Warner’s ‘Scoob!’ Tops U.K. Weekly Home Entertainment Chart

Warner Bros.’ Scoob! nabbed the top spot on the weekly U.K. Official Film Chart through Sept. 23, knocking off perennial leader Trolls World Tour (Universal Pictures Home Entertainment).

Disney’s Star Wars IX: The Rise of Skywalker held the third spot ahead of eOne’s Oscar winner 1917, and Sony Pictures Home Entertainment’s Little Women in fifth. The studio continues to score with Spider-Man: Far From Home (6) and Bad Boys For Life (7), ahead of Warner’s A Star Is Born in eighth.

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Paramount Home Entertainment’s Sonic The Hedgehog ended in ninth, while SPHE’s Jumanji: The Next Level rounded out the Top 10.

The Official Film Chart Top 10 – 23rd September 2020

LW Pos Title Label
NEW 1 SCOOB WARNER BROS.
1 2 TROLLS WORLD TOUR DREAMWORKS ANIMATION
3 3 STAR WARS IX – THE RISE OF SKYWALKER WALT DISNEY
5 4 1917 ENTERTAINMENT ONE
10 5 LITTLE WOMEN (2019) SONY PICTURES
6 6 SPIDER-MAN: FAR FROM HOME SONY PICTURES
7 7 BAD BOYS FOR LIFE SONY PICTURES
19 8 A STAR IS BORN WARNER BROS.
8 9 SONIC THE HEDGEHOG PARAMOUNT
9 10 JUMANJI: THE NEXT LEVEL SONY PICTURES

Deloitte: Consolidation, Niche Content Key to Surviving Industry Transformation

In the rapidly evolving over-the-top video ecosystem, traditional media distribution has been turned on its ear as pay-TV, linear broadcast and packaged media are being supplanted by technology companies entering the media and entertainment space — many with original content.

From subscription streaming video-on-demand pioneers Netflix and Roku to e-commerce behemoth Amazon, consumer tech giant Apple and social media stalwart Google/YouTube, tech companies have forced traditional media companies and studios to reconsider their business models to survive.

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And in the midst of COVID-19, recovery from the pandemic disruption will likely dominate operational strategy in the near term, even as companies consider how to address the broader and longer-term transformations in media and entertainment.

New data from consulting giant Deloitte suggests mergers and acquisitions, in addition to content differentiation are keys to surviving media distribution in the coronavirus era.

Since 2014, more than $700 billion in strategic M&A deals occurred across media and entertainment sectors, highlighted by Disney’s acquisition of 21st Century Fox’s entertainment assets and AT&T’s acquisition of Time Warner, including Warner Bros., HBO and Turner assets. Just as unprecedented change has forced companies to consider transactions — such as merging with a rival — that would have been unthinkable years before, Deloitte contends ongoing disruption may cause companies look to invest in areas previously ignored or out of their comfort zone.

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Globally, M&A activity in the broader telecom, media, and entertainment sector fell by 17% in the first half of 2020 compared to a year earlier, while value is 47% down. In the United States, the sector has been far more resilient, with volume down only 4%. But the 45% decline in deal value suggests that companies are looking at small and midsized deals following the megamergers, albeit with continued pandemic-related uncertainty also hampering valuations. Although the economic outlook will loom large, M&A deal pricing is likely to be influenced by demand for and supply of independent targets.

Differentiated Content is King

At the heart of media consolidation is access and control of content. With the arrival of more streaming services, and the heightened competition for talent and content, costs are skyrocketing. Since 2010, the number of scripted TV shows on domestic networks has more than doubled. And streaming services are now paying up to $20 million per hourlong episode— several times the cost of just a few years ago, according to the report.

With Netflix raising the bar on original content spend almost beyond the reach of most competitors, Deloitte suggests media companies differentiate by targeting niche audiences within their platforms. In Deloitte’s 2019 Digital media trends survey, 40% of paid streaming video users said they subscribed primarily to access original content. And this was up to as high as 57% for millennial consumers.

