“Put it on a Disc.” That was the name of our relay team that back in August 1995 ran the 200 miles from Mount Hood to the Oregon coast over a 24-hour period.
I didn’t have a clue how that phrase would come to dominate my career.
The startup company I was working for at the time in Portland, Creative Media, was my introduction to DVD as it pivoted from the early computer multimedia era of CD-ROM. One of our first DVD products was the Blockbuster Guide to Movies and Video, recently ported from CD-ROM to the higher capacity DVD.
That product led me to Southern California in 1998 to join the Warner Bros. team that was launching movies on DVD. When I walked through those doors on the famed Warner Bros. lot, I would never have imagined I would still be here 24 years later, but it’s a testament to a company and industry that is ever-changing.
Those early days were frenetic — much as they were at the startup I left. Warren Lieberfarb [at the time, Warner Home Video president and the “father of DVD”] was a missionary, resolute in the belief that people would want to own and collect movies, and he was determined to make the format a success.
It wasn’t a forgone conclusion. There were naysayers everywhere: “Movies are one viewing and done, why would anyone want to own?”; “DVD isn’t the future; digital tape will win the format war”; “DVD players are too expensive, no one will buy.”
But Warren saw the future and tirelessly drove his staff, industry and detractors until DVD became one of the fastest-growing consumer electronics formats in history. It was a fun, heady time. The breakout was the first The Matrix movie. I remember speaking with my mother, who said she bought The Matrix DVD, which was interesting because it wasn’t her type of movie, but more to the point, she didn’t own a DVD player! When asked why she bought it, she said she heard so much about it, she just had to buy it.
On a large title we’d ship 20+ million discs, host lavish launch parties and debate spending millions on advertising “chase” campaigns. There were many innovations including special features (behind the scenes/making of/documentaries), connected discs which enabled content updates and “virtual” theater events with the director, and E Copy, a digital copy of the film that could be stored on a computer.
There were format wars (Divx/Blu-ray/HD DVD) that spilled over to the front page of The Wall Street Journal, business model innovations (rental revenue sharing, subscription by mail), discovery of latent consumer interest in TV series (DVD was the original binge format), and hijacked trailer trucks full of DVDs (because of their value).
As successful as DVD was, it would only be a bridge to the next chapter in distribution: digital, delivered over the internet. Eliminating the physical disc was the ultimate efficiency tool, promising near instantaneous global distribution, where and when needed.
Physical media is inherently inefficient in that predicting consumer demand down to the individual store is fraught with either not enough or too much product, and the resultant lost sales or “returns” (excess inventory) could have a major impact on profitability. Internet-delivered movies and TV shows also freed up endless “shelf space” so even the most obscure movie or TV series could find a listing in a digital retailer’s database.
But there were challenges, too, including slow internet speeds, data caps, digital rights management, getting it to the TV, rights and supply chain issues.
The early days of digital were a lift and shift of the physical world in that the predominant business model was transactional; either a rental (video-on-demand, or VOD) or “ownership” (electronic sellthrough, or EST). The MVPDs and satellite companies were offering VOD or PPV and eventually expanded into EST, but it was the internet-based businesses that had the biggest impact. There were many retail pioneers, including Movielink, the studios’ ill-fated joint venture. iTunes extended their innovation of unbundling the music album to TV, allowing consumers to buy individual episodes of TV shows versus the whole series; they also were one of the first to offer special features from a digital menu familiar to DVD users and were the first to build a global footprint. Other early pioneers that are still offering transactional include Vudu, Xbox, Amazon and Google.
Another concept borrowed from the world of physical media was buy-and-play anywhere. Back then, digital platforms were silos where the content was captive to the platform it was purchased on, unlike DVD, which could be bought at any retailer and played on any DVD player.
Ultraviolet (UV) was an attempt to add more utility to a digital purchase, so that a movie bought through retailer “A” could be played back at retailer “B” — which was particularly helpful in the early days, with limited ways to playback on TVs. Eventually, the entitlement concept pioneered by Ultraviolet was replaced by Movies Anywhere, with a more robust retailer and studio network.
Today, digital video is everywhere, but the dominant business model has shifted from transactional to subscription. An undeniable consumer bargain, the all-you-can view subscription buffet continues to enjoy tremendous growth as it spurs the industry to create ever-more storytelling.
It’s interesting to note that the other formats have not gone away. The transactional market generated over $8 billion in consumer sales through DVD/Blu-ray and transactional digital last year — the majority purchased by consumers who also have subscription services. For fans of movies and series, there has never been a better time.
Having seen it all, I can retire the “Put it on a Disc” shirt. I have a new one to wear now that says “HBO Max.”
Jim Wuthrich is president of content distribution for WarnerMedia and chair of DEG: The Digital Entertainment Group.
The uncertainty over the COVID-19 surge triggered by the emergence of the Omicron variant has made any and all predictions for the coming year suspect. Life could go back to normal fairly quickly or we will continue to battle surges and adjust our lives accordingly. Most observers don’t see us going back to the draconian shutdowns and lockdowns of the early days of the virus, but studio executives and exhibitors are understandably nervous about the current and any future surges since theatrical attendance could suffer — which ultimately affects everyone down the food chain.
