Best Buy Q4 Same-Store Entertainment Sales Fall 9.5%

Best Buy March 3 reported that same-store domestic fourth-quarter (ended Jan. 22) entertainment revenue dropped 9.5% compared to an increase of 31.4% in the previous-year period.

The segment, which includes products such as DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software, saw revenue of $1.2 billion compared with revenue of $1.38 billion the previous year.

International entertainment revenue sales dropped 6.9%, compared with a 59.5% increase in the prior-year period.

Notably, while online revenue comprised 40% of domestic revenue, e-commerce actually declined 11.2% in the quarter compared with an increase of 89.3% a year earlier. For the fiscal year, e-commerce dropped 12% versus an increase of 144.4% in the prior-year period, underscoring the return of consumers in retail stores.

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Apple Services Q4 Revenue Up 26% to $18.3 Billion

Apple Oct. 28 reported fourth-quarter (ended Sept. 25) services revenue of $18.3 billion, up 26% from revenue of $14.5 billion during the previous-year period. Services revenue includes sales of movies and TV shows on iTunes, the App Store, Mac App Store, Apple Music, Apple Pay, Apple TV+, Apple Arcade and Apple News+, among others.

For the fiscal year, services revenue spiked 27% to $68.4 billion, from $53.7 billion a year ago. Quarterly margins in the segment remained strong, generating almost 70% in gross income in the quarter, up slightly from 67% in the previous-year quarter.

Meanwhile, iPhone sales skyrocketed 47% to $38.8 billion, compared with $26.4 billion in the previous-year quarter — underscoring the appeal of the new iPhone 13 model. For the fiscal year, iPhone revenue reached $192 billion, up more than 39% from $137.7 billion a year ago.

Mac sales increased 2% to $9.2 billion, from $9 billion a year ago. Apple iPad revenue increased 21.5% to $8.2 billion, from $6.8 billion. Wearables and home accessories revenue rose 11.5% to $8.7 billion, from $7.8 billion.

The record September revenue of $83.4 billion, up 29% year-over-year, prompted CEO Tim Cook to look beyond the finances, focusing on Apple’s loftier goals.

“We are infusing our values into everything we make — moving closer to our 2030 goal of being carbon neutral up and down our supply chain and across the lifecycle of our products, and ever advancing our mission to build a more equitable future,” Cook said in a statement.

Lionsgate Posts Record $780 Million FY 2021 Movie, TV Catalog Revenue

Movie theaters may be slowly re-opening, but that didn’t stop Lionsgate from generating a record $780 million in catalog movie and TV show revenue across multiple distribution channels, including home entertainment, for fiscal-year 2021 (ended March 31). Lionsgate generated about $700 million in catalog revenue in FY 2020.

In addition to packaged-media and digital retail and rental, Lionsgate catalog content buyers include subscription streaming video services and, most recently, new AVOD players The Roku Channel and IMDb TV, among others.

Motion Picture segment revenue in the quarter declined about 25% to $292.4 million, compared with $393.3 million in the prior-year quarter, and segment profit declined almost 40% to $61.6 million, compared with $101.2 million a year earlier. The declines were attributable to continued theater closures due to the COVID-19 global pandemic and wide theatrical releases in the prior year, partially offset by higher library revenue.

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The Santa Monica, Calif.-based studio distributor said global subscribers for its Starz-based digital platform increased to 29.5 million, including StarzPlay Arabia, a non-consolidated equity method investee, and excluding Pantaya (which Lionsgate sold its stake in March), driven by strong domestic and international streaming subscriber growth. Global streaming subs increased 69% year-over-year to 16.7 million, exceeding the company’s previous forecast of 13 to 15 million subs.

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“Fiscal 2021 was a year of strong domestic and international subscriber growth at Starz, great television series, record library sales and a successful pivot to alternative release strategies for many of our films,” CEO Jon Feltheimer said in a statement.

Lionsgate said the television production segment posted revenue of $210.7 million, compared with $258.1 million in the prior year quarter, and segment profit of $9.1 million, compared with $21.5 million in the prior year quarter, due to the timing of series deliveries and library revenue and profits in the prior year quarter.

