Analysts: Home Entertainment ‘Virus’ Bump Could Be Short-Lived

With studios shuttered and live sports on indefinite suspension due to the threat of the coronavirus, home entertainment options ranging from broadcast and pay-TV, transactional VOD, DVD and streaming video are projected to see at least short-term bumps in viewership and revenue during the “social distancing” period, according to media analysts.

Nielsen reports “TV usage” in South Korea, Italy and the United States increased double digits during the initial weeks of the virus. Nielsen’s classification includes broadcast/pay-TV, VOD, AVOD, SVOD and the DVR.

Data from Sensor Tower found Netflix sign-ups via its app increased 57% and 34% in Italy and Spain, respectively. Streaming Elements reported live streaming via Facebook, YouTube, Twitch and other platforms jumped 66% in Italy in February. The country is on virtual lockdown after more than 2,500 people have died from the virus.

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“[SVOD] is an obvious beneficiary if consumers stay home due to coronavirus concerns, and this has been reflected in considerable stock price outperformance this week,” Dan Salmon with BMO Capital Market wrote in a March 13 note.

JC O’Hara, analyst with MKM Partners, told CNBC that consumers “stuck inside” all day during a pandemic quarantine would inevitably turn on the TV. O’Hara said streaming services such as Netflix, Hulu, Amazon Prime Video, as well as ad-supported VOD platforms, would all benefit.

Neil Begley, with Moody’s Investors Services, back in January suggested that if the virus became widespread but short of panic, home entertainment content such as TV shows and films on Netflix, Disney+, Comcast’s Peacock, AT&T’s HBO Max, among others, would rule the day.

But should the pandemic last longer, leading to a global recession as some have projected, consumer spending on home entertainment would fall to the wayside, according to analysts Laura Martin with Needham and Craig Moffett with MoffettNathanson.

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“[SVOD] will be replaced pretty quickly by the necessity of reducing monthly bills, when people will have to deal with the financial impacts of a recession,” Moffett told The New York Times. “Cord-cutting will accelerate with a vengeance.”

A long-term pandemic and fiscal gains in home entertainment would likely be offset by a fiscal hardships in households as viewers — suddenly out of job due to sever downturns in the economy — reconsider spending on non-essential items.

“Cost will become that much more urgent,” Moffett said. “There are going to be very large parts of the population out of work.”

And some of those unemployed could work in media. With ESPN and sports-themed channels unable to broadcast live content, consumers would question spending on platforms largely streaming classic reruns and endless coronavirus chatter.

Disney-owned ESPN and WarnerMedia Entertainment’s Turner are projected to lose $481 million and $210 million in NBA-related ad-revenue alone. NBCUniversal has $1.2 billion in advertising at stake for the 2020 Tokyo Summer Olympics — with President Trump now suggesting the latter could be postponed — a scenario one Games executive has called “impossible.” NBCU parent Comcast says it has insurance should the Games be canceled.

Apple CEO Tim Cook, who has already cautioned the tech giant would miss quarterly fiscal projections on iPhone sales due to the virus, told Fox Business he thinks the virus has run its course in China, epicenter to the COVID-19 outbreak.

“It feels to me that China is getting the coronavirus under control,” Cook said on March 12. “You look at the numbers, they’re coming down day by day by day. And so I’m very optimistic there.”

Indeed, China March 18 reported no new COVID-19 infections throughout the country on March 17. That news comes the day after government officials expelled media representatives from major U.S. news organizations.

 

Sky Selling Theatrical Releases in the Home

With the shutdown of theatres worldwide, satellite TV operator Sky has begun offering digital video access to select theatrical releases in the home. The move is the latest among media companies upending traditional distribution channels as consumers face quarantine situations against the spread of the coronavirus (COVID-19).

Sky, which is owned by Comcast, parent of NBCUniversal, has 24 million customers across seven countries in Europe. It is following a strategy taken by Universal Pictures in the United States, which has begun offering digital retail access to select theatrical movies.

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Sky Store will have a range of NBCU titles available the same day as their global cinema release. They will be priced at £15.99 ($18.99). This is available for Sky+ and Sky Q subscribers. Sky Store digital sales typically include a DVD backup sent in the mail.