The home entertainment business weathered the initial COVID crisis quite well, with streaming growing stronger and transactional video-on-demand (TVOD) winning a premium first-run window. That said, there are several “givens” as 2022 gets underway.
Netflix, Disney+, HBO Max and the other high-profile streamers will continue to battle for dominance, with Netflix doing everything in its power to reduce churn and not lose market share. The second tier of SVOD players, including Paramount+ and Peacock, will make as much noise as possible to win a seat at the table — as evidenced by Peacock’s recent announcement that it will be streaming the winter Olympics in their entirety.
On the transactional side, a lot depends on the fate of movie theaters as this pandemic lumbers on. The early pandemic led to an overall shortening of windows and new-release strategies that ultimately benefited both home entertainment divisions and digital retailers such as Vudu by Fandango, Redbox On Demand, Microsoft and Google Play.
But while TVOD, and physical media, benefit from shorter windows, it is also impacted by studios accelerating, or re-ordering, SVOD windows. A film available as part of an all-you-can-watch subscription streaming service simply isn’t going to sell or rent nearly as well as it would if there was no “free” competition. And that plays into the bigger picture that the more consumers tune in to SVOD services, the less likely they are to purchase or rent something a la carte.
Jim Wuthrich, president of content distribution for WarnerMedia, says he’s “optimistic that we’ll continue to adapt to the changing nature of COVID and learn to live with it.”
“Although there are many challenges, we’ve learned how to be productive with a distributed workforce, productions are largely back and there’s more consumer choice than ever before — both in amount of content and ways to view,” he says. “It’s a great time to be a fan of linear storytelling. We will continue to improve and expand HBO Max to more markets, while providing a la carte options for fans and collectors. SVOD services will continue to dominate viewing time, with transactional supporting a vital role in discovery, sampling and fandom. Physical media (4K/Blu-ray/DVD) continues to be a meaningful market, with approximately $2 billion in U.S. consumer sales, and largely immune to evolving distribution patterns.”
On the WarnerMedia side, Wuthrich says, “We have a great movie slate, with four DC films coming to theaters and another installment of ‘Fantastic Beasts.’ We also have a number of series releasing, including the new ‘House of the Dragon,’ a ‘Game of Thrones’ prequel. History has shown these franchises to be powerhouses in driving catalog sales so we are looking forward to a great year.”
“Similarly to 2021, we expect a very healthy home entertainment market in 2022, with strong consumer engagement across multiple business models,” says Michael Bonner, president of Universal Pictures Home Entertainment. “Release patterns will likely continue to fluctuate and vary across studios on a title-by-title basis.
“With the theatrical marketplace continuing to strengthen, the growth of PVOD and the expansion of various SVOD services, the distribution landscape is stronger than ever. As we look ahead, studios have more options and outlets to create value and reach consumers which strengthens our ability to continue investing in great content.”
Bonner maintains that Universal, with its slate of anticipated new releases including Jurassic World: Dominion, Minions: The Rise of Gru and Downton Abbey: A New Era, “is perfectly positioned to draw audiences back into theaters and fuel further transactional growth across the varying windows and platforms.”
Paramount Home Entertainment president Bob Buchi says that “as the global hub for transactional home entertainment across ViacomCBS, our division is exceedingly fortunate and singularly focused on delivering an extraordinary 2022 line-up of the company’s theatrical and television content, as well as third-party acquisitions through our extensive partnerships.”
“Our theatrical slate includes new entries in wildly popular franchises, including ‘Scream,’ ‘Top Gun,’ ‘Mission: Impossible,’ ‘Sonic the Hedgehog’ and ‘Jackass,’ which are not only highly anticipated, but also provide excellent opportunities to stoke fan interest in the earlier films and television shows available through home entertainment,” he says.
On the catalog front, Buchi adds, the division’s most ambitious initiatives are the year-long 50th anniversary salute to The Godfather, “for which we anticipate massive consumer excitement for the film’s return to theaters, new 4K home entertainment releases, and licensed merchandise,” and the first-time-on-4K director’s edition of Star Trek: The Motion Picture, “with fantastic new VFX, which will be released first on Paramount+ and then on home entertainment platforms.”
Cameron Douglas, VP of home entertainment for Fandango, which oversees the Vudu digital retailer, also has high hopes for the new year.
“We expect the TVOD sector to deliver even more value to consumers, as fans sort through a fragmented streaming world, looking for a one-stop-shop entertainment service for movies and TV,” he says. “Because subscription services, by their nature, cater to specific audiences and content offerings, we continue to see consumers utilizing the flexibility, depth and breadth of Vudu’s new release and catalog offering of over 200,000 titles to complement their monthly entertainment needs.”
Douglas says Vudu “is working hard to expand our catalog every day. It’s both a challenge and an opportunity, as we continue to secure new and previously unavailable titles. There’s a variety of titles where digital rights were originally unsecured, but with the demand increasing, there’s more pressure than ever to make these films available for fans to stream at home. We pride ourselves on providing the best quality of experience and we are always working to create a bigger, better home entertainment experience for our customers. We want to be that place where fans can find every beloved movie and show they desire.”
