Lionsgate Fiscal-2019 Home Entertainment Revenue Falls

Fiscal 2019 (ended March 31) was not a good year for Lionsgate home entertainment.

The distributor saw revenue decrease $181.8 million, or 23.5%, to $592.2 million in the sales of DVD, Blu-ray Disc and digital content. Revenue topped $774 million in fiscal 2018.

For the quarter, packaged media revenue declined nearly 36% to $257.5 million from $400 million last year. Digital sales declined nearly 11% to $334.7 million from $373.7 million.

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Lionsgate attributed the drop primarily due to a decrease of $153.9 million in home entertainment revenue from the studio’s feature films. Box office revenue topped $388.9 million in 2018, down 56% from $885 million in ticket sales in 2017.

In particular, home entertainment revenue generated in fiscal 2019 from retail releases of A Simple Favor, Robin Hood and The Spy Who Dumped Me from the theatrical slate and The Commuter from the fiscal 2018 theatrical slate was significantly less than the year before.

The fiscal 2018/17 theatrical slates released in home entertainment included The Hitman’s Bodyguard, La La Land, John Wick: Chapter 2, and Power Rangers. The four titles generated $75 million in combined DVD/Blu-ray Disc revenue.

In addition, home entertainment revenue from non-feature films decreased $27.9 million, driven by lower revenue from a distribution arrangement acquired as part of the Starz acquisition, partially offset by higher home entertainment revenue from ancillary-driven platform theatrical releases.

On the TV side, home entertainment revenue decreased $33 million , or 30.7% , as compared to fiscal 2018, primarily driven by a significant contribution of revenue from a digital media licensing arrangement in fiscal 2018 for the Starz original series, “Power” Seasons 1-4.

Packaged media revenue dropped 32% to $7.6 million from $11.2 million in 2018.

Lack of Home Entertainment Releases Contribute to 39% Drop in Q2 Disney Studio Operating Income

A lack of home entertainment releases in the second quarter (ended March 31) contributed to Disney reporting a 39% drop in studio operating income to $534 million compared to operating income of $875.4 million during the previous-year period. Revenue fell 15% to $2.1 billion from $2.4 billion last year.

The decrease in home entertainment results was due to lower unit sales reflecting the performance of Thor: Ragnarok and Star Wars: The Last Jedi in the prior-year record quarter compared to no comparable Marvel or Star Wars titles in the current quarter.

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Other significant titles included Ralph Breaks the Internet in the current quarter and Coco in the prior-year quarter.

The results do not include Marvel Studios’ Avengers: Endgame, which was released in the current third quarter.

Growth in TV/SVOD distribution results was due to a benefit from the adoption of new revenue accounting guidance and increases in domestic pay television title availabilities and rates, partially offset by lower free television sales in part in anticipation of the launch support of Disney+.

MPAA: Global Home Entertainment Market Up 16% in 2018

It’s an over-the-top video world and it’s got the revenue to prove it.

Global home entertainment consumer spending increased by 16% in 2018 to reach $55.7 billion from $48 billion in 2017, according to new data from the Motion Picture Association of America. The growth was driven by digital home entertainment, with U.S. digital spending increasing by 24% and international digital spending increasing by 34%. Since 2014, digital spending has increased 170% globally.

Much of the spending was driven by subscription streaming video services such as Netflix, Hulu and Amazon Prime Video, in addition to sales and rental of digital movies and TV shows.

Globally, the number of subscriptions to online video services reached 613 million, an up 27% from 2017. Subscriptions to online video services surpassed cable subscriptions for the first time in 2018.

The number of SVOD subscribers in the U.S. increased 17% to 186.9 million, according to the MPAA.

“More than 80% of U.S. adults watch movies and TV shows via traditional services, while more than 70% watch via online subscription services,” read the report.

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In 2018, overall spending on home entertainment in the U.S. increased to $23.3 billion, up 12% over 2017. Americans now spend 52% of their media time on a digital platform.

Indeed, global sales of DVD, Blu-ray Disc and 4K UHD Blu-ray content fell 14% to $7.3 billion from $8.4 billion in 2017. Domestic packaged media revenue declined 15% to $5.8 billion from $6.8 billion.