The program begins with DreamWorks Animation’s Trolls World Tour April 6. This is the first time customers have been able to rent NBCUniversal movies as soon as they hit cinemas. On March 20, The Hunt, The Invisible Man and Emma will also be available on-demand on Sky Store, following their recent release in cinemas.

“We’re working hard at Sky to make sure we continue to look after our customers,” Stephen van Rooyen, EVP & CEO of Sky UK and Europe, said in a statement. “We’re also introducing some things to help make life a little easier for anyone at home trying to work, stay connected to loved ones, or keep the family entertained.”

During the ongoing pandemic, Sky will also make it “Go Extra” platform available free to all customers so European households have access to Sky TV on three screens at the same time. Calls to U.K. landlines any time of day will be free for existing Sky Talk customers through the end of April.

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Sky Mobile subscribers will get an extra 10GB data free added to their accounts. Call centers and engineers will prioritize the needs of existing customers to ensure their service keeps running smoothly.

Premium platform Sky Q will soon add over-the-top video platform Disney+ (March 24), in addition to YouTube Kids.

 

Home Entertainment ‘Social Distancing’ — Boon or Double-Edged Sword?

With movie theaters shuttered and government officials calling on people not to congregate in groups larger than 10, home entertainment, including transactional VOD and packaged media, is getting a boost from consumers sequestered at home during the spread of the coronavirus pandemic.

Universal Pictures said it is releasing select theatrical titles concurrent with home entertainment following a weekend box office that saw its five releases generate a paltry $11.7 million in collective ticket sales.

Warner is putting Harley Quinn: Birds of Prey early into digital retail channels. It’s not a big gamble considering the movie has been out in theaters since Feb. 7.

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“Yes, they will see increased usage in home entertainment distribution,” said Michael Pachter, media analyst with Wedbush Securities.

While no studio is going to admit it might profit from home-confined consumers, Wall Street analysts are less concerned about optics and more motivated by trends and cost/benefit analysis, among other factors.

Pachter cautions that any uptick in transactional purchases, Redbox rentals and subscription streaming is limited in its “attractiveness” as investments. Indeed, after Universal and Warner, no other studio has announced expediting retail channels. Box office king Disney has heretofore resisted altering the theatrical window for obvious reasons.

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“There are other things going on out there that limit their attractiveness as investments,” Pachter said.

Home entertainment spending in the fourth quarter of 2019 increased 9% to $6.8 billion, from $6.3 billion spent in the final three months of 2018, according to DEG: The Digital Entertainment Group.

The analyst contends any increased revenue studios make from DVD will be “far less” than the “normal” revenue they would generate from theatrical exhibition. A noted Netflix bear, Pachter says the SVOD behemoth remains an overvalued stock, “but less so now due.” He says Disney will benefit from releasing its movies on Disney+, but will still “lose mightily” on theme parks and cruise ships — both of which are shut down.

“Redbox definitely benefits, but it’s a private company,” Pachter said. The kiosk vendor and its former corporate parent, Outerwall, were acquired by a private equity group in 2016 for $1.6 billion.

Richard Greenfield, media analyst with Lightshed Partners, said the elimination of live sports on TV makes SVOD a valuable alternative.

“To the extent consumers are increasingly working from home and refraining from out-of-home activities, without sports to watch on TV, we suspect streaming services such as Netflix will see increased subscriber additions and higher utilization per account (leading to higher ARPU plans that enable more users per household and lower churn),” Greenfield wrote in a March 12 note.

Analyst Laura Martin with Needham was one of the first Wall Street pundits to predict a home entertainment gold rush as a result of the pandemic. Martin cautions that with the pandemic now centering in Europe, international  Netflix subscriber growth will stall.

“In distressed times, people will give up their Netflix subscriptions,” Martin wrote in a note.

Greenfield disagrees.

“Netflix appears incredibly well-positioned to entertain consumers as [other] entertainment options dry up, especially if more movie theaters close globally,” he wrote.

 

Universal Releasing Theatrical, Home Entertainment Releases Simultaneously

Seeking to counter the coronavirus spread and delayed theatrical release schedules, Universal Pictures March 16 announced it would release its current theatrical slate into home entertainment distribution channels simultaneously.

The sudden move in one stroke eliminated the traditional 90-day theatrical window — an exclusivity exhibitors have fought hard for ever since home entertainment emerged. But last weekend’s domestic box office was the lowest in 20 years, prompting the studio to act.

