Bob Chapek: Pandemic Brought Flexibility to Disney Content Distribution

As Hollywood puts the pandemic in the rear-view mirror, Disney, like other studios, has revisited its distribution strategy of original movies and TV shows. Speaking May 24 on the virtual JPMorgan 49th Annual Global Technology, Media and Communications Conference, CEO Bob Chapek said the pandemic put renewed focus on how consumers want to access content, rather than traditional norms revolving around the 90-day theatrical window.

“One of the things we learned is flexibility is good because there’s two dynamics going on: One is people’s willingness to return to theaters and theaters’ ability to return in a meaningful way,” Chapek said. “And then the second is the change in consumer behavior that’s happening naturally, with COVID probably acting as a bit of a catalyst, but was going to happen anyway.”

Disney is returning to the movie theater in late summer with exclusive (and curtailed) 45-day windows for 20th Century Studios’ Free Guy and Marvel Studios’ Shang-Chi and the Legend of the Ten Rings. Free Guy launches on Aug. 13 and Shang-Chi on Sept. 3. The films mark Disney’s first exclusive theatrical releases since the Aug. 28 release of The New Mutants.

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Other theatrical titles Cruella (May 28), Black Widow (July 9) and Jungle Cruise (July 30) will debut in cineplexes and on $29.99 Premier Access via Disney+ simultaneously.

“We’re trying to offer consumers more choice as they gain confidence in how they want to go ahead and return to theaters,” Chapek said, adding that consumer return to the box office has been stronger in select international markets.

“We’re seeing some hesitancy to return [to movie theaters] in a way that would look anything like normal back in 2019,” he said. “And as such, during this sort of interim period, it’s really nice to be able to give consumers some flexibility.”

Marvel Studios’ Black Widow

When asked why a theatrical tentpole title like Black Widow would get concurrent purchase access on Disney+, Chapek said the Marvel Universe movie, starring Scarlett Johansson, had been delayed twice — and a third delay was not an option.

“At the same time, we always knew that there was a risk that exhibition wasn’t going to be fully developed or that consumers wouldn’t want to go back and sit in the theater,” he said. “We realized we had to sort of ‘prime the pump’ and give theatrical exhibition a chance, but we couldn’t put all our eggs in the exhibition basket, because we knew that in the weeks leading up to the decision, the domestic market was not coming back and is still fairly weak. We’re really confident we made the right call there.”

Pixar Animation’s Luca

The June 18 release of Pixar Animation’s Luca direct to Disney+ without a $29.99 purchase fee, and bypassing theatrical surprised some observers. Chapek said the decision revolved around keeping Disney’s evolving distribution channels stocked.

“We’ve increased our investment in creative content to ensure that all channels have a full complement of offerings to sort of keep everybody happy,” he said. “We want to make sure, given the importance of Disney+ in the marketplace and our shareholders, that we keep feeding that machine.”

Indeed, Disney’s Christmas Day release of Pixar’s Soul was topped only by Warner’s same-day release of Wonder Woman 1984 on HBO Max.

“We believe that Luca will get a lot of eyeballs,” Chapek said.

Disney’s Star+ to Bow Aug. 31 in Latin America

Star+ will launch in Latin America on Aug. 31 as a standalone streaming service that will offer a full slate of ESPN content, including live events from the top leagues and sports shows; series, animated comedies, movies and documentaries; and regional and international original Star productions, including exclusive content, Disney Media & Entertainment Distribution announced May 14.

“Star+ will offer a never-before-seen customized experience and will expand our connection with the different audiences,” Diego Lerner, president of The Walt Disney Company Latin America, said in a statement. The strength of the content, that will include all of ESPN, makes Star+ a unique and relevant offering with its own identity that will become a recognized digital service, independent from Disney+. Having said that, its arrival will represent a service that is complementary to Disney+ and it will consolidate The Walt Disney Company’s presence in Latin America’s streaming market. With Star+, we will also reinforce our constant commitment of over 20 years to develop, produce, and offer local content that represents the taste of consumers of the whole region, producing original content with well-known local production companies and talents, to tell stories that connect with Latin American audiences. We will do so through different genres, addressing original fiction stories, and social and historic themes that are relevant and of general interest.”