The report says media companies should focus on excelling in one or more of the following differentiators to remain ahead of the competition:

  • Providing differentiated content and programming, either at scale or through dominating a niche;
  • Controlling direct access to consumers through owned distribution channels, including direct-to-consumer(DTC)/over-the-top (OTT) alternatives, either at scale or through owning access to a valuable consumer segment;
  • Owning the capabilities required to capitalize on increased data and using it to boost profitability, optimizing proprietary data to develop better insights.

 

Acorn TV generated more than 1 million subscribers (paying $6 per month) while maintaining high customer retention rates based on offering mainly British TV murder mysteries, even as more diverse and more capitalized platforms struggle to achieve half of that subscriber count. AMC Networks acquired Acorn’s parent RLJ Entertainment for $100 million in 2018.

Disney’s streaming-driven acquisition of Fox, including the rights to the X-Men, Avatar, The Simpsons, FX Networks and National Geographic — was a key step to accumulating premium content and expanding its digital presence through Disney+, ESPN+ and Hulu.

“A paucity of conventional targets may force companies to think more laterally about how to attain differentiated content,” read the report.

Indeed, news media businesses now view their back catalog of content as monetizable source material for video content, including TV series, documentaries, and even feature films. Similarly, companies have developed podcast programs into premium video content.

“These nontraditional sources of original content could provide targets for M&A in the coming months and years,” Deloitte wrote.

Target Reports Record Q2 Store Sales Across All Merchandise Categories, Including Entertainment

Target Corp. Aug. 19 reported record second-quarter (ended Aug. 1) sales, up 24.3% to $22.9 billion from $18.4 billion during the previous-year period. Net income ballooned 80% to $1.7 billion from $938 million last year.

The Minneapolis-based retailer attributed the fiscal rise to continuation of heightened sales volume and significant household investments in response to the COVID-19 pandemic.

Target, along with Walmart and Best Buy, is one of the largest sellers of packaged media, including DVD, Blu-ray Disc and 4K UHD Blu-ray. While online sales grew 195% in the quarter, in-store sales drove nearly 90% of the company’s quarterly revenue.

“Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target’s digital sales,” CEO Brian Cornell said in a statement. “We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. We are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead.”

Target operates nearly 1,900 stores nationwide, in addition to Target.com.

Home Entertainment Booming Down Under During Pandemic

Add Australia to countries that have driven home entertainment revenue during the COVID-19 pandemic, according to new data from emerging technology analyst firm Telsyte. Aussies added 5.6 million new subscriptions to the end of June, an increase of 18% from a year ago. This growth was across streaming video on demand (SVOD), streaming music and games related subscription services.

The total number of subscriptions reached almost 37 million and is forecast to grow to 58 million by 2024.

The Telsyte Australian Entertainment Subscriptions Study 2020 found SVOD and streaming music remained the top two largest categories with 16 million and 12 million subscriptions respectively.

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Video Entertainment Tops Consumer Demand 

COVID-19 sent the Australian SVOD services market to new heights as Australians spent more time at home, with over half (52%) of SVOD users believing their services have become “essential” since the pandemic. The total number of subscriptions reached around 16.3 million at the end of June 2020, a year-on-year increase of 32% from 12.3 million in June 2019.

Telsyte research shows Netflix (5.4 million) and Stan (2.1 million) remained the top two SVOD service providers at the end of June. Amazon Prime Video and Disney+ (launched in Nov 2019) both emerged strongly with 1.7 and 1.1 million subscriptions, respectively.

Use of Amazon Prime Video benefited from the strong uptake of Prime subscriptions (Telsyte measures a subset of Prime users based on those that use the Prime Video option), as demand for online shopping and delivery has also soared.

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Demand for Live Sports

With Australians, like other countries, unable to attend their favorite sporting matches during the pandemic, the pandemic has only made Aussies’ appetite for sports content even stronger, with a surge in adoption towards the end of June when many sporting codes resumed.

“Despite a hiccup during the shutdown period, sports video subscriptions are set to continue to grow strongly as fans turn to apps instead attending stadiums,” managing director Foad Fadaghi said in a statement.

Telsyte estimates the total sports SVOD category grew by 11% to 4.9 million subs at the end of June. Telstra Sports Live Passes, Optus Sport and Kayo Sports made up around 95% of total sports SVOD subscriptions.