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Movies include The Invisible Man, The Hunt and Emma, among others. Universal’s DreamWorks Animation Trolls sequel, Trolls World Tour, will now hit theatrical and home entertainment channels April 10. Titles will be available on assorted digital channels for a 48-hour rental period at $19.99 each.

“Rather than delaying these films or releasing them into a challenged distribution landscape, we wanted to provide an option for people to view these titles in the home that is both accessible and affordable,” NBCUniversal CEO Jeff Shell said in a statement. “We hope and believe that people will still go to the movies in theaters where available, but we understand that for people in different areas of the world that is increasingly becoming less possible.”

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Movie theaters have now been closed in more than 30 markets around the world, while in the United States, the AMC Theatres chain announced it would limit movie attendance to 50 in an attempt to adhere to “social distancing” guidelines. Earlier, AMC had said it would cut capacity in its theaters by half.

In New York City and Los Angeles, mayors have ordered all movies theaters to be closed.

In its latest guidelines, issued March 15, the Centers for Disease Control and Prevention (CDC) recommends that for the next eight weeks, organizers cancel or postpone in-person events that consist of 50 people or more throughout the United States.

 

MPAA: Global Box Office, Home Entertainment Revenue Topped $100 Billion in 2019

Rome may be burning (figuratively) due to the coronavirus, but in 2019 the entertainment industry was looking rosy.

The Motion Picture Association of America March 11 released a report finding the global entertainment market in 2019 topped $101 billion in revenue for the first time ever.

Domestic theatrical, home and mobile entertainment topped $36 billion, up 4% from 2018 and 25% from 2015. The international box office topped $30 billion for the first time, while worldwide home and mobile entertainment reached $58.8 billion in revenue — largely driven by streaming video, including Netflix and Amazon Prime Video. Indeed, Netflix joined the MPAA in 2019.

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The U.S. digital entertainment revenue increased 18% from 2018, while international digital revenue increased 29%. The global SVOD market saw subscriptions reach 864 million, up 28% from 2018. Notably, cable remains the top pay-TV revenue generator with $116 billion in 2019.

“The film, television, and streaming industry continues to transform at breakneck pace, and this report shows that audiences are the big winners,” Charles Rivkin, CEO of the MPAA, said in the report. “Most importantly, our industry continues to innovate and deliver great storytelling for movie and TV fans — where, when, and how they want it.”

The top-grossing movie of 2019, according to Box Office Mojo, was Avengers: Endgame, with a worldwide gross of nearly $2.8 billion. Second and third place went to two other Disney films, The Lion King and Frozen II, which took in just under $1.66 billion and $1.45 billion, respectively. Sony Pictures’ Spider-Man: Far From Home came in at No. 4, with just over $1.13 billion. A fourth Disney film, Captain Marvel, finished fifth with a worldwide box office tally of just under $1.13 billion.

The report made no mention of the coronavirus, which has shuttered movie theaters globally and caused havoc for Hollywood productions, studio operations and releases. Instead, the MPAA outlined that 85% of children and 55% of adults watch movies and TV shows on portable devices.

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“Our industry remains focused on better representation not only because it’s the right thing to do, but because it’s also good business,” Rivkin said.

 

Iger: Disney Sticking to 90-Day Theatrical Window

Late last year, Disney CEO Bob Iger said the company was considering steps to expedite access to select studio box office titles into retail channels — a move that could shorten the venerable 90-day theatrical window for new-release movies.

No sooner had he said that, Iger reiterated his ongoing support affording exhibitors such as AMC Theatres and Regal exclusive access to movies upon release.

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

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Indeed, any mention of shortening Disney’s massive theatrical gravy train for the sake of earlier access on DVD/Blu-ray Disc and digital, seemed shortsighted.

Disney ended 2019 with seven movies each generating more than $1 billion at the global box office. The studio ended the previous fiscal year with nearly $10 billion in ticket sales.

Regardless, the seeds of doubt had been sowed, prompting one analyst on the Feb. 4 Q1 fiscal call to ask Iger if he would “recommit to the theatrical window.”

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“The theatrical window is working for this company, and we have no plans to adjust it for our business,” Iger responded.

With upstart Disney+ streaming service getting every original studio release, domestic exhibitors saw a near 7% decline in tickets sold in 2019 compared to 2018.

Iger suggested the analyst’s question was a reflection how other studios are positioning their films and distribution business.