At the top of Vudu’s agenda for the coming year, Douglas says, are plans “to innovate new services for our customers and add new platforms and devices to meet the fan demand in an ever-changing marketplace. We also plan to offer deeper integration with our sister sites, Rotten Tomatoes, for entertainment discovery, recommendation and curated content, and Fandango for crossover promotional opportunities to help enhance the theatrical experience. With our entertainment lifecycle marketing strategy, we look forward to helping new and returning partners more effectively and efficiently reach high-value entertainment audiences at scale.”
The big challenge for home entertainment executives in the coming year is to apply lessons they learned during the pandemic and react quickly to market conditions.
Paramount’s Bob Buchi says that “with two years of experimentation and the expedited evolution of our business, we know we need to remain agile in our windowing and co-promotional strategies as we continue to support the return to theaters and the rapid growth of our streaming service, Paramount+.”
Adam Frank, SVP of global digital sales and distribution at Lionsgate, says what happens at the box office will trickle down into all aspects of home entertainment.
“Our expectation, given the quality and quantity of the theatrical release slate, is that box office sees significant increase and momentum in 2022 vs. 2021,” Frank said. “The old adage of content is king still rings true, and with more product in the marketplace, consumers will ultimately have more choices and more opportunities in the home entertainment space.”
Jed Grossman, EVP and GM of worldwide sales and distribution at Lionsgate, adds, “We expect all business segments — transactional digital, packaged media, SVOD and AVOD/FAST — to grow year-over-year driven by five key factors:
A more robust theatrical release schedule, inclusive of major tentpoles and franchises like ‘Jurassic World,’ ‘Top Gun’ and ‘Black Panther’ that were delayed during the pandemic. Lionsgate has a strong slate that includes Unbearable Weight of Massive Talent, starring Nicolas Cage; Are You There God? It’s Me Margaret; and White Bird, among others;
A more viable theatrical marketplace, with theater-going comfort increasing as vaccine/booster shot rates increase and tentpoles drive attendance;
The continued unprecedented demand for new release and library product from SVOD and AVOD/FAST platforms. Lionsgate has achieved record library revenue over the past year;
The ability to capitalize on home entertainment consumer behavior, consumer content thirst and technology enhancements — across all offer types — as accelerated by the pandemic lockdowns of 2020 and early 2021; and
Continued collaboration with our theatrical exhibition partners to release films with dynamic windows to meet demand across all platforms.”
For independent film distributors, don’t expect much variance in 2022 from established policies of continuing to take aim at the collector and niche markets, particularly on the physical media side.
“For disc sales, MVD and our label partners are focusing on collectible content in deluxe packaging,” says Ed Seaman, COO of MVD Entertainment Group. “We anticipate a similar trajectory for disc sales, which have steadily grown over the last several years. The pandemic certainly gave them a boost, but the resilience and resurgence of disc sales may have more to do with the frustrating customer experience our industry has created in the OTT space. Finding what you want is now very challenging. How many streaming services do you need to subscribe to only to not find the film you want to watch, when you want to watch it? You can more easily find what you want transactionally, but it is still a search. Why not just pay a bit more and own the deluxe-edition disc?”
On the digital front, Seaman says “AVOD/FAST will continue to grow dramatically as consumers clearly embrace and enjoy that model. TVOD is tricky; considering Amazon’s tight curation of non-fiction, we expect some other platforms to step up and become more dominant in that space. There is a real opportunity for platforms focusing on non-fiction to deliver to fans what they want when they want it.”
At MVD, Seaman notes, “we’ve just added Zach Fischel to our leadership team; Zach is a veteran in the entertainment industry and is leading our label management team and marketing department. We’ve additionally moved longtime MVD staffer Chris Callahan to lead our digital sales and operations team. Chris has been with MVD since 1999 and has served in sales management, label management and international licensing. Both of these leaders are committed to improving their areas of responsibility; they have great ideas particularly in digital marketing, an area of overlapped responsibility. We are really excited about 2022!”
So is Mark Fisher, president and CEO of OTT.X, a streaming industry trade group.
“2022 will be a year that portends the future of our industries — a future that, enabled by OTT distribution, is more egalitarian, more global and more diverse,” Fisher says. “While Hollywood continues to make great movies and TV shows, smaller distributors and independent producers from all over the world are making a lot of great content, too — enabling the consumer to be less reliant and dependent on content from the big studios and on domestic-produced content. And, while the big ‘Pluses’ and ‘Maxes’ continue to grow, consumers are finding plenty of additional content on indie and niche channels, both FAST and on demand.”
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.
“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.”
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.
“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.
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.
“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, 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.”
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.”
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, 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.
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.
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, 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.”
DEG: The Digital Entertainment Group is entering its 25th year with an influx of new members, the trade group announced Dec. 2.
The newest DEG members include Altman Solon, Anuvu, BIGtoken, Guts + Data, IRIS.TV, NAGRA, Omdia, Plex, Synamedia, TiVo, Visual Data Media Services, Vobile and ZOO Digital. Spherex also returned as a member of DEG, bringing the number of new DEG member companies to 26 so far in 2021 (a total that includes 12 new members announced at the end of the first quarter).
