Trans World Entertainment Stock Plunges Following Poor Fiscal Results

Despite a 1-for-20 shares reverse stock split, shares of Trans World Entertainment plunged more than 30% Aug. 29 after the parent to home entertainment retailer f.y.e. (For Your Entertainment) reported dismal quarterly earnings.

Indeed, fye comparable store sales decreased 1.2%, compared to an increase of 9.6% during the previous-year period. Increases in lifestyle categories were offset by declines in electronics and packaged media movies, TV shows, music and video games. Comp revenue in the electronics category decreased 0.1%.

Video sales were down 16.1%, due to the underperformance of new releases impacted by soft theatrical releases.

“A headwind that will continue to influence this category in the second half of the year,” CFO Edwin Sapienza said on the fiscal call.

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Lifestyle and electronics categories represented 58% of $76 million revenue for the second quarter as compared to 53% last year. Media category comp sales declined 12.8% for the quarter, and represented 42% of the f.y.e. segment sales compared to 47% last year. Music sales were down 7.8%.

“We continue to see strong sales of K-pop merchandise,” Sapienza said.

The company operated about 200 f.y.e stores in the period compared to 241 stores last year.

Strong ‘Aquaman’ Home Entertainment Sales Up Warner Bros. Q2 Operating Income

Strong retail sales of Warner Bros.’ ocean-based superhero Aquaman contributed to the studio increasing second-quarter (ended June 30) operating income 30% to $440 million from operating income of $338 million during the previous-year period.

Video game (which included the Mortal Kombat 11 release) and home entertainment revenue increased nearly 28% to $552 million from $432 million a year ago.

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Theatrical revenue grew 13.4% to $1.52 billion from $1.34 billion last year. Television product revenue decreased almost 15% to $1.31 billion compared to $1.53 billion last year.

The decrease was primarily due to lower licensing revenue as parent company WarnerMedia holds back content from third parties such as Netflix for its pending subscription streaming video service, HBO Max.

Total WB studio revenue increased 2.5% to $3.39 billion compared with $3.3 billion last year.

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.

Best Buy Widens Q1 Entertainment Sales Decline

Christmas is officially over. The post-winter holiday blues hit Best Buy entertainment sales with a thud.

The nation’s largest consumer electronics retail chain May 23 reported a 12.7% drop in same-store entertainment sales to $424 million for the quarter ended May 4. The business unit includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

Entertainment sales declined less than 1% to $504 million in the previous-year period.

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International entertainment sales dropped 14% to $33 million, compared to an 8.3% decline to $41.8 million in the previous-year period.

Overall, Best Buy upped domestic operating income 24.3% to $332 million from $267 million last year. Revenue upped less than 1% to $8.48 billion from $841 billion.

The largest comparable sales growth drivers were appliances, wearables and tablets.

Domestic ecommerce revenue of $1.31 billion increased 14.5% on a comparable basis primarily due to higher average order values and increased traffic. As a percentage of total domestic revenue, online revenue increased to 15.4% versus an increase to 13.6% last year.

On June 11, CEO Hubert Joly transitions to the newly created position of executive chairman. CFO and strategic transformation officer Corie Barry becomes Best Buy’s fifth CEO and first female chief executive.

Joly appears to relish the transition from day-to-day operations to cushy board oversight.

“I am very proud of the seamless transition we have decided to implement, as it reflects positively on our momentum as well as our focus on executive development and succession planning,” Joly said in a statement.

Subscription Streaming Overtakes Physical/Digital Transactions in the U.K.

As expected, subscription streaming video and music services have supplanted physical/digital transactions in the United Kingdom, the world’s third-largest home entertainment market.

More than 60% of consumers collectively streamed music, video and video games in 2018, compared to 39% who purchased content in physical or digital formats.

“This is a significant moment,” Kim Bayley, CEO of the Entertainment Retailers Association, said in a recent statement.“New digital services have created a “generation rent” for whom [direct] access models seem natural. It is nothing less than a revolution in the entertainment business.”

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The trend mirrors the United States, where subscription streaming (i.e. Netflix, Amazon Prime Video, Hulu, etc.) accounted for 60% of consumer home entertainment spending in the first quarter, ended March 31.

Similar to U.S., the Internet and streaming are driving overall home entertainment segment growth. U.K. revenue grew for the sixth consecutive year in 2018 to a record £7.5 billion ($9.7 billion), up 9.4% from $8.8 billion in 2017.

Digital now accounts for 76.1% of revenue. As recently as 2011, digital’s market share was less than 20%. Around 85% of total entertainment retail revenue is generated over the Internet.