“We’re not the only movie company,” he said. “I suspect that [questions about the window are] not due to us or either a lack of conviction on our part or any suspicion that we might not be telling the truth. It’s working for us, and we have no plans in the foreseeable future to change it.”

 

‘Frozen 2’ Theatrical Success Bodes Well for Home Entertainment

Walt Disney Animation Studios set a global opening weekend box office record with Frozen II, the sequel to the equally successful original Frozen from 2013.

That release went on to generate nearly $1.3 billion at the box office for Disney — the 15th largest worldwide theatrical tally in history — and help launch a global brand across theme parks, merchandise, cruise ships and ice shows.

Frozen II generated $350 million through Sunday, Nov. 24 and is on course to become Disney’s sixth billion-dollar movie in 2019 following a string of Marvel hits and live-action remakes.

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For home entertainment, the initial box office success of Frozen II could portend greener days for transactional retail, including packaged media and electronic sellthrough.

That’s because the 2014 home entertainment release of Frozen generated combined DVD/Blu-ray Disc sales of $335 million from more than 18 million discs, according to The-Numbers.com.

That’s more discs sold than the combined total for the next three years’ top-selling packaged-media releases: Universal Pictures Home Entertainment’s Jurassic World (2015), Disney’s Star Wars: The Force Awakens (2016) and Moana (2017).

The electronic sellthrough release of Frozen also established a record for fastest-selling digital release of all time.

“If Frozen was happily ever after, then Frozen II is the day after happily ever after,” Jennifer Lee, who wrote and co-directed both films, said in a statement.

SVOD Again Fuels Consumer Home Entertainment Spending in Q3 2019

Consumer spending on home entertainment rose 11% in the third quarter of 2019, according to the latest quarterly report from DEG: The Digital Entertainment Group.

Spending on digital purchases and streaming was up 19%, the DEG reported, fueling total Q3 consumer spending on all forms of home entertainment to more than $6.3 billion.

Subscription streaming, according to the DEG, solidified its position as the dominant way consumers watch movies, TV shows and other filmed content on demand, with subscription streaming leading the way at $4.1 billion, up nearly 25% from the third quarter of 2018. Earlier, data from digital measurement firm Conviva found a 63% increase in third-quarter (ended Sept. 30) video viewing hours.

During the third quarter of 2019, DEG says, consumers spent just under $700 million on digital purchases, up 13.1% from the third quarter of last year. A la carte streaming, the digital equivalent of renting a disc, fell nearly 10% to an estimated $448 million.

Total spending on digital came in at nearly $5.3 billion.

On the physical side, consumer spending on purchased Blu-ray Discs, DVDs and 4K Ultra HD discs came in at an estimated $736 million, down 13% from the prior year’s Q3. Including electronic sellthrough, consumers spent more than $1.4 billion to own content, about 2% less than in the third quarter of 2018.

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Disc rentals at physical video stores suffered another big drop, coming in at just $56.2 million, down 21.5% from the prior year. Kiosk rentals, mostly Redbox, generated an estimated $214.4 million, down 21.4%, while subscription disc rental — carried mostly by Netflix’s legacy disc-by-mail rental business — was off 19% to $72.6 million.

The box office value of films that were released for home consumption in the third quarter was down 1.5%, the DEG reported.

Top disc sellers in the third quarter of 2019 included Disney’s Avengers: Endgame and live-action Aladdin remake, along with Lionsgate’s John Wick: Chapter 3 — Parabellum and Warner’s Shazam!, according to NPD VideoScan data.

For the first nine months of 2019, consumers spent an estimated $18.34 billion on home entertainment, an 8.3% uptick from the first nine months of 2018. Subscription streaming accounted for more than 63% of total home entertainment dollars spent, or $11.6 billion. Total digital spending accounted for nearly 82% of total consumer spending, or just under $15 billion, while packaged-media sales and rentals trailed at 18.4%, or $3.4 billion.

Bob Iger: Home Entertainment Key to Pixar Acquisition, Movies to Netflix, Disney+ Launch

With Walt Disney Co. CEO Bob Iger in the final years at the helm of the global media brand, the executive has been making the media rounds peddling his memoir, The Ride of a Lifetime.