Total studio revenue in the fiscal year topped $3.27 billion, down 16% from revenue of $3.89 billion in fiscal 2020. Fourth-quarter revenue declined less than 8% to $876.4 million, from $944 million in the previous-year period.

Lionsgate narrowed Q4 and full-year net losses to $41.8 million and $34.5 million, respectively. That compared with net losses of $48.9 million and $206.4 million in FY 2020.

Netflix Adds 8.8 Million Q4 Global Subs Despite Missing U.S. Projection

As expected, the surge in new SVOD services from Disney and Apple is having an impact on Netflix.

The SVOD pioneer Jan. 21 announced it added 8.8 million subscribers in the fourth quarter, ended Dec. 31, 2019. That topped company and Wall Street estimates of 7.6 million subs. The streamer added 420,000 subs in the U.S., which was down from 600,000 projected. It added 130,000 subs in Canada.

Netflix added 1.75 million subs in the U.S. and Canada in the previous-year period. The service ended Q4 with 167 million subscribers worldwide, including topping 100 million outside the U.S. That is up more than 20% from the previous-year period. The service finished with 67 million subs in North America.

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CEO Reed Hastings and CFO Spencer Neumann, in a shareholder letter, attributed the North American decline to domestic price hikes and new competing services such as Disney+ and Apple TV+.

“Our low membership growth in [U.S. and Canada] is probably due to our recent price changes and to U.S. competitive launches,” Hastings and Neumann wrote. “We have seen more muted impact from competitive launches outside the U.S. (NL, CA, AU). As always, we are working hard to improve our service to combat these factors and push net adds higher over time.”

For the current first quarter (ending March 31), Netflix is forecasting global paid net adds of 7 million, which is down 2.6 million from the 9.6 million added in Q1 in 2019, which was an all-time company high in quarterly paid net adds.

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Hastings and Neumann cited “lightly elevated churn levels” in the current quarter, with expectations for more “balanced” paid net adds across Q1 and Q2 this year — on par with 2018 rather than 2019.

“This is due in part to the timing of last year’s price changes and a strong upcoming Q2 content slate, where we’ll have some of our bigger titles like ​’La Casa De Papel’ (a.k.a. ​’Money Heist’) launching.”

On the content front, Netflix said the December 2019 debut of “The Witcher” is tracking to be ​one of the streamer’s biggest first-season TV series ever. Through its first four weeks of release, 76 million subscriber households have viewed parts of the action-fantasy, starring Henry Cavill. Netflix counts any viewer watching at least two minutes of a program.

“As a testament to how our hit content can penetrate the global zeitgeist and influence popular culture, the show’s launch drove up sales of ​’The Witcher’​ ​books and ​games​ around the world, and spawned a viral musical ​hit​,” Hastings and Neumann wrote.

The executives said major SVOD competition is still in its infancy as rival media companies transition from linear TV to over-the-top video distribution.

“We have a big head start in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years — pleasing members,” they wrote. “We believe if we do that well, Netflix will continue to prosper.”

On the fiscal front, the service ballooned net income to $587 million on revenue of $5.46 billion, compared to net income of $133 million and revenue of $4.18 billion in the previous-year period.

For the fiscal year, Netflix reported profit of $1.86 billion on record revenue of $20.15 billion, compared to profit of $1.21 billion on revenue of $15.8 billion in 2018.

At the same time, Netflix’s liabilities and long-term debt continue to escalate. Total current liabilities increased to $6.85 billion from $6.48 billion, while long-term debt surpassed $14.75 billion from $10.36 billion. Overall fiscal liabilities now exceed $26.4 billion from $20.73 billion at the end of 2018.

Indeed, in Q4, net cash used in operating activities increased to a negative $1.5 billion compared to negative $1.2 billion in the prior-year period. Free cash flow (FCF) in Q4 — the cash left over after a company pays for its operating expenses and capital expenditures — totaled negative $1.7 billion vs. (-$1.3 billion) in Q4’18.

For the full year, FCF was a record negative $3.3 2 billion, which Netflix believes is “the peak in our annual FCF deficit.”