Slowed Content Production

Disruptions to content production during the pandemic will likely present an issue for services going into the second half of 2020, with research showing consumers are recognizing new program additions are in decline.  More than one in three SVOD users feel there is less new content being added to their services since the pandemic.

However, rather than impacting negatively on the market, in the short term Telsyte believes this has driven consumers to consider subscribing to multiple services to address content shortfalls, rather than turning off services.

“Australians continue to show a strong willingness to subscribe to multiple services,” Fadaghi said.

Telsyte research shows that nearly half (47%) of households that subscribe to SVOD services have more than one service, an increase from 41% in June 2019.

The market is well positioned to accommodate multiple providers, as more platforms such as Fetch TV, Apple TV and Foxtel are shaping to be more inclusive, allowing easy subscriptions to multiple services and single billing through the one platform. The study found 36% of Australians are interested in using simplified, one-stop access to multiple services.

Free video demand solid as Pay-TV subsides

SVOD services have not been the only winners during the past 12 months with free to air TV apps also growing viewership. Broadcasting Video on Demand services (BVOD), including 9Now, ABC iView, etc., have benefited as Aussies searched for more content during the lockdown, especially as a trusted news sources for information about the current health crisis.

The main BVOD platforms had upwards of 10 million Australians using their service during FY2020 and almost half of survey respondents claimed they are spending more time on BVOD due to COVID-19.

In contrast, the total pay-TV market (which includes residential cable, satellite and IPTV) was down 6% year on year to 2.6 million subscriptions at the end of June 2020. Foxtel’s pay-TV was the main source of the market decline due to increasing adoption of SVOD, which itself is now pivoting strongly towards with Foxtel Now, Kayo Sport and Binge.

Fetch TV with its mixed business model as both a set top box platform and an IPTV subscription service remained the growth engine for the pay-TV market alongside the uptake of broadband bundles.

Streaming Music Market Grows

The total number of streaming music subscriptions only increased 2% year-on-year to 12.2 million at the end of June 2020; however, over half are now paid subscriptions, compared to 42% at the end of June 2019.

The top three streaming music service providers in Australia remained Spotify, Google (including YouTube Music, YouTube Premium and Google Play Music) and Apple. Streaming music providers are increasingly focused on the podcast segment as growth has slowed.

According to Telsyte’s research, more than one in four Australians aged 16 and over listened to podcasts between January and June 2020, with comedy, health and news and politics related podcasts most popular.

Video Game Subscriptions Explode

Video games have been booming in popularity following the lockdown. About half of Australian households have a gaming console and 5 million people regularly purchase games (downloads and physical) making it a vibrant part of the entertainment market.

As well as dedicated consoles, Telsyte research shows that gamers overall were spending between 25 and 35% more time on games during the pandemic ranging on devices such as smartphones, tablets, computers and gaming consoles.

Australians had 5.8 million games related subscriptions at the end of June 2020, consisting of console subscriptions (e.g. PlayStation Plus, Xbox Live Gold), video game service subscriptions (e.g. EA Access, Xbox Game Pass and Apple Arcade), and Massively Multiplayer Online Game (MMOG) subscriptions (e.g. World of Warcraft).

The biggest growth was in video game service subscriptions which more than doubled to 2 million at the end of June 2020 (up from 0.9 million in June 2019). Telsyte forecasts this market is set to explode as several companies vie to be the ‘Netflix’ of games.

The study found a third of gamers are already aware of cloud gaming, where games are streamed from a remote server rather than stored locally on the users’ devices. This allows games to be played on devices with less computing power and the games also do not need to be downloaded and stored on the local device.

“Streaming gaming could be a game changer for the industry as it opens high end gaming to almost any device,” Fadaghi says.

Telsyte also found a growing interest in next-generation PlayStation 5 and Xbox Series X consoles as release dates get closer. Both will likely to help boost the games subscription market.

Telsyte estimates the total number of games related subscriptions could reach more than 17 million by June, enabled by fast broadband and 5G Internet connectivity, next generation game consoles and services that will appeal to casual players on smartphones and tablets.