DEG’s Direct-to-Consumer Alliance (D2CA), created in 2019, and Advanced Content Delivery Alliance (ACDA), new this year, play an increasingly important role in focusing DEG membership for the future and attracting new members across a broad swath of the digital entertainment industry, according to the trade group.
“DEG’s wide reach across content creators, retailers, platforms and strategic vendors is an important part of its value to members, bringing companies in different industry segments together to work within DEG to advance industry positions and meet common goals,” said DEG chair Jim Wuthrich, president of content distribution for WarnerMedia. “The D2C Alliance and the Advanced Content Delivery Alliance are the latest examples of this community building, and I’m thrilled that so many new members see the value in DEG. I’m happy to welcome all of the new member companies to the DEG community.”
The new ACDA within DEG addresses advancements in technology to enable more and improved content delivery. ACDA member companies are aligned in committees addressing localization, supply chain efficiencies and security, cloud/edge computing and 5G.
The D2C Alliance represents the global direct-to-consumer media industry and supports its members to help create a robust marketplace to lead the new era of content consumption.
“We are thrilled about the expanding participation in DEG of advanced content delivery and direct-to-consumer companies,” said Amy Jo Smith, DEG president and CEO. “I’m grateful that they see the value of membership in DEG, which has been working harder and smarter than ever since last year to provide our members increased opportunities for business collaboration, education and networking.”
The home entertainment pie is getting bigger — and not just on the subscription streaming side, according to an Aug. 10 panel presented by DEG: The Digital Entertainment Group.
“The story on SVOD services I think is really well told, and we’ve seen a lot of consumers come over through those subscriber numbers, but I don’t think there’s been much focus on consumers who’ve been coming into the transactional end of the business,” said Jim Wuthrich, president of home entertainment and content licensing at WarnerMedia.
After a year in 2020 that saw a big jump in at home entertainment viewing due to a pandemic, the transactional business — revenue from consumers who rent or buy titles either digitally or physically — has proven resilient, even though it has dropped from the pandemic highs of last year. Transactional spending was down 28.7% to an estimated $3.4 billion, from $4.8 billion in the first six months of 2020.
“I would say overall these numbers to me are remarkable,” said Michael Bonner, president of worldwide home entertainment at Universal Pictures.
Comparing the numbers to pre-pandemic 2019, transactional has grown its appeal, especially with catalog.
“We have evidence that the consumer adoption and engagement during the pandemic is up overall, and those levels are kind of maintaining,” Bonner said.
“We had this big spike last year where consumers were looking for any content they could transactionally,” Wuthrich added. “This year we’ve come down, but we’re running against that big spike we had last year.
“The one drag that we’ve got for the first half of this year was really around new-release product because we don’t have a lot of new-release product.”
Still, Bonner noted that on a title-by-title basis, the new releases that have come out are performing well.
“If you look at it at on a title level, that product that is flowing in, it’s performing very well relative to historical,” he noted.
Then there’s premium rentals and sales (PVOD, PEST), which the DEG does not track. That segment of the business, which some industry pundits say helped the transactional market grow for the first time in a decade last year, has continued its appeal.
“Our estimate is there’s $1 billion of consumer spend that’s not captured in the numbers that you’re presenting,” Bonner said. “And those numbers are not insignificant. We’ve seen tremendous engagement from consumers on that product that’s made available early in its window. Again, some of that is to be expected — given where the box office has been over the past year — but the numbers, they’re fantastic.”
Wuthrich sees a strong last half of the year, as new releases flow into the transactional pipeline.
“Going into the back half of year, we’re pretty bullish around it,” he said.
“I think in Q3 and Q4, we’re not quite out of the pandemic yet, so I think there’s still going to be heavy engagement in the home, so I think the numbers should be strong again,” Bonner said.
While moves to put titles on streaming services early — and, in the case of Warner, on HBO Max concurrently with theaters — may shrink demand in the transactional realm, there are customers for every segment of the entertainment marketplace, said panelists.
“When it’s widely available on a streaming service, it does take some of the demand, but it also adds in other ways,” Wuthrich said.
“The reality is studios are all kind of making tradeoffs in terms of how to put product through different consumer offerings earlier than ever,” Bonner added. “We’re all trying to figure that out.”
Each segment of the business is finding an audience, panelists said.
“We see spikes in demand across each of those new offerings,” Bonner said. “There are consumers and there’s an audience out there for each of these.”
Even the physical business is holding its own, Wuthrich said.
“We found there are still over 35 million households in the U.S. that are still transacting in physical,” he said, noting that Warner entered into a joint venture, Studio Distribution Services (SDS), with Universal to serve the continuing physical disc consumer.
“One of the reasons that people continue to buy physical media is it’s a habit. Another reason though is quality. You can’t beat the quality to the television of physical media, particularly around 4K with HDR,” Wuthrich noted. He added that physical consumers span all demos, young and old. Close to 60% is in the age range of 25-44, he said.
And retailers have maintained a lot of that shelf space for physical during the pandemic.
“I think longer term, this is a mature category, and you’ll see continued consolidation,” Wuthrich said. “I think of the retailers that have, particularly the large ones that have exited or shrunk the category, we see stabilization in that space. And that’s where it was particularly encouraging, at least some of our retailers held most of the space, even through COVID, even though there wasn’t a lot of new product that was flowing in. And it was because it was something that was desired by their customer. They were looking for distractions and such. So maybe they were only shopping for diapers and popcorn, but they were still going by and picking up physical.”