The MPAA, citing data from DEG: The Digital Entertainment Group and IHS Markit, found that when subtracting SVOD revenue from the equation, transactional revenue in the U.S. from packaged and digital media, video stores, kiosks, digital sellthrough and transactional VOD dropped 5% to $10 billion from $10.5 billion in 2017.

Citing The-Numbers.com, the MPAA report listed Walt Disney Studios Home Entertainment’s Black Panther as the top-selling disc in 2018. (The NPD Group’s VideoScan tracking service has ranked Disney’s Avengers: Infinity War as the top-selling disc of last year.)

Sony Pictures Home Entertainment’s Jumanji: Welcome to the Jungle was listed as the top-rental title, citing comScore.

Meanwhile, box office ticket revenue in the U.S. — driven by Black Panther and Incredibles 2 — climbed 7% to a record $11.9 billion from $11.1 billion in 2017.

“In today’s dynamic marketplace, stories come to life for audiences in theaters, at home, and on the go,” Charles Rivkin, CEO of the MPAA, said in a statement. “Our companies continue to deliver content where, when, and how audiences want it – and the numbers released today speak volumes.”

 

Samsung Halting Blu-ray Disc Player Production

Samsung is stopping production of 1080p and 4K Blu-ray Disc players for the United States market — leaving Sony, Panasonic and LG as the last CE manufacturers supporting the next-generation packaged media format.

The South Korean company had been working on a follow-up to the UBD-M9500 4K BD player, which has now been scrapped. Samsung last bowed a new BD player in 2017.

Though speculated after Samsung didn’t showcase any new BD players at CES in Las Vegas in January, the company confirmed the move in a media statement.

“Samsung will no longer introduce new Blu-ray or 4K Blu-ray player models in the U.S. market,” a spokesperson told CNET.

Samsung’s decision follows the exit of Oppo Electronics Corp., the Chinese company known as Oppo, which ceased production of a 4K BD player last year.

While observers contend the move could be due to Samsung backing its proprietary HDR10 and HDR10+ high dynamic range formats versus Dolby Vision, a more realistic reason is market forces.

For the week ended Feb. 9, 4K Blu-ray accounted for just 5% of sales of the top 50 titles, according to VideoScan. That compared with nearly 40% for Blu-ray and 55% for standard DVD.

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Indeed, pending Oscar-nominated new release  The Favourite (20th Century Fox Home Entertainment) and Stan & Ollie (Sony Pictures Home Entertainment), reportedly are not getting 4K UHD releases, while Oscar nominee Bohemian Rhapsody and Widows (Fox) are.

Regardless, home entertainment studios remain bullish on 4K UHD.

Format sales surged nearly 70% in the third quarter last year, according to DEG: The Digital Entertainment Group. There were 392 4K Ultra HD Blu-ray Disc titles available in Q3 representing more than $162 million in consumer spend for the period, and 595 4K titles available digitally.

“4K UHD discs already account for almost one in 10 new release discs sold in the U.S,” Eddie Cunningham, president of Universal Pictures Home Entertainment, told Media Play News.

Paramount Home Media Distribution boss Bob Buchi in January said the studio would offer most of its theatrical releases on 4K UHD Blu-ray, as well as select catalog titles.

“The response to our catalog 4K releases has been very promising, so we expect to see increased interest in owning treasured classics in the very best format available,” he said.

 

Streaming, TVOD Fuel Consumer Spending on Home Entertainment to Record Heights

Consumer spending on home entertainment hit a new record in 2018, buoyed by subscription streaming as well as transactional video-on-demand (TVOD), DEG: The Digital Entertainment Group announced Jan. 8.

Total consumer spending on home entertainment during the year shot up to an estimated $23.3 billion, up 11.5% from total consumer spending in 2017, the DEG said, noting that figures are preliminary. Final numbers will be issued in early February.

As expected, subscription streaming — chiefly through Netflix, Amazon Prime Video and Hulu — led the way, with a 30% year-over-year gain to $12.9 billion.

