. “I’ll miss working with all my Redbox team members but know the company’s best days are ahead. I’m looking forward to taking some time off and then starting my next role.”
Smith took over as CEO of Redbox in September 2016 and subsequently steered the company through a digital transformation, with digital movie sales and rentals and free live TV, both on demand and ad-supported. He also recast the company’s legacy disc-rental kiosks as a marketing tool to further facilitate the consumer transition from physical to digital.
“We have this incredible business with a very loyal customer base that absolutely loves movies,” Smith told Media Play News in July 2021. “They still love renting movies at our kiosks, but as we know consumers are shifting to digital, and we want to create an opportunity for them to make it easy by having all those opportunities in one place — free live TV, TVOD, and on demand — and then as part of this transition we’re going through we also will be adding subscription channels.”
In October 2021, Smith took Redbox public through a merger with Seaport Global Acquisition Corp., a publicly traded special purpose acquisition company.
But when the pandemic hit, the lack of fresh new movies stymied Redbox’s growth plans and caused the company’s stock price to plummet, which ultimately led to its sale to Chicken Soup last August.
In a Dec. 9 8-K filing with the Securities and Exchange Commission, Chicken Soup for the Soul stated, “On Dec. 5, 2022, Galen Smith, who joined Chicken Soup for the Soul Entertainment Inc. as our executive vice chairman following our acquisition of Redbox Entertainment Inc., delivered notice to our board of directors that he would be resigning that position effective Jan. 2, 2023, in order to pursue other leadership opportunities. Mr. Smith had served as chief executive officer of Redbox from 2016 until our acquisition of Redbox in August 2022. From 2013 to 2016, he served as chief financial officer of Outerwall, Redbox’s predecessor company and a leading provider of automated retail solutions, including Redbox, Coinstar and ecoATM. Mr. Smith was instrumental in evolving Redbox into an industry leading company with a talented management and operational team and has helped lay the foundation for our combined company’s continuing journey to become the foremost entertainment destination for value conscious consumers. Mr. Smith has helped lead our integration of Redbox since the acquisition and has ensured the establishment of a clear path forward to best serve our consumers. Through Jan. 2, 2023, Mr. Smith will work closely with our management and personnel to ensure a smooth transition of his responsibilities. Mr. Smith’s duties will be assumed by our chairman and chief executive officer, William J. Rouhana Jr. The terms of Mr. Smith’s departure will be governed by his existing employment agreement with our company.”
Redbox posted a net loss of $9.5 million on revenue of $31.6 million renting DVDs and Blu-ray Discs, and renting and selling digital movies, in the third quarter (ended Sept. 30). The revenue, which accounted for 34% of Chicken Soup for the Soul Entertainment’s total $72.4 million in revenue, represents the partial period of the quarter after CSSE officially completed its $375 million acquisition of Redbox on Aug. 11.
The company operates about 34,000 kiosks nationwide and is looking to add 1,000 kiosks at a select national retailer in 2023. Disc rental revenue topped $24.8 million.
On the heels of Chicken Soup for the Soul Entertainment’s acquisition of Redbox Entertainment, Redbox CEO Galen Smith, in a memo to employees, said the transaction would in part help the legacy DVD rental kiosk vendor transition to ad-supported streaming video distribution.
Chicken Soup, which owns and operates Crackle Plus, one of the original AVOD streaming platforms, is set to acquire Redbox in an all-stock transaction valued at $375 million.
Galen said Crackle Plus would “perfectly” complement Redbox’s legacy business as well as newer digital offerings. Launched originally in Canada in 2004 as Grouper, Sony Pictures Television acquired the platform in 2006 and renamed it Crackle. Sony sold the service to Chicken Soup in 2019. Other Crackle Plus streaming platforms include AVOD Popcornflix, Truli (faith-based content), and SVOD Pivotshare.
“Chicken Soup for the Soul Entertainment also acquires and distributes original video content, much like we have started to do through Redbox Entertainment,” Smith wrote in the memo.
The executive characterized AVOD as a “massive market opportunity” in AVOD, with Chicken Soup offering substantial capabilities, including technology and existing advertising relationships, to Redbox.
“Crackle Plus has one of the top AVOD network groups, with more than 40 million monthly active users,” Smith wrote. “Together with Redbox’s 40-million-plus loyalty members, our content library and free ad-supported streaming television (FAST), we’ll be able to offer consumers unparalleled choices for a phenomenal value.”
In the memo, Galen he recognized that many Redbox employees would have questions about the company’s future and their jobs.
“I want to be transparent — we don’t have all the answers today, but we’ll do our best to provide you with what we know,” Smith wrote. “A lot of questions about how the two companies will be integrated are still being made and will be decided over the coming months once the deal has been completed, which is expected to be in the second half of 2022.”