“Pre leading up to that period, home entertainment spending overall from a transactional standpoint was down about 5% in total consumer spend,” he said. “Since March 14, that mid-March time frame, home entertainment transactional spending is now up 38%.”
The growth took off in triple-digit percentages as the pandemic measures took effect.
“Our digital sellthrough business as an industry — which we call EST here at Warner Bros. — it’s been up over 100% each week since safer at home began.”
Physical, too, has seen a lift, Wuthrich said.
“Physical has continued to be challenged, but it’s interesting that now even in this environment, with stores that are closing and such, physical has shown great resiliency,” he said. “Since post safer at home, the physical business has been trending stronger than what it was doing prior to that.
“We just had a title launch this week, Just Mercy, in physical and we actually did better than what we had been planning. I had to ask the team did we correct it for a post-COVID world and we hadn’t. The fact that people are still in stores shopping for the essentials at Walmart, Target and Best Buy has been helpful in holding up the physical. And of course Amazon and the online retailers have all done well in that space.”
Wuthrich noted that the pandemic has had effect on what titles consumers are watching.
“The top catalog title for the industry year to date is a title that many of you may have watched yourself. It became a bit of a cultural swelling, and that movie is Contagion,” he said. “The movie’s been out for a number of years, but obviously a lot of interest in it. It’s uncanny how it kind of mimics what’s going on in the real world today. That is actually outselling our ‘Harry Potter’ collection, Jumanji, Avengers: Endgame, World War Z. So basically people are binging on franchise and apocalypse movies.”
Wuthrich stressed how important theaters are to the overall business.
“It’s really unfortunate that theaters had to close because of the crisis, and we are looking forward to when we can get the theaters back in business. I just want to comment on that,” he said. “This is all an ecosystem, and it’s a very important ecosystem, having theaters open, driving people into theaters, eventizing films and providing the traditional windows that come from that. So that fact that the theaters are closed is a big hit to our business. We’re looking forward to getting back into business with our exhibition partners.”
Still, home entertainment and games have helped stem the losses in theatrical revenue, he noted.
“Games and home entertainment, increases in those businesses have nearly offset the loss of what we’ve seen in the industry from moviegoing,” Wuthrich said. “So there’s a lot of growth happening in entertainment and games.”
Coming off a year of momentous change, home entertainment executives expect more turbulence to hit their business in 2020.
Streaming has clearly become the dominant force, with two more high-profile subscription streaming services scheduled to launch in 2020. Comcast/NBC Universal in April will bow Peacock, with more than 15,000 hours of content and a free, ad-supported service as well. A month later, WarnerMedia will debut HBO Max, with a large library of titles from across the media titan’s family — including a curated list of classic movies.
And then there’s Quibi, a mobile-centric, short-form video platform launching in April, the brainchild of ex-Disney and DreamWorks chief Jeffrey Katzenberg.
But home entertainment executives, whose proverbial bread-and-butter has always been the transactional model — in which consumers pay a set fee to either buy or rent a movie, TV series or other filmed content, either digitally or on disc — insist there’s enough of an audience for both aspects of the home entertainment (or at-home, or direct-to-consumer) business.
“With an abundance of exceptional content combined with a plethora of platforms, we can expect a ‘roaring’ start to the ’20s as consumers are met with a mass of entertainment options,” says Bob Buchi, president of Paramount Home Entertainment. “It is now the challenge of the industry to focus on marketing and distribution to hone the messaging and delivery to meet the varied needs of consumers across linear, on-demand, subscription and transactional.
“While SVOD has captured the attention of consumers and created an ‘always on’ expectation, the transactional business continues to offer very unique and important consumer propositions: the first post-theatrical home viewing opportunity, the greatest breadth of selection, the highest quality viewing options, and custom bonus content to extend the entertainment experience. The data continues to show that SVOD and transactional can co-exist and thrive. More than half of viewers are involved in both activities, and despite the availability of catalog titles on SVOD platforms, we at Paramount saw record sales numbers for our catalog in 2019.”
Jason Spivak, EVP of distribution at Sony Pictures Home Entertainment, is similarly optimistic. “As the business evolves consumers are becoming increasingly aware and comfortable with the ways that various distribution models fit together,” he says. “While SVOD delivers great value for many use occasions and types of content, the benefits of transactional models — recency, collectability and image quality — also continue to be prominent, especially in regard to new release theatrical content, and premier catalog titles.”
“Obviously we have been paying very close attention to growth and adoption of streaming services, and we are constantly evaluating their impact on our physical and digital business,” adds Jim Wuthrich, president of Warner Bros. Home Entertainment & Games. “With Warner Media’s HBO Max coming in 2020 the industry will continue to grow. And as the business grows, so does access to an ever-increasing new consumer base who are familiarizing themselves with digital transactions and streaming, so it opens doors for us to bring in new audiences for our products and content.”