Home Entertainment Giants Walmart, Target to Release Financial Results This Week

Following home entertainment studios’ strong quarterly fiscal results, top retailers Walmart and Target are set to release fiscal results this week that should underscore ongoing consumer demand for both physical and digital movies and TV shows.

Walmart, which reports fiscal results on Aug. 18, is the world’s biggest brick-and-mortar retailer and top seller of DVDs and Blu-ray Discs, with more than 5,000 outlets in the U.S. and more than 6,000 international stores.

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Long a packaged-media promotional juggernaut, on big releases Walmart will often do a gift set pairing a Blu-ray combo pack with a collectible such as a plush or keychain. The chain also offers exclusive bare-bones DVDs of Warner titles.

Target Corp., which reports results on Aug. 19, markets home video at more than 1,800 stores with point-of-purchase displays and significant shelf space. Like Walmart, Target has long been a big seller of DVDs and Blu-ray Discs. Disney in 2019 launched 25 branded sections within select Target stores, with 40 additional locations opening by this October.

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Target’s go-to marketing angle is the behind-the-scenes booklet add-on to packaged-media releases. For instance, for Onward, the latest Pixar release, Target offered a 4K Ultra HD Blu-ray with a gallery booklet and slipcover for $34.99.

Target has seen increased sales due to the coronavirus pandemic, reporting a 141% increase in e-commerce revenue for the first quarter (ended March 31) as consumers stocked up on lower-margin products online. CEO Brian Cornell said Target.com saw an increase of 5 million customers in the quarter, while more than 2 million used the drive-up service. The chain said more than 70 million people have downloaded the Target Circle app to access e-commerce.

Best Buy reports fiscal results on Aug. 25.

Home Entertainment: Studio Fiscal Lifeline During Pandemic

NEWS ANALYSIS — Throughout the ongoing coronavirus pandemic, much has been reported about home entertainment’s fiscal resurgence as increasing numbers of consumers purchase or rent video entertainment in the home rather than frequent (now shuttered) movie theaters.

Last week the proof was in the pudding as the last of the major studios reported quarterly fiscal results for the three-month period that ended June 30 — and began April 1, two weeks after theaters closed.

Excluding Warner Bros., five studios (Sony Pictures, Paramount Pictures, Lionsgate, Disney and Universal Pictures) reported combined theatrical revenue of $68.3 million.

By comparison, home entertainment segments of the aforementioned studios generated a combined $1.35 billion in revenue. That’s more than Warner’s outlying $1 billion in theatrical revenue. Studios’ theatrical segments remain under siege as the coronavirus pandemic keeps movie theaters largely closed and production idle.

Indeed, home entertainment results topped the previous-year period by 13.4%, when the five studios collectively generated $1.19 billion in Q2 revenue.

That means consumers actually spent more money on transactional home entertainment (from those five studios) during the second quarter of 2020 than they did in Q2 of 2019, when there was plenty of high-profile theatrical product available — including Aquaman, How to Train Your Dragon: The Hidden World, Bumblebee and Spider-Man: Into the Spider-Verse.

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“As long as people are literally stuck in neutral at home, they are going to be consuming a much-greater-than-average number of over-the-top transactional rentals and sales because the [theatrical] options are so limited,” Paul Dergarabedian, analyst with Comscore, said in a statement.

Indeed, the second-quarter domestic box office ended down 99.9% year-over-year to $3.69 million, as most domestic screens remained closed throughout the quarter.

“Theatrical revenue was immaterial in the quarter,” Bob Bakish, CEO of ViacomCBS, said on his company’s fiscal call.

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Wedbush Securities media analyst Michael Pachter expects the 2020 box office to end significantly lower than the last two years as theater re-openings sputter and several tentpole movie releases were moved to 2021 or removed from the theatrical release slate indefinitely.

Following AMC Theatres and Universal Pictures’ landmark agreement to partner on premium video-on-demand releases in the home just 17 days after a movie’s theatrical debut, home entertainment is expected to get an additional, if not limited, boost going forward.

Pachter thinks the AMC/Universal deal is a band-aid for a mortal wound, trying to capture some revenue in an environment where theatrical exhibition is unlikely for the next six months.

“When the results are in, the other studios will adopt the model if successful, and will criticize Universal if not,” he wrote in a note. “I don’t expect it to succeed.”