Smith said he plans to address all issues of the corporate merger in a future company Town Hall.
“I encourage you all to join, and we’ll do our best to answer your questions. We’ll also be sharing a list of Frequently Asked Questions to address some we expect you may have. I want to sincerely thank you for all you have done for Redbox. It hasn’t always been easy, but this team is resilient, and we couldn’t have reached this outcome without you.”
Redbox April 25 announced that CFO Kavita Suthar will step down, effective May 16, to spend more time with her family. Suthar joined Redbox in 2015, becoming CFO in 2020 and played an integral role in navigating the home entertainment company’s successful SPAC merger and public listing in October 2021.
Mitchell Cohen, who has prior experience as COO and CFO at several public and private companies, will serve as interim CFO. Suthar will remain involved with Redbox in an advisory capacity to facilitate a smooth transition.
“Kavita played an important role in Redbox’s public listing and provided the sound financial leadership required to navigate the process successfully,” CEO Galen Smith said in a statement. “On behalf of the board and executive team, I’d like to thank her for her contributions over the years. We wish her the very best in her future endeavors.”
Redbox, which lost $140 million in fiscal 2021, is undergoing internal restructuring as it cuts overhead costs and attempts to transition to digital distribution.
Separately, Redbox shares exploded (41%) April 25 as more than 33 million shares traded hands on Wall Street — well above the average daily volume around 2.4 million shares. Online scuttlebutt suggests the stock has piqued the interest of short sellers who are betting the company becomes a “meme stock,” triggering major up-and-downturns.
Redbox Entertainment shares did a strange thing on March 18. The stock catapulted more than 50% in value at the close of the business day after climbing from $1.82 per share at the opening bell, to $3.48 in midday trading, and closing at $2.69 per share.
Through the course of the business day, more than 22 million shares traded hands — exponentially higher than the average daily volume of 984,000 shares traded. The home entertainment icon’s stock continued its upward trajectory March 21, with shares up 4.5% in mid-morning trading on more than 3.2 million shares changing hands
Such movement typically is the result of some company news or outlying market conditions impacting the stock. But there wasn’t any news. Nothing. Redbox Entertainment management hasn’t mentioned much since presenting at the 2022 Virtual ICR Conference on Jan. 11, where CEO Galen Smith again reiterated the company’s strategy of targeting DVD kiosk renters and late streaming adopters with a one-stop-shop for their home entertainment needs.
Redbox’s lone bad news has been an ongoing market shortage of new release movies from the studios due to the pandemic, among other supply issues.
Michael Pachter, senior media analyst at Wedbush Securities in Los Angeles, covers Redbox and is perplexed by Friday’s stock movement.
Could it be short sellers hoping to cash in when shares plummet? Day traders looking to turn Redbox into a meme stock where a company’s stock gain sudden popularity with individual investors on social media platforms and goes through the roof in value?
Redbox Entertainment and Red Sea Media Inc. (RSM) Feb. 16 announced they have signed worldwide rights for the action-adventure film King of Killers. The film was written by and will be directed by actor, screenwriter, and comic book writer Kevin Grevioux, who was behind the successful “Underworld” franchise for Sony Pictures.
Based on Grevioux’s graphic novel of the same name, King of Killers tells the story of a group of international assassins who are contracted to take out the most dangerous killer in the world. The film will be shot in Winnipeg, Canada later this month. Redbox Entertainment will release the film domestically later this year in theaters and, on the same day, through its Redbox On Demand digital video store as well as on disc at its Redbox kiosks.
King of Killers stars Frank Grillo, best known for his appearances in the “Captain America” and “Purge” films. It will be produced by Shane Walker and Angel Gracia of Creative Tank, Michael Wright and Christopher Rush Harrington of Dovetail Media, Juliette Hagopian of JuliJette Inc., Channel 56 Films, and Todd Slater of Slater Brothers Entertainment. Redbox CEO Galen Smith and Marc Danon of Redbox Entertainment will serve as executive producers, along with Grant Slater of Slater Brothers Entertainment, Matthew Helderman, Luke Taylor and Tyler Gould from BondIt Media Capital and Roman Kopelevich and Roman Viaris of RSM.
The deal was brokered by Roman Kopelevich, CEO of RSM, and Todd Slater, partner at Slater Brothers Entertainment on behalf of the producers, and by Danon for Redbox Entertainment. BondIt Media Capital is providing direct financing for the film.
Grillo is represented by Management 360, Creative Artists Agency, Paul Hastings and 42West. Grillo recently wrapped on the biopic Lamborghini, based on the life story of Ferruccio Lamborghini, founder of the iconic Italian sports car company.