Consumers spent an estimated $2.46 billion on digital purchases of movies, TV shows and other content, up 14.4% from what they spent in 2017.

They spent another $2.09 billion to stream movies on demand, the electronic equivalent of renting a DVD or Blu-ray Disc, up 6.2% from the prior year.

Total spending on TVOD, the DEG estimates, came in at $4.55 billion, a healthy 10.5% spike from TVOD spending in 2017.

Total disc sales continued to fall, despite the growing popularity of 4K Ultra HD Blu-ray, with consumer spending on physical media in 2018 coming in at an estimated $4.03 billion, a 14.6% drop from the prior year.

In the fourth quarter, home entertainment spending was particularly strong, with an overall gain of 13% to $6.3 billion.

Subscription streaming the fourth quarter was up 30% to an estimated $3.49 billion, while EST rose 20.2% to $664 million and on-demand streaming was up 21.8% to nearly $517 million.

Combined consumer spending on DVDs and Blu-ray Discs in the fourth quarter of 2018 was $1.24 billion, down 14.8% from the fourth quarter of 2017.

Sales of 4K UHD content rose 70% during the year and 46% in the fourth quarter. The number of 4K Ultra HD Blu-ray titles available in the market grew to 445 titles, with another 682 4K titles available digitally.

The box-office performance of films released in the year rose nearly 15%.

Among the bestselling film titles released on 4K for the home in 2018 were: Justice League (Warner Bros.), Ready Player One (Warner Bros.), Mission: Impossible — Fallout (Paramount), Jurassic World: Fallen Kingdom (Universal Pictures), Deadpool 2 (20th Century Fox) and Avengers: Infinity War (Walt Disney Studios).

4K UHD TV penetration rose 61% over the year-earlier period, to 48 million households, DEG says. Also during the year, penetration of 4K-capable player devices (game consoles and set-top boxes) rose 66%, to 13 million homes.

 

 

FandangoNow to Offer Imax Movies in the Home

FandangoNow Jan. 7 announced it will be the first U.S. digital retailer for Imax movies releasing to home video. FandangoNow will have exclusive rights as the sole transactional VOD service to feature this content in the U.S. through 2019.

The move is part of a significant expansion of Imax Enhanced, a certification and licensing program that combines consumer electronics with Imax digitally re-mastered 4K HDR content and DTS audio technologies to offer consumers the next generation of immersive sight and sound experiences for the home.

Imax and DTS created the platform out of their combined expertise in immersive image and sound technology development to enable consumers to select consumer electronics and content for home viewing that deliver the highest quality and sharpest 4K HDR images, along with powerful, immersive sound.

Several companies, including consumer electronics, entertainment market leaders and studios are supporting Imax Enhanced, including Sony Electronics, Sony Pictures, Paramount Pictures and Sound United, parent company to Denon and Marantz.

Imax Enhanced announced that it has added streaming partners Tencent Video in China and Rakuten TV in Europe, in addition to device partners Arcam, Elite, Integra, Lexicon, Onkyo, Pioneer, TCL and Trinnov. Privilege 4K (U.S.) will stream Imax Enhanced content to select Sony Bravia televisions beginning this year.

The first Imax titles to be released on streaming platforms and Ultra HD Blu-ray Disc include Sony Pictures Home Entertainment’s Venom and Alpha, among 15 confirmed titles.

Additionally, Paramount Pictures will make its initial Imax titles available in 2019. Last month, Imax documentaries Journey to the South Pacific and A Beautiful Planet, were the first enhanced Ultra HD Blu-ray discs to be released, from Mill Creek Entertainment.

“We are thrilled to be collaborating with Imax and DTS to serve as the exclusive digital retailer in the U.S. for Imax enhanced content releasing later this year, helping consumers access premium 4K HDR content as the filmmaker intended in the home,” Cameron Douglas, head of FandangoNow, said in a statement.

Available on more than 200 million connected devices, FandangoNow experienced double-digit sales growth in 2018. In December, the streaming service was inducted into Variety’s Home Entertainment Hall of Fame, being recognized for its innovation and expansive library of more than 80,000 new release and catalog movies, next-day TV shows and growing library of 4K titles.