Ron Schwartz, president of worldwide home entertainment for Lionsgate, says “the transactional home entertainment space remains a very dynamic and robust business for our many types of content.” He touts the success on both digital and physical platforms of John Wick: Chapter 3 and Angel Has Fallen, calling those two films “great examples of the type of content that home entertainment consumers want to own. Overall, multiple steaming platforms and transactional, physical and digital will all continue to coexist as the marketplace continues to evolve.”
Digital retailers agree. “In 2020, we think transactional and subscription will both continue to grow because they complement one another,” says Cameron Douglas, head of FandangoNow. “Nowadays, digital entertainment is a mainstream business. Every TV is connected and OTT services have become the norm for audiences looking for content at home. The growth bodes well for the future of our industry.”
Even at Disney, where much of the focus is on the much-hyped Disney+ service, there’s room for transactional, according to David Kite, SVP of marketing for Disney Media Distribution.
“With this year’s acquisition of 20th Century Fox, we remain committed to both digital and physical ownership,” Kite says. “We successfully integrated the Fox team into the expansive Disney home entertainment organization and have implemented a unified strategy that includes a more synergistic approach across key lines of business. We’re looking forward to another exciting year across both physical and digital platforms with a wide-range slate of home entertainment releases.”
In the first quarter of 2020, Kite says, “We will be releasing two very promising titles — the critically acclaimed awards contenders Jojo Rabbit and Ford v Ferrari. We’re also excited about the rollouts of Frozen II, Star Wars: The Rise of Skywalker, Marvel Studios’ Black Widow, Disney-Pixar’s Onward and the live-action Mulan as our customers continue to build their libraries.”
While disc sales will likely continue to decline in 2020, no one’s giving up on DVD, Blu-ray Disc or, in particular, 4K Ultra HD.
“The 4K UHD physical market will continue to experience growth throughout 2020,” says Eddie Cunningham, president of Universal Pictures Home Entertainment. “We are encouraged by industry forecasts, which anticipate the sales of that format in North America alone will deliver 25% of Blu-ray Disc dollars in 2020.”
“We will continue to release the majority of our new release titles in the highest possible definition and also mine our vast catalog library for worthy and deserving films to be remastered, as we did this year with The Wizard of Oz,” adds Wuthrich. “The desire for classic titles in the ultimate high-definition format is definitely a factor in the continued momentum of 4K UHD.”
Spivak agrees. “As consumer viewing habits evolve, the disc remains a prominent part of the home entertainment market, particularly given the steady growth for 4K Ultra HD,” he says. “With households nationwide regularly upgrading their TVs to 4K UHD there’s every indication that 4K UHD will evolve beyond a niche audience of format enthusiasts. We will continue to put out most of our new releases and select catalog in UHD, while working with retailers to expand placement and experimenting with features that make the product most attractive to consumers.”
Disney’s Kite is similarly optimistic for the disc business. “Physical ownership remains a robust line of business for us, especially among the collectible consumer,” he says. “There continues to be a healthy appetite for the physical format, particularly with premium, and we already have substantial plans in place for 2020.”
Universal’s Cunningham stresses the importance of retail partnerships in maximizing the transactional model’s potential.
“Given that physical and digital transactional consumption rates are remaining steady year over year and that disc purchases are making up more than half of that consumption, there’s no question that movie buyers continue to be vitally important to retail,” he says. “At no other time in our industry has it been more critical to ensure that we work together to retain the loyalty of movie consumers, creating urgency for our products and delivering the utmost value, quality, accessibility and convenience possible.
“It is important for us to continue supporting our retail partners with creative thought leadership and close collaboration to ensure that we collectively continue to capture shopper attention and deliver key, compelling reasons to transact.”
Sony Pictures’ Spivak agrees. “More than ever we must embrace the fact that our retail partnerships are multi-faceted and cross distribution models — from transactional to SVOD and AVOD,” he says. “Ultimately, our mutual objective is maximizing the consumer value proposition and providing the best potential viewer experience.”
The phrase “transformational change” has been used so much it’s become a cliché — and yet there really is no better way to describe what happened in not just home entertainment, but also the entertainment industry overall, in 2019.
The completion in March of the Walt Disney Co.’s purchase of 20th Century Fox saw the number of major studios drop to five from six. Some of the home entertainment sector’s most familiar faces were suddenly gone, including Mike Dunn, the longtime leader of Fox’s home entertainment unit, and Danny Kaye, the visionary behind Fox Innovation Labs. Later, in the summer, Janice Marinelli, Disney’s home entertainment chief, also exited in a surprise move, given that she had opened an office on the Fox studio lot and was reportedly screening staffers.
In November, two new streaming giants emerged to take on longtime leader Netflix, Apple TV+ and, most significantly, Disney+.
Meanwhile, a new flavor of streaming gathered momentum: free to consumers, paid for by advertisers. Among the heavyweights jumping into what’s known as “AVOD” are ViacomCBS, with its Pluto TV acquisition, and Comcast Corp., which in December was reported to be in advanced talks to acquire Xumo TV, which boasts more than 140 digital channels of programming across 12 genres, including sports, news, kids and family entertainment.
The overall impact of all these developments on home entertainment: It got smaller — and bigger.