Lionsgate Explodes Q1 Home Entertainment Revenue 45%

Lionsgate’s unsung workhorse, home entertainment, may not get many shoutouts by company officials on fiscal calls, but the business segment continues to positively impact the bottom line during the coronavirus pandemic.

Aug. 6 Lionsgate announced that home entertainment generated $167.2 million in first-quarter (ended June 30) packaged-media and digital sales of movies, which was up 20% from revenue of $139.7 million during the previous-year period. Sales of TV content skyrocketed 538% to $46.6 million, from $7.3 million a year ago. Overall, home entertainment revenue increased 45% to $213.8 million, from $147 million during the previous-year period.

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“The increase in feature film home entertainment revenue was primarily due to digital media revenue from our fiscal 2020 theatrical slate, and in particular, I Still Believe and Knives Out,” Lionsgate said on its 10Q filing.

Home entertainment helped the studio generate operating income of $101 million in the first quarter — rivaling Lionsgate’s combined media networks ($71.8 million) and television production ($34.9 million) segments.

Lionsgate bounced back on the bottom line as well, generating $46.2 million net income compared with a net loss of $58.4 million in the previous-year period. Revenue dropped 15.6% to $813.7 million, from $963.6 million a year ago — due primarily to theater and TV production shutdowns.

“During the quarter we took steps to monetize our film and television library [via home entertainment], embraced innovative distribution strategies for our films, and acquired new properties while renewing others,” CEO Jon Feltheimer said in a statement.

Bob Chapek Uses Home Entertainment Resumé to Push Disney Across PVOD Line in the Sand

NEWS ANALYSIS — With its live-action feature film Mulan delayed three times at the box office due to the ongoing coronavirus pandemic, and theaters not slated to re-open (maybe) until later this month, Disney had to act.

CEO Bob Chapek reached back to his home entertainment roots and went where former CEO Bob Iger never ventured: premium VOD. Chapek, former president of Walt Disney Studios Home Entertainment, announced Aug. 4 that Disney+ subscribers would be afforded exclusive in-home access to Mulan on Sept. 4 for $29.99. The movie will be released simultaneously in theaters in regions internationally that do not have access to Disney+.

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In crossing the PVOD line in the sand with theaters, Chapek dealt a major short-term blow to exhibitors that have come to count on Disney movies to drive attendance and concession sales. It was just over a year ago that Disney’s market share of the domestic movie theaters reached 35% ($1.88 billion) — surpassing the next two studios combined.

With Avengers: Endgame, Aladdin, Toy Story 4, The Lion King and Sony Pictures’ Spider-Man: Far From Home (produced by Disney’s Marvel Studios), Disney reigned supreme at the box office. Previous attempts at jumpstarting PVOD had largely failed because Disney refused to join. The studio ended 2019 with seven movies each generating more than $1 billion at the global box office — a fiscal tally replicated in 2018.

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“We have a studio that is doing extremely well and a [90-day release window] formula that is serving us really well in terms of its bottom line,” Iger said last November.

How times have changed. And for Chapek, upending traditional distribution business models is part of his legacy. As home video boss, Chapek championed the shrewd “Disney Vault” release strategy for its legacy animation titles. The studio would take specific DVD/Blu-ray Disc movies out of retail circulation and put them into the “vault” for months, thereby allowing the studio to re-sell the movies to starved hardcore fans, families and general consumers.

For Mulan, which reportedly has upwards of $300 million in production and marketing costs, going straight to home entertainment allows Chapek to test the PVOD waters while leaving the door open to theatrical.

“In order to meet the needs of consumers during this unpredictable period, we thought it was important to find alternative ways to bring this exceptional family-friendly film to them in a timely manner,” Chapek said. “We see this as an opportunity to bring this incredible film to a broad audience currently unable to go to movie theaters, while also further enhancing the value and attractiveness of a Disney+ subscription.”

Chapek said the Mulan PVOD release would be (for now) a one-off experiment, and Wedbush Securities media analyst Michael Pachter believes him.

“It really is that they can’t afford to do nothing and wait for theaters to re-open,” Pachter said. “It will be more problematic for Marvel stuff down the road.”