The service’s push into 4K has resulted in more than 20% of transactions coming from 4K, when that format is available.

“For decades, Fandango has helped millions of movie fans enjoy Imax movies on giant screens by creating innovative movie discovery and ticketing services using next generation online, mobile and voice technologies,” said Geir Skaaden, EVP, chief products and services officer at Xperi Corporation, parent company of DTS. “Now, with the company’s video on-demand service FandangoNow and its support of Imax films, Fandango can help deliver to fans a level of quality never before experienced at home.”

2018: Getting Along in a Multi-Platform World

Back in 1989, a State Department official named Francis Fukuyama wrote a controversial essay on the “end of history,” opining that the collapse of the Soviet Union and Eastern bloc communism, the reform movement in China, and the reunification of Germany signaled a triumph for Western democracy and a very real promise of freedom and liberty for all.

Fukuyama’s vision of a global utopia didn’t last long, but for a brief moment in time cultural and political differences seemed to be set aside in favor of everyone working together to make the world a better place.

Similarly, in 2018 the various factions in home entertainment seemed to set aside their differences and recognize that we’re living in a multi-platform world — and that a peaceful coexistence between disc and digital, subscription and transactional, was, indeed, possible.

“2018 saw the continued integration of technology and content at an even more accelerated pace, and, with that, the opportunity to engage fans with more focused and meaningful experiences that extend the life of our film and television properties,” said Keith Feldman, president of worldwide home entertainment for 20th Century Fox.

Indeed, studios cut back on selling content to Netflix — most notably Disney, which pulled all its movies off the service by the end of the year — in favor of issuing it on their own platforms. They rallied behind Movies Anywhere, a digital movie storage “locker” launched in October 2017, and saw digital movie sales soar, with an 18% gain reported in the third quarter of 2018, according to DEG: The Digital Entertainment Group numbers.

Netflix, meanwhile, vowed to spend $8 billion in 2018 on producing its own shows, with the goal of making its content library 50% original.

Studios that once sued Redbox for renting DVDs and Blu-ray Discs, claiming the kiosk vendor was cannibalizing disc sales, struck distribution deals in which prior holdbacks were either sharply cut back or eliminated. They also rallied behind Redbox On Demand, a digital movie store launched in December 2017.

On the retail front, big-box chains like Best Buy and Walmart put discs back into the spotlight, buoyed by the emergence of 4K Ultra HD Blu-ray.

And digital retailers like FandangoNow and Google Play revved up their promotional muscle and pumped up the message that they had fresh movies for sale or rent. FandangoNow even put up a notice on its home page, touting the fact that it offers “New releases not on Netflix, Hulu or Amazon Prime subscriptions.”

It was all part of a bigger picture, in a year dominated by major media mergers — AT&T buying Time Warner, Disney buying 20th Century Fox — suggesting it was high time to come together and restructure existing business models to reflect changing consumer habits.

Content, as always, was king, but the feuding fiefdoms of the past were at last coming to peace with each other — and with themselves.

Subscription streaming continued to dominate the home entertainment business in 2018. Indeed, in the first nine months of this year, according to DEG: The Digital Entertainment Group, consumer spending on Netflix and other subscription streaming services rose more than 30% to $9.4 billion, nearly $2 billion more than consumers spent on all other forms of home entertainment combined– disc purchases ($2.79 billion) and rentals ($1.37 billion); digital purchases, or electronic sellthrough (EST, $1.8 billion),  and digital rentals, or transactional video-on-demand (TVOD, $1.57 billion).

But where Hollywood once saw a threat, in 2018 the studios saw an opportunity. As consumers, thanks to streaming, became increasingly accustomed to viewing movies and other content electronically, studios focused on moving them toward on-demand digital purchases or rentals — driving home the message that new releases aren’t typically available through subscriptions.

“Our comprehensive and strategic efforts to drive digital ownership and bolster engagement such as leveraging the early window, offering exclusive extras and emphasizing the best viewing experience possible are proving to be very effective as consumers continue to move toward and embrace the digital experience,” said Chris Oldre, EVP of pay TV, digital and international distribution at Walt Disney Direct-to-Consumer and International.