Smaller, because the traditional transactional business model that has defined home entertainment since its birth more than 40 years ago has increasingly come under fire, with subscription streaming, in particular, gobbling up more and more consumer attention — and dollars — that previously would have gone toward buying or renting movies, either on disc or through digital retailers.
But also bigger, because streaming, in its various incarnations, is now widely accepted as being part of home entertainment — which is now broadly defined as people watching what they want, on demand. There’s even a new name for all of this — direct-to-consumer — which was first adopted by Disney and is now used interchangeably with “home entertainment.”
Bob Buchi, president of Paramount Home Entertainment, says 2019 “was the year of transition.”
“From media mergers and changing consumer viewing habits to the explosion of streaming services, the landscape has shifted dramatically,” he says.
The Nov. 1 launch of Apple TV+ marked the tech giant’s entry into the content business, with nine original series. One of them, “The Morning Show,” picked up several Golden Globe nominations from the Hollywood Foreign Press Association (HFPA), a first for a new streaming service.
Less than two weeks later, Disney launched its much-ballyhooed Disney+, with a full menu of in-demand movies and series — including the “Star Wars” spinoff “The Mandalorian.” Disney said more than 10 million people signed up for the service in the first 24 hours. By the end of November, the service had 24 million subscribers, according to estimates from Wall Street firm Cowen & Co. (Netflix as of October had more than 60 million domestic subs.)
“It’s an exciting time and we believe we have a unique and significant role to play,” Ricky Strauss, president of content and marketing for Disney+, told Media Play News on the eve of the service’s launch. “Disney+ will compete based on the unparalleled strength of our brands, the quality of our intellectual property, and expertise in high-quality video streaming.”
And yet industry insiders insist that despite streaming’s growth, there’s room for transactional — largely because new theatrical films, particularly the blockbusters, aren’t available on SVOD services. This distinction has prompted FandangoNow, one of the big digital retailers, to boldly proclaim on its home page, “New releases not on Netflix, Amazon Prime or Hulu subscriptions.”
“Because we’re the first point of entry for fans to see movies in theaters, and first at home, we’ve seen a significant growth among consumers who are excited to own movies as soon as they’re available digitally,” says Cameron Douglas, head of FandangoNow. “Fans looking for high-quality content right out of theaters, including 4K HDR movies, don’t have to wait until they arrive later on subscription services, and innovative deals like rental binge bundles and the availability on new platforms keep them coming back to transactional digital services like our own.”
“New movie releases continue to be sought out by consumers during the first window in the home amidst the frenzied buzz around new streaming services,” adds Michael Bonner, EVP of digital distribution for Universal Pictures Home Entertainment. “While there’s no denying the landscape is becoming more competitive, this business has successfully co-existed with abundant availability of non-transactional content for a long time and we expect it to continue to do so.”
“There is space — and demand — for both transactional content as well as streaming — just as there is consumer interest in both digital and physical,” says Amy Jo Smith, president and CEO of trade association DEG: The Digital Entertainment Group.
Beyond new releases, streamers have a limited selection of older films and TV shows, particularly with their increased focus on original content.
“For many consumers, their streaming options are good enough,” says Mark Fisher, president and CEO of home entertainment trade association the Entertainment Merchants Association (EMA). “But just like the days when the first video rental stores opened and made it easy for the consumer to watch anything they wanted to watch when they wanted to watch it, online VOD retailers offer that same opportunity to the consumer. I know that every time I see a montage of old movie clips, I’m driven to watch titles that aren’t new releases — and these are titles not readily (or easily) found on the streaming services.”
Sales of digital movies, in particular, were a bright spot, with consumer spending up nearly 7% in the first nine months of 2019, according to trade association DEG: The Digital Entertainment Group.
“We’ve continued to see growth in EST (electronic sellthrough) — both in our new releases and in our catalog,” says Jason Spivak, EVP of distribution, for Sony Pictures Home Entertainment. “Certainly the enhanced consumer experience enabled by Movies Anywhere is part of that, as is increasing consumer connectivity in their homes. EST continues to gain prominence in our marketing planning, release data scheduling, and retailer partnerships.”
Ron Schwartz, president of Lionsgate Home Entertainment, says Lionsgate EST revenue grew 30% this year, “four to five times faster than the overall industry. With increased collaboration between studios and retailers, and more offerings such as dynamic bundling, customers are starting to build their lockers up to 10-plus titles. Recent data shows that once a customer gets to between 10 and 12 titles in their locker, their EST purchasing behavior doubles.”
In addition to selling movies, digital retailers also offer them for a la carte streaming, the digital equivalent of a physical movie rental. Redbox remains the only retailer to offer both digital and physical rentals, the former through an e-commerce site and the latter, through a network of more than 40,000 kiosks situated outside (or inside) large retailers like Walmart, convenience and drug stores, and other retailers.
“Redbox owns the transactional space with more transactions across physical and digital formats — for rental and purchase — than any other transactional provider,” says Redbox CEO Galen Smith.
In 2019, he said, Redbox expanded its offering of 4K Ultra HD discs into new markets, and stepped up promotions as well, with its Back to the Movies campaign and a joint Dinner & A Movie offering with meal delivery service DoorDash.