Universal Generates $229 Million Q2 Home Entertainment Revenue — but Just $8 Million at the Box Office Due to Pandemic

It’s a fiscal line item no Hollywood studio accountant ever wants to see. Universal Pictures generated just $8 million in 90 days at the box office in the second quarter (ended June 30). Instead of hundreds of millions in ticket sales, Universal, like all other studios, saw its legacy business model sidelined by the coronavirus pandemic — shuttering movie theaters and production globally.

Picking up the slack: home entertainment and content licensing. Universal Pictures Home Entertainment generated $229 million in the quarter from sales of digital and packaged-media titles — on par with the previous-year period. Content licensing generated $850 million in the period — up 18.5% from the equivalent previous-year period.

Total studio revenue topped $1.19 billion, down 18% from $1.45 billion a year ago.

NBCUniversal CEO Jeff Shell said the lack of movie production and marketing costs actually had a positive impact on the quarter, but would have a negative impact on the “coming years.” He said production began on several major films in the past few weeks, including the new Jurassic World: Dominion in the United Kingdom.

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The results in part contributed to Universal hammering out a landmark distribution deal with AMC Theatres that enables the studio to deliver movies into homes just 17 days after their theatrical debut.

As expected, Comcast chairman/CEO Brian Roberts said little about studio operations, focusing instead on distribution alternatives and the company’s resilience during the pandemic.

“Based on our results and the many organic growth opportunities that we have across our company, I am confident in our ability to continue to successfully navigate the impact of COVID-19, and emerge from the crisis even stronger,” Roberts said in a statement.

U.K. Report: Home Entertainment a ‘Lifeline’ During Pandemic

With an entertainment industry on shutdown since mid-March due to the coronavirus pandemic, home entertainment has largely filled the void through subscription/ad-supported VOD, transactional VOD and packaged-media content.

A new online survey of 3,000 adults from June 25 to July 2 in the United Kingdom — the No. 2 home entertainment market worldwide — underscores the value of home entertainment to consumers, as well as their desire to return to movie theaters.

A whopping 90% of respondents said they access SVOD in the home for entertainment, with 4% opting for on-demand content and 3% live TV. Not surprisingly, 92% of respondents rely on Netflix, followed by Amazon Prime Video (72%). Disney+ trailed with 62% adoption, but 47% of respondents said they signed up for the service during the lockdown.

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“Home entertainment has provided a lifeline for people during the lockdown — and still now, with many still spending much more time at home,” Chris Whittle, managing director at London-based pop culture marketing firm Experience 12, said in a statement.

Most sought after TV shows include:

  1. The Mandalorian: Season 2
  2. The Falcon and the Winter Soldier
  3. The Boys: Season 2
  4. The Great British Bake Off
  5. RuPaul’s Drag Race
  6. Adventure Time: Distant Lands
  7. Doom Patrol: Season 2
  8. Lovecraft Country
  9. Hanna: Season 2
  10. Truthseekers

“Netflix, Amazon Prime and now Disney+ are keeping the nation entertained and, while our research shows that Netflix retains the crown when it comes to the best content, it’s interesting to see that it’s actually output from Prime Video and Disney+, such as “The Mandalorian,” “The Falcon and the Winter Soldier” and “The Boys,” which are the most anticipated,” Whittle said.

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At the same time, Brits seem eager to return to the movie theater. More than 66% of respondents said they would frequent the cinema within two months of their re-opening.

Most anticipated movies include:

  1. Wonder Woman 1984
  2. Bill & Ted Face the Music
  3. A Quiet Place Part II
  4. Tenet
  5. Mulan
  6. The King’s Man
  7. The Conjuring: The Devil Made Me Do It
  8. Monster Hunter
  9. Candyman
  10. The SpongeBob Movie: Sponge on the Run

 

“It’s clear to see that pop culture fans are keen to get back to the cinema as soon as they can,” Whittle said. “Superhero movies are, as ever, what fans are looking forward to the most. But what’s interesting is that – while 79% of our respondents claim to prefer Marvel over DC (21%) – the top two most anticipated movies come from the DC comic stable, namely Wonder Woman 1984 and Bill & Ted Face The Music.”