“Movies Anywhere has had a tremendous impact on transforming digital consumption and is a testament to the strength of the studios and digital retailers that have joined forces on an unprecedented scale. This year Disney once again experienced remarkable growth as our digital sales exceeded expectations in conjunction with the studio’s unrivaled box office success. Disney has the top three bestselling digital titles to date with Avengers: Infinity War, Black Panther and Thor: Ragnarok. We’re also incredibly proud of our celebration of Marvel’s 10-year anniversary this year.  We promoted the Marvel Cinematic Universe home entertainment catalog with a special sales promotion across digital, which undoubtedly helped propel Avengers: Infinity War to the No. 1 live-action spot on the all-time digital sales chart in a record-setting period.”

Ron Schwartz, president of Lionsgate Worldwide Home Entertainment, said that as consumer habits evolve, digital movie sales and rentals – electronic sellthrough (EST) and transactional video-on-demand (TVOD) — remain a priority. “We saw a significant increase in industry spending in this area in 2018, up 20%, and we will continue to collaborate with our retail partners on fresh ideas to keep consumer interest alive,” he said. “We see a large and growing market with multi-platform and specialty releases and will continue to build our leadership in this area.”

At the same time, Schwartz notes, “Disc sales remain robust … 4K UHD BD is rapidly gaining in popularity, as spend is on track to double this year versus last. We are committed to serving our audiences across the full spectrum of the digital   and physical business and we will continue to be a first mover in adapting these businesses as they continue to evolve.”

For Bob Buchi, president of worldwide home media distribution at Paramount Pictures, 2018 was the year of 4K.

“More than 42 million homes now have a 4K Ultra HD television and roughly 400 titles are available on 4K Ultra HD Blu-ray Disc and over 600 on Digital 4K,” Buchi said. “The numbers keep growing and for good reason: 4K brings home entertainment to life like never before, delivering content that better represents filmmakers’ original vision.  We’ve seen this play out with the week one 4K sales of Mission: Impossible — Fallout, which delivered our highest number of UHD discs sold, as well as the highest percentage of our physical sales ever.”

Disney’s Oldre agrees. “4K Ultra HD is a robust line of business for us and we’re experiencing healthy growth,” he said. “We continue to receive solid support from our physical retail partners and are confident it’s a market that our customers will continue to embrace given the format’s premier resolution.”

Catalog sales were another bright spot in 2018, Buchi said. “We’ve seen our digital catalog sales growing in markets around the world, including a 35% increase domestically through October, which indicates that more and more consumers have become comfortable with the format and are returning to the concept of building collections.  In addition, physical catalog sales have exceeded our expectations, as we continue to make concerted efforts to celebrate anniversaries of classic titles and strategically promote films from our library.”

Retailers certainly did their part in pushing the transactional business. At Best Buy and Walmart, the emergence of 4K Ultra HD Blu-ray led to bigger disc sections and, in the case of Best Buy, placement back in the center of the store.

Redbox in 2018 relaunched its brand, which included some major ad campaigns and sponsorships, including the Redbox Bowl college football game on New Year’s Eve at Levi’s Stadium in Santa Clara, Calif. The company also revamped its loyalty program; negotiated more favorable distribution deals with studios; and expanded the availability of previously rented movies and video games at kiosks.

The Redbox On Demand digital service, meanwhile, celebrated its first birthday in December with a new app on Vizio SmartCast TVs. The company also expanded its selection to 12,000 titles, from 7,000 at launch. CEO Galen Smith in December told Media Play News that Redbox On Demand has “surpassed major milestones to become a real player in the competitive digital home entertainment space. We’re seeing hundreds of thousands of customers, including bringing back folks we haven’t seen in a while.”

FandangoNow, a business unit of movie-ticket seller Fandango, struck deals with most major studios that allow it to package movie rentals into “binge bundles” that let consumers watch multiple movies at a lower price. The new offering launched on the Labor Day weekend with more than 100 bundles.

FandangoNow also cross-promotes digital movie sales and rentals with ticket sales. In December, just before the holidays, consumers who spent $20 on FandangoNow received $8 toward a movie ticket.