Grevioux said: “I am thrilled that Redbox Entertainment and Red Sea Media are on board as our partners. Similarly to Underworld, I created the graphic novel to be a franchise in a series of action films. Now with our incredible cast, we have a property that audiences around the world will have a lot of fun experiencing.”
“After reading the script and seeing Kevin’s amazing track record with Underworld, we know this will be an action-packed film that will thrill audiences,” said Redbox’s Smith. “We’re looking forward to releasing King of Killers later this year.”
Since going public in October with special purpose acquisition company Seaport Global Acquisition Corp., Redbox Entertainment has been on overdrive.
In addition to pursuing digital distribution deals and content licenses to jumpstart its ad-supported VOD and free ad-supported streaming television businesses, the company is launching, in the first half of the year, a channels platform, which similarly to Amazon, will feature third-party subscription streaming services.
“That way, you have all of your content in one place,” CEO Galen Smith said at this week’s virtual 24th Annual Needham Growth Conference.
The venerable kiosk disc rental company has also added 1 million loyalty members (consumers earning points renting and buying games, DVDs, Blu-ray Discs, and On Demand movies), to start 2022 with 40 million — up from 27 million in 2018, according to Redbox.
Smith said the brand is undergoing a “radical transformation from a one-window legacy DVD business to a multi-window, multi-faceted digital entertainment company.” He said Redbox has 400 million estimated weekly retail impressions, 600 million monthly media impressions, 43 million app downloads and 46 million email subscribers.
“The app downloads were started as a way for people to find a movie at a local kiosk and reserve it ahead of time,” Smith said. “Now, we’ve been able to morph that and offer digital experience opportunities as well.”
Indeed, the Redbox Perks program is enticing its 40 million members with bonus points to try AVOD, FAST, transactional VOD and soon, SVOD, with a single sign-on, payment, app platform.
“It allows us to give additional value, additional currency to consumers trying things,” Smith said. “We want to create this one destination, to make it very easy for consumers to find all of their digital content in one place.”
Smith said 58% of Redbox’s consumers (55% women) are loyalty members, with 71% identifying themselves as “deal hunters,” two times more likely to rent a movie than the average consumer, while 70% also admit to being late technology adopters.
“That’s why I think our Redbox Perks program is so valuable bringing them along,” he said.
Smith said the brand is currently embedded on 8 million Roku streaming media devices on sale at Walmart stores nationwide with a $5 discount coupon inside.
“We think we’ll be able to move over some of our Walmart customers over to a Roku streaming stick, and also find new customers that might not have experienced Redbox before,” he said. “We want to give them this incredible, single app experience.”
Redbox has also licensed three branded content channels to third-party platforms, including Roku and online TV syndication. The company’s AVOD service has 1 million monthly average users across 9 million unique devices featuring more than 100 channels. Since test-launching Redbox Channels, the platform has sold 62,000 bundled subscriptions (feature a free kiosk movie rental) as part of its SVOD market test.
“We’re really excited, once this launches in the second quarter, what it will do for our business,” Smith said. “Creating this stickiness overall, in terms of coming to Redbox for more and more [the consumers’] entertainment needs.”
Specifically, Redbox contends the average kiosk-only consumer spends about $22 a year on rental discs, while consumers that also acquire digital movies spend about $70. Consumers who engage in disc rentals, transactional VOD and retail, spend about $100. When combining ad-supported content and SVOD to the mix, Smith said Redbox can generate from $215 to $295 in incremental revenue per select customers.
“To be really clear, it’s not going to everyone,” Smith said. “Some [consumers] will continue to do one thing. But we’re excited about the opportunities that presents.”
Redbox on Jan. 5 announced the most-watched movies in 2021 across its AVOD channels, Redbox On Demand digital retail store, and nearly 40,000 kiosks offering DVD and Blu-ray Disc rentals.
Texas Killing Fields, a crime drama starring Jeffrey Dean Morgan, was the top AVOD title; Free Guy, the Ryan Reynolds action comedy, was the top TVOD release; and the animated kids’ movie The Croods: A New Age was the top disc rental of 2021.
Galen Smith
The year 2022 marks the 20th anniversary of Redbox, which went public last October in part to fuel its content spend. The company continues to offer disc rentals at its nearly 40,000 red kiosks outside, or inside, supermarkets, convenience stores, and mass merchants such as Walmart. But its main focus these days is digital, including Redbox on Demand, where consumers can rent or buy movies and TV shows either through the Redbox website or apps that are now available on Roku, Samsung, VIZIO, LG, Xbox, PlayStation, iOS, Android, and many other platforms. Also available through the Redbox website and app is an AVOD streaming service where consumers can watch thousands of movies for free.