In addition, Redbox Entertainment, a new content acquisition and production division, has further transformed Redbox into a multi-channel content provider and programmer. Launched in October, the new division is headed by Marc Danon, who spent eights at Lionsgate, most recently as SVP of acquisitions and business development.
Disc sales in 2019 continued to decline in the low double digits, with DEG reporting that in the first nine months of the year, combined 4K Ultra HD, Blu-ray Disc, and DVD revenues were down 18.5% to an estimated $2.3 billion — exactly half what they amounted to five years ago, in 2014.
But studios continued to support the disc. And while a trend among smaller titles is to release them only on DVD and digital, bypassing Blu-ray Disc, major new releases are still getting significant marketing campaigns behind them, particularly for the 4K Ultra HD editions. The UHD disc also made headlines last August when the UHD Alliance, along with leaders in consumer electronics, the Hollywood studios and members of the filmmaking community, announced collaboration on a new viewing mode for watching movies called “Filmmaker Mode,” designed to reproduce the content in the way the creator intended. Filmmaker Mode, bowing next year, will allow viewers to enjoy a more cinematic experience on their UHD TVs when watching movies by disabling all post-processing (e.g. motion smoothing, etc.) so the movie or television show is displayed as it was intended by the filmmaker, preserving the correct aspect ratios, colors and frame rates.
“For the time being, 4K UHD is still the gold standard for at-home content,” says Jim Wuthrich, president of Warner Bros. Home Entertainment & Games. “With hardware costs dropping and television functionality such as Filmmaker Mode being made available next year, there is still a great value proposition in owning content in 4K UHD, both physically and digitally, as is still represents the best home-viewing experience.”
“As evidenced by the exceptional growth of 4K UHD to date, it is clear that there is a sizable appetite for premium high-definition products, and that format plays a meaningful role in boosting retail traffic,” says Eddie Cunningham, president of Universal Pictures Home Entertainment.
Retail partnerships are key, Cunningham adds. “Given that physical and digital transactional consumption rates are remaining steady year over year and that disc purchases are making up more than half of that consumption, there’s no question that movie buyers continue to be vitally important to retail,” he says. “At no other time in our industry has it been more critical to ensure that we work together to retain the loyalty of movie consumers, creating urgency for our products and delivering the utmost value, quality, accessibility and convenience possible.”
DEG: The Digital Entertainment Group on Aug. 9 announced its incoming board of directors at the start of its 23rd year as one of the home entertainment industry’s leading trade associations.
DEG’s voting member companies elected the new board to serve for the 2019-20 fiscal year (Aug. 1 – July 31). New board members include Pedro Gutierrez of Microsoft Corp., Cheryl Goodman of Sony Electronics and Erol Kalafat of Amazon Studios.
Amazon Studios is a new member company represented on the
DEG board for the first time.
The DEG also has added two additional companies to its membership: Row8, a transactional digital movie service that allows viewers to stop a movie they don’t like and choose a new one at no additional charge, and Snap Inc., parent company of social networking app Snapchat.
The Officers of the DEG board were elected to a two-year term in 2018 and will continue to serve through July 2020. Officers include Chair Matt Strauss of Comcast Cable; Vice Chair Sofia Chang of WarnerMedia Distribution (HBO); CFO Bob Buchi of Paramount Home Entertainment; Secretary Jim Wuthrich of Warner Bros. Worldwide Home Entertainment & Games, and Chair Emeritus Mike Dunn, formerly of 20th Century Fox Home Entertainment.
“At a time when our industry is rapidly changing, the board of directors strives to produce deliverables that meet the needs of the industry at this dynamic time, such as DEG’s D2C Alliance, formed at the start of the year,” said Amy Jo Smith, president and CEO of the DEG.
WarnerMedia on May 8 announced the transfer of HBO Enterprises and HBO Home Entertainment, home to the enormously popular “Game of Thrones” franchise, to Warner Bros.
The distribution of the US Turner Originals also is part of this realignment.
Jeffrey Schlesinger, president of Warner Bros. Worldwide Television Distribution, will take leadership responsibility for activities of HBO Enterprises and the distribution of Turner content produced in the United States, according to a WarnerMedia news release.
HBO Home Entertainment will transfer to Warner Bros. Worldwide Home Entertainment and Games under the leadership of its president, Jim Wuthrich.
“Bringing these businesses all under one roof means we improve cooperation and create scale,” Gerhard Zeiler, chief revenue officer at WarnerMedia, said in the release. “Acting as one will strengthen our position in an increasingly challenging marketplace.”
Schlesinger added, “For the first time at our company, the diverse and unparalleled portfolio of genre-defining new and library programming created by HBO, Warner Bros. and Turner will be distributed globally by one group. This structure will enable us to speak with one voice, as we create new and innovative ways to license our top-quality programming to networks, channels and services globally, helping them grow their audiences and subscriber bases.”
Wuthrich, whose full title is president, Warner Bros. Worldwide Home Entertainment and Games, said, “While we have had a strategic alliance with HBO in the past that involved physical product distribution, we are now excited to welcome the digital transactional sales and marketing teams into the Warner Bros. Home Entertainment family. We look forward to sharing their iconic and acclaimed original programming with home entertainment audiences worldwide.”