Record Online Sales Drive 2019 Winter Holiday Retail Results Up 3.4%

With a six-days-shorter winter holiday period this year compared to 2018, retailers pushed earlier discount pricing in stores and online, which resulted in record e-commerce sales and a 3.4% increase in overall consumer spending (excluding autos), according to new data from Mastercard.

Online transactions increased nearly 19% from a year ago and accounted for nearly 15% of overall sales for the period from Nov. 1 through Dec. 24.

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“E-commerce sales hit a record high this year with more people doing their holiday shopping online,” Steve Sadove, senior advisor for Mastercard and former CEO of Saks, said in a statement. “Due to a later-than-usual Thanksgiving holiday, we saw retailers offering omnichannel sales earlier in the season, meeting consumers’ demand for the best deals across all channels and devices.”

Department stores saw overall sales decline 1.8% and online sales growth of 6.9%, emphasizing the importance of omnichannel offerings. Electronics and appliances were up 4.6%, while the home furniture and furnishings category grew 1.3%.

E-commerce continues to drive retail, accounting for 15.4% of Black Friday (Nov. 28) and 24.5% of Cyber Monday (Dec. 1) consumer spending, respectively.

Top online retailers included Walmart, Amazon and Target — all drivers of packaged-media (including DVD/Blu-ray Disc) sales.

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Best Buy Q3 Entertainment Revenue Plummets

Best Buy can’t wait for the winter holiday retail season.

The nation’s largest consumer electronics retailer Nov. 26 said third-quarter (ended Nov. 2) domestic entertainment revenue dropped nearly 21% in same-store sales compared to a gain of 12.4% during the previous-year period. International entertainment sales fell 31% compared to a gain of 10.8% last year.

The entertainment segment includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

Entertainment represented 5%, or $448 million of domestic revenue, compared to 6%, or $525 million during the previous-year period.

International revenue represented 5%, or $40 million of same-store sales, compared to 7%, or $58.3 million last year.

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Domestic revenue increased to $8.96 billion, up 2.4%versus last year. The increase was driven by comparable sales growth of 2% and revenue from GreatCall, which was acquired in Q3 last year, partially offset by the loss of revenue from store closures in the past year.

The largest comparable sales growth drivers were appliances, headphones, tablets, services and computing. These drivers were partially offset by declines in the gaming and home theater categories.

“We are excited about our holiday plans,” CEO Corie Barry said in a statement. “Customers ordering online will get free next-day delivery on thousands of items all season long with no membership or minimum purchase required. They can also choose to pick up their products in a store within an hour of placing their order.”

Indeed, domestic online revenue increased 15% to $1.4 billion due to higher average order values. As a percentage of total domestic revenue, online revenue increased 15.6% versus 13.8% last year.

As the holidays loom, Best Buy is offering free next-day delivery on myriad items, excluding bigger and heavier items such as big-screen TVs and refrigerators.

With the service “Store Pickup,” customers can get their order ready within an hour at their local Best Buy. Best Buy reports 40% of online sales are picked up in stores.

‘Frozen 2’ Theatrical Success Bodes Well for Home Entertainment

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

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

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

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

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

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

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

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

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.”