Meanwhile, sales of DVD, Blu-ray Disc and 4K UHD Blu-ray continue. Brits spent $523.5 million on DVD movies and TV shows; $145.7 million on Blu-ray and $21.9 million on 4K UHD Blu-ray.

“Video has gone full circle – from a rental-based business at the dawn of VHS, to an ownership model with DVD and now a subscription/rental model,” Bayley said.

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.”

 

Bye Bye Brazil? Not for Netflix

Brazil has quietly become Netflix’s No. 2 foreign market (after the United Kingdom) since the SVOD pioneer established service in the country in 2011.

With the largest economy in Latin America ($902 billion GDP), Brazil is a hotbed for U.S. multimedia companies doing business south of the border. And Netflix is leading the way in over-the-top video. Netflix Brazil now tops 8.5 million subscribers, with 1.5 million added in 2018, according to according to new data from Futuresource Consulting.

Original Brazilian programing on Netflix includes “The Process,” “The Mechanism,” “Space,” and “Samantha!” among others.

“Consumer spend on SVOD is almost entirely driven by Netflix and accounted for around 8% of total entertainment spend in 2018,” analyst Tanzim Rahman said in a statement. “Beyond 2019, the SVOD market is projected to experience 20% growth in revenue per year, with revenue expected to nearly double by 2022, reaching just shy of $1 billion.”

Netflix’s prospects in Brazil didn’t seem so rosy a year after bowing service. With about 1 million total subs in Latin America a year after launching, Netflix was having trouble convincing consumers to use their credit cards to pay for online service, in addition to reported bureaucratic issues. Viewers also wanted programming with subtitles (instead of dubbing) or the option of audio in Portuguese.

Now, 28% of respondents in a separate IHS Markit survey claim they turn to Netflix first when looking for something to watch on television.

While pay-TV still dominates the Brazilian home entertainment market, representing 77% of consumer spending, that revenue declined 6% in 2018 to $5.9 billion compared to $6.2 billion in 2017, according to Futuresource.

Sales and rental of DVD and Blu-ray Disc content fell 20% — largely offset by digital sales and transactional VOD.

“Despite a choppy ride, the overall video entertainment market will begin to rise again, although it faces another decline in 2019,” Rahman said. “We project a climb [of] retail value to $7.2 billion in 2022.”

 

 

Lionsgate Q3 Home Entertainment Revenue Falls, Starz CEO Chris Albrecht Departs

Lionsgate Feb. 7 reported third-quarter (ended Dec. 31, 2018) home entertainment revenue from movies of $149.7 million, down 31% from revenue of $189 million during the previous-year period. Through nine months of the fiscal year, movie revenue fell 22% to $462 million compared to $588.6 million last year.

Sales of DVD and Blu-ray Disc movies fell 35% to $68 million from $104 million, while digital sales dipped about 4% to $81.7 million from $85 million.

Through nine months, packaged media movie revenue is down 33% to $209 million from $311.5 million last year. Digital sales are down less 9% at $253 million from $277.1 million.

Sales of TV shows on disc reached $2.5 million, compared to $4.1 million during the previous-year period. Digital sales reached $10.9 million, down 58% from $25.7 million last year.

Motion Picture segment revenue reached $362.6 million. Segment profit decreased 19.9% to $43.5 million, reflecting underperformance of certain titles in fiscal 2019 compared to the outperformance of Wonder in the prior year quarter.

Media Networks segment revenue increased to $366.8 million due to strong OTT (i.e. Starz) subscriber growth. Segment profit increased 9.6% to $134.1 million from the prior-year quarter. Overall domestic subscribers were sequentially consistent in the quarter at 25.1 million and up 1.1 million year over year.

Starz had a strong revenue and subscriber quarter, ending the quarter with 25.1 million overall domestic subscribers, which was consistent sequentially and up 1.1 million subscribers from the prior year quarter.  Starz achieved strong over-the-top (OTT) subscriber growth for the sequential quarter as well as year-over-year.

“We’re pleased to report a strong quarter with significant free cash flow and continued revenue and subscriber growth at Starz,” CEO Jon Feltheimer said in a statement.  “As we refill our feature film and television pipelines at a robust pace and take our integration of Lionsgate and Starz to the next level, all signs are pointing to strong growth in the year ahead.”

Feltheimer gave a shoutout to departing Starz CEO Chris Albrecht, who helped transition the pay-TV and OTT platform following Lionsgate’s $4.4 billion acquisition in December 2016.

“[Chris transformed] Starz from a legacy media network to a forward-looking streaming platform,” Feltheimer said on the fiscal call.  “He worked closely with me to position Starz for the next phase of its growth and he leaves behind a strong programming slate and a talented leadership team. I’m confident we will maintain our momentum without missing a beat.”