In an interview with BBC Studios, Iger recounts many aspects of his life and career, including discussions with the late Steve Jobs about acquiring Pixar Animation, which counted the Apple co-founder as its majority stakeholder at the time.

But before that $7.4 billion transaction could be approached, Iger said he had to develop a relationship with the often mercurial Jobs. According to Iger, it was his willingness to put select Disney and ABC TV shows on the upstart Apple iTunes platform, which had just started selling videos, including an iPod capable of playing video in addition to music, that paved the way toward the 2006 Pixar acquisition.

“Steve was immediately impressed with my knowledge of  [iTunes], or my interest in it, my willingness to disrupt using technology current business models, [and] my ability to do a deal very quickly without too much bureaucracy,” Iger said.

The iTunes pact helped migrate the home video industry from purely packaged media distribution to transactional video-on-demand and electronic sellthrough.

As of January 2017, iTunes offered more than 35 million to 40 million songs, 2.2 million apps, 25,000 TV shows and 65,000 films.

Through June 30, 2019, digital sales and rentals of movies and TV shows topped $2.2 billion, according to DEG: The Digital Entertainment Group.

Iger said the key is “owning and controlling content that is so valuable, so important, so loved by consumers that they’ll access it, buy it almost anyway they possibly can.”

Separately, Iger confirmed the pending Disney+ subscription streaming service would be launched in Western Europe within the next year. Calling over-the-top video distribution a “nascent market,” Iger said there remains plenty of room for other players besides Netflix and Amazon Prime Video to succeed.

“You have to launch [your OTT product] when the technology is right and when you have enough content. It takes time to get both of those right,” he said.

The executive reiterated that he does not consider Netflix to be a rival to Disney+, calling the SVOD pioneer a “volume play” service with a lot of quality in it.

“They created the market in the direct-to-consumer space in video — and brilliantly, by the way,” Iger said.

At the same time, he doesn’t regret licensing Disney movies exclusively to Netflix in 2012 — a landmark deal that helped broaden Netflix’s appeal on a global basis.

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“It was an enormously profitable deal for us at a time when we had no ability to launch a Netflix-like service,” he said. “We didn’t have the technology and we didn’t have enough content. We’ve never second-guessed the decision.”

Iger said Disney+ will offer much less volume of content than Netflix, which he contends makes the service less of a direct competitor.

“There may be room for people to have more than one [SVOD] subscription,” Iger said. “I don’t think we know how large the global market is for these products yet.”

When asked about the proliferation of Marvel-themed movies released by Disney, Iger said the comic book brand is as popular as ever. He admitted that Disney has released too many “Star Wars” movies over a short period of time.

“I have not said that they were disappointing in any way. I’ve not said that I’m disappointed in their performance. I just think that there’s something so special about a ‘Star Wars’ film, and less is more,” he said.

Report: Kids Multitask While Watching Video

Children are consuming increasing amounts of content from a wider variety of sources, and often multitasking to fit more in, according to new data from Futuresource Consulting.

In a study of 9,800 consumer interviews carried out with children aged between three and 16 years in Brazil, China, France, Germany, Mexico, the U.K. and U.S., London-based Futuresource found  multi-tasking is becoming the norm for entertainment consumption, with 52% of children in the survey saying they engage with another device while watching TV.

Of these, 61% play video games, 32% watch video on a second screen and 28% are on social media.

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“Children are constantly finding more time for entertainment consumption,” Carl Hibbert, associate director at Futuresource Consulting, said in a statement. “From watching online video, to playing video games; from consuming music, to interacting with social media, the hours of engagement continue to climb.”

Despite a rise in non-video activities, this does not seem to be cannibalizing TV viewing on a large scale. Linear TV is still reported as the most popular viewing platform in China, France and Germany across all age ranges, with free online video becoming increasingly important for kids of 11 and above.

In the U.K. and U.S., SVOD and free online video consumption is becoming comparable to free linear TV. In Brazil and Mexico, there is a significant migration towards new media, with free online video the most popular viewing platform across all ages.

According to the study, 45% of parents stated ease of use was the main feature as to why their child used a specific video platform. It ranked number one across kids that used linear TV, free online video and transactional video services, ahead of the quantity of content available recognised/preferred brand and safer content.

“As an example, our survey shows that children who interact with TikTok, the free social media app that lets you watch, create, and share short videos, [most respondents] are looking for a combination of consumption and creation,” Hibbert said.