In the end, studio executives agree, it all comes down to keeping consumers engaged — which requires constant work.

“From a functional solution like Movies Anywhere that allows consumers to build and enjoy a streamlined digital library, to premium viewing with 4K HDR, to story extensions through virtual reality and other emerging formats, keeping consumers invested and engaged requires constant experimentation and innovation,” says Fox’s Keith Feldman. “Our ongoing challenge is to exceed consumer expectations today and simultaneously deliver next-generation offerings that will continue that engagement in the future.”

F.Y.E. Parent Back in Nasdaq Compliance

Trans World Entertainment Corp., parent of mall-based home entertainment retailer f.y.e. (For Your Entertainment), said it has been notified by Nasdaq that its stock is again in compliance with the trading board.

At issue was TWMC’s ability to meet Nasdaq’s minimum $1-per-share stock valuation. Failure to do so can resort to delisting, which can negatively impact a company’s ability to generate funding, among other issues.

On Nov. 16, TWMC said it received written notice from Nasdaq stating that the company’s common stock had a closing bid price of at least $1 per share for 10 consecutive business days (from Nov. 2 to 15).

In a statement, the company said it had regained compliance with Nasdaq Listing Rule 5450(a)(1) and “the matter is now closed.”

TWMC shares closed Nov. 20 at $1.02 per share

Disney’s Bob Iger Wants to Expedite Home Video Window

Following strong Q4 home entertainment and theatrical results, Walt Disney CEO Bob Iger said he has no plans to downsize the theatrical window as it relates to Disney movies transferring earlier to the company’s pending over-the-top video service, Disney+.

The same restraint, however, cannot be said about retail channels, including DVD, Blu-ray Disc and electronic sellthrough.

Speaking Nov. 8 on the fiscal call, Iger said that with the studio generating a record $3 billion in operating revenue – up 27% from a record $2.3 billion in the previous-year period – shortening the traditional 90-day window would only dampen revenue (and anger exhibitors).

Indeed, studio revenue reached nearly $10 billion in the fiscal year, up 19% from $8.4 billion last year.

“With us, if it ain’t broke … ,” quipped Iger, in response to an analyst’s question whether OTT video platform Disney+ afforded the studio opportunities to give consumers earlier streaming access to branded movies in the home.

Iger said Disney would continue fight to maintain the traditional theatrical window, which has been under (now measured) attack by Netflix.

“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.

Interestingly, Iger gave a shout out to home entertainment – his first in years – which he said continued to deliver strong retail results for digital and physical content. In fact, the executive said there is ongoing internal strategy about putting theatrical content into retail channels sooner.

“The home video window continues to be quite important to us,” said Iger. “You’ll likely see us protect that as well, although there’s going to be discussion around whether there’s an opportunity to move product into that window maybe a little sooner.”

Iger quickly clarified Disney was not looking to encroach – at the moment – upon the theatrical window.

Disney is ending a record year in home entertainment with five of the top-six selling DVD/Blu-ray Disc titles, including Black Panther, Star Wars: The Last Jedi, Coco, Thor: Ragnarok, Avengers: Infinity War, and just-released, Solo: A Star Wars Story. The titles — excluding Solo — have generated nearly $400 million in combined revenue since their release.

Trans World Entertainment Amends Credit Facility Regarding F.Y.E. Store Closures

Trans World Entertainment, parent of the f.y.e. (For Your Entertainment) home entertainment retail chain, Nov. 1 announced an amended agreement with Wells Fargo regarding its five-year, $75 million revolving credit facility.

Specifically, TWEC agreed to receive written consent from Wells Fargo prior to closing additional f.y.e. store locations. The company said closures would not exceed 35 locations, or 68 stores in aggregate through the end of the fiscal year (Feb. 2, 2019).

The agreement provides that any store closures from the signing of the amended agreement until the end of the fiscal year shall be made in accordance with liquidators or liquidation consultants “reasonably” acceptable to Wells Fargo.

Mall-based f.y.e. posted an operating loss of $6.6 million in its most-recent fiscal period operating 241 stores. Revenue dropped 15% to $104.6 million from $123.9 million.