British Trade Group Lobbies for Packaged-Media Survival

On the heels of British entertainment retailer HMV’s second time into administration (a form of bankruptcy), trade group British Association for Screen Entertainment (BASE) has issued an impassioned plea for the survival of packaged media.

When the His Majesty’s Voice retail chain, operating more than 120 stores in the United Kingdom selling DVD, Blu-ray Disc and music CDs, filed for administration on Dec. 28 – the second such filing in six years – executives cited a 30% year-over-year decline in DVD sales for the move.

BASE, in a statement, said the percentage decline was misleading, and in fact, represented a single week on the British charts when comparing the 2017 retail release of Warner Home Video’s highly touted Dunkirk.

The trade group said year-over-year DVD sales actually dropped 17% and still represent nearly 60% of consumer spending on movies — especially on Top 10 theatrical releases.

“HMV is a key player in physical sales across TV, comedy and special interest genres, allowing consumers to browse the remarkable breadth and depth of titles showcased in-store,” said BASE.

“Standout titles consistently achieve great DVD sales results; in December, Mamma Mia! Here We Go Again sold over 1 million DVDs in less than a month, the first title to do so in five years since Despicable Me 2 [both Universal Pictures Home Entertainment] in 2013.”

The group said retail still offers the best avenue for impulse purchases of movies and TV shows. Indeed, 20% of home video consumption in 2018 was done on impulse, contributing £70 million ($90 million) to the market. BASE said 30% impulse buys of packaged media occurred at HMV stores.

Analyst Kantar Worldpanel reported that in-store sales accounted for 60% of all spend over the year, and research conducted by Vista found that 81% of UK consumers continue to see the physical store as vital to the shopping experience.

“Impulse purchases add significant value to the physical market, and HMV, accounting for one in three impulse entertainment buys, plays a huge role,” Ian Foster, managing director, NBC Universal, said in a statement. “For this, and many other reasons, HMV’s place on the high street is vital for the category and we are very keen to see a positive outcome.”

BASE said HMV and brick-and-mortar retail have contributed to 4K UHD Blu-ray sales accounting for 13% of BD sales, with Blu-ray now representing 24.3% of the total physical disc market value.

The group said the potential customer base for 4K content continues to grow, with Futuresource Consulting projecting a UHD TV installed base of 8.5 million households and 2.2 million capable 4K Blu-ray players across the U.K. at the end of 2018.

Indeed, 41% of U.K. shoppers went to a store specifically to buy 4K Blu-ray titles, compared to 27% for Blu-ray titles in general.

“The growth of 4K UHD within the market has helped increase the average price paid for a Blu-ray up to £14.21, a year-on-year increase of the average Blu-ray selling price of 5.3%, attesting to the fact that consumers are willing to invest more in a high-quality home entertainment experience,” said BASE.

The group said that despite media reports suggesting younger consumers largely covet digital and streaming video services, the demo still purchases video content on physical formats. Citing Kantar Worldpanel data, 18.4% of 16-24-year-olds bought a disc in 2018, and 16-25-year-olds accounted for 11% of all disc consumption, which was equal to 2017.

BASE said that since news of HMV’s administration broke, there has been a “groundswell” of affection for packaged media on social media and op-ed pieces.

“Personal accounts of outstanding service, recommendations from knowledgeable staff members leading to new favorites in music and film, as well as accidental finds in the store’s extensive catalog highlight the true value of HMV, with experiences that cannot be replicated via online purchasing,” said the group.

 

Barnes & Noble Upbeat Entering Key Winter Retail Period

National bookseller Barnes & Noble Nov. 20 reported second-quarter (ended Oct. 27) operating loss of $1.5 million for its Nook business unit – down 48% from an operating loss of $2.9 million during the previous-year period. Revenue dropped nearly 17% to $21.7 million from $25.9 million last year.

The Nook segment, which includes electronic readers and tablets, in addition to digital content (movies, TV shows, music), continues to a bright spot for Barnes & Noble. The last-standing national bookstore chain continues to grapple with a changing consumer habits underscored by online entertainment and ecommerce.

Even better, legacy retail sales – which include packaged media – improved with operating loss of $26.7 million compared to an operating loss of $49.43 million last year. Revenue dipped about 2% to $753.2 million.

Chairman of the board Len Riggio, who took over control of the company following the firing of CEO Demos Parneros for alleged inappropriate behavior in the workplace, said the same-store sales decline of 1.4% was the best result since Q4 in 2016.

“While we cannot predict the outcome of the holiday, we are putting our full effort behind our holiday plans, including launching a new ad campaign,” Riggio said in a statement. “We expect this to lead to continued sales improvement during the holiday period.”