The company says its Redbox Free Live TV service has now surpassed 130 Free Ad Supported Television (FAST) channels offering a wide range of content from The Price is Right: The Barker Era to The Bob Ross channel.
“In 2021, we continued to see growth in our streaming services and our kiosks remain very popular with our customers,” said Galen Smith, CEO of Redbox. “2022 will be a big year for Redbox as we accelerate our digital businesses and celebrate 20 years of bringing the best in entertainment to millions of customers.”
Redbox’s Top 10 Movies of 2021 (Digital sales and rentals, Redbox On Demand)
Free Guy
The Croods: A New Age
F9: The Fast Saga
Venom: Let There Be Carnage
Wrath of Man
Greenland
A Quiet Place Part II
Hitman’s Wife’s Bodyguard
The Marksman
Nobody
*Based on TVOD transactions between Jan. 1 through Dec. 31, 2021.
Redbox’s Top 10 Movies of 2021 (DVD and Blu-ray Disc rentals at the kiosk)
The Croods: A New Age
Greenland
The Marksman
Wonder Woman 1984
Wrath of Man
News of the World
F9: The Fast Saga
Nobody
A Quiet Place Part II
Let Him Go
*Based on DVD and Blu-ray Disc rentals between Jan. 1 through Dec. 31, 2021.
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.
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 Carnage, Ghostbusters: 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.”
Redbox officially went public Oct. 25 after CEO Galen Smith rang the bell to open the NASDAQ stock exchange. Smith traveled to New York’s Times Square with his leadership team to participate in the ceremony at NASDAQ headquarters.
CEO Galen Smith travelled to New York’s famed Times Square to ring the opening bell on the Nasdaq stock exchange Monday (Oct. 25) morning, marking Redbox’s official debut as a publicly traded company.
“It was amazing, it was a huge highlight,” Smith told Media Play News in an interview shortly after the ceremony. “This is something I’ve wanted to do for years. I started working on taking Redbox public back when I was a banker in 2008, so to be actually here and doing this feels like a truly incredible day.”
Rather than going the long and tedious IPO route, Redbox became Redbox Entertainment Inc. — with its common stock and warrants trading under the ticker symbols “RDBX” and “RDBXW,” respectively — through a merger with Seaport Global Acquisition Corp., a publicly traded special purpose acquisition company.
“We felt it was going to be the most efficient way to bring the company to market,” Smith said. “Our business is in transition, moving from physical only to multi-channel and multi-platform, so it allowed us to have a platform to really tell our story.”
The story, of course, is a digital transformation to bulk up Redbox’s digital offerings — digital movie sales and rentals; free live TV, both on demand and ad-supported; and, down the road, selling subscriptions to streaming services — while using the company’s more than 40,000 disc-rental kiosks as a marketing tool to further facilitate the consumer transition from physical to digital.
“We have this incredible business with a very loyal customer base that absolutely loves movies,” Smith said. “They still love renting movies at our kiosks, but as we know consumers are shifting to digital, and we want to create an opportunity for them to make it easy by having all those opportunities in one place — free live TV, TVOD, and on demand — and then as part of this transition we’re going through we also will be adding subscription channels.
“And then you have this single plane of glass, a single window, with single billing, that makes it incredibly easy for consumers to access all of this entertainment. And having this incredible billboard through our kiosks creates an amazing opportunity that really allows us to serve our customer base.”
Redbox’s digital transformation, ambitious as it might be, is fully on track, Smith said. “We’re making a lot of progress,” he said. “We’ve set some important goals and objectives, and we keep running and chasing after that. We’re pleased with the momentum, but we think there’s a huge opportunity and we want to seize that opportunity. We still have a long way to go.”
Redbox’s over-arching goal, Smith said, is to create a one-stop destination for entertainment. “And we’re going to get there by constantly bringing in more titles for ad-supported free live TV, as well as more channels — we’d love to get 200 or so channels; continuing to expand the functionality of TVOD; and, with subscriptions, it’s really important for us to get those deals done and make that content available to consumers.”
Through the business combination with Seaport Global, Smith said, Redbox raised nearly $90 million in cash. “Part of it went to pay down debt, and the other part we’re investing in the business, in four key areas,” he said. “First, we’re building up our channels platform. Second, we’re leaning into advertising. Right now we have this really creative program with Roku selling discounted bundles for Redbox digital. You get that when you buy a Roku streaming device at Walmart. Third, we’re going to license more content for our ad-supported service, both on demand and free live TV. And then we’re going to continue to build up Redbox Entertainment, the titles we’ve been distributing — we’re going to bring in more and more of those.”