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The service will be available on Internet-connected devices and users can subscribe separately or as part of a bundled offer with Disney+.

The service includes exclusive premieres of general entertainment TV series and movies from The Walt Disney Company’s content studios, including Disney Television Studios, FX, 20th Century Studios, STAR Original Productions, National Geographic Original Productions and more, and the streaming service for live sports from ESPN. From dramas to comedies (including all seasons of “The Simpsons”) and thrillers for adults, Star+ also features exclusive original programming from the Star general entertainment brand, along with a collection of regional original productions from Latin America.

Disney, NFL and ESPN Reach Long-Term Agreement

The Walt Disney Company, ESPN and the National Football League have reached a long-term agreement that will result in ABC/ESPN joining the Super Bowl rotation, having additional playoff action, exclusive national ESPN+ matchups over the course of the agreement, and more regular-season contests including “Monday Night Football.”

The deal will also result in enhanced game quality and new schedule flexibility, according to a Disney press release.

The 10-year agreement begins with the 2023 season.

“This landmark agreement guarantees that ESPN’s passionate fan base will continue to have access to the best the NFL has to offer,” Disney CEO Bob Chapek said in a statement. “Bringing all the considerable and unique capabilities of The Walt Disney Company and ESPN to the table opens up so many opportunities across our industry-leading direct-to-consumer, broadcast, cable, linear, social and digital outlets. Special thanks to Roger Goodell and the NFL owners for continuing to embrace new ways to appeal to their fans, especially through increasingly important platforms like ESPN+.”

“When ESPN and the NFL work best together, the results are transformational for sports fans and the industry,” Jimmy Pitaro, chairman, ESPN and sports content, said in a statement. “Some of the most remarkable collaborative examples have occurred in the past 12 months and have demonstrated the extraordinary range of The Walt Disney Company that is fundamental to this agreement. There are so many exciting new components, including Super Bowls and added playoff games, new end-of-season games with playoff implications, exclusive streaming games on ESPN+, scheduling flexibility and enhancements, and much more. It’s a wide-ranging agreement unlike any we’ve reached with the NFL, and we couldn’t be more energized about what the future holds.”

“We are thrilled to extend and expand our partnership with Disney far into the future, as ESPN will continue to host cable’s most-watched series, ‘Monday Night Football,’ and ABC is returning as a Super Bowl broadcaster,” said NFL Commissioner Roger Goodell. “We look forward to working with Disney as they use new platforms, including ESPN+, in innovative ways to reach even more NFL fans.”

ABC/ESPN will carry two Super Bowls (2026, 2030 seasons) as part of a rotation between the NFL’s media partners, marking the first time that an ESPN-NFL agreement includes such Super Bowl rights, according to the press release. ABC last televised the Super Bowl in February 2006 (2005 NFL season). Also, ESPN will present more playoff action, adding an annual divisional round game to its schedule, which will continue to include a wild-card matchup.

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ESPN’s increased regular-season package will include one annual exclusive national game on ESPN+. The game will take place internationally and will be aired live in the Sunday morning Eastern time zone window. Additionally, this agreement allows ESPN the opportunity to simulcast all ESPN/ABC game telecasts on ESPN+.

Also included is rights for the return of ESPN+ highlights show “NFL PrimeTime” each week on the streaming platform.

ESPN will increase its regular-season schedule by 35% — six more games per year (from 17 to 23). It will include an ESPN game on Monday nights (including three weeks with a separate game on ABC), a Saturday doubleheader the season’s final week and the Sunday morning game on ESPN+.

The added two Saturday games will take place during the final week of the regular season and will showcase matchups with playoff implications. Both of those games will be simulcast on ABC and ESPN.

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The agreement includes new elements that will enhance the caliber of the “Monday Night Football” slate, according to the press release. First, the schedule will be more flexible than in years past with the ability for the NFL to swap “a more meaningful” game into the “Monday Night Football” slot with 12 days’ notice from Week 12 on, according to the press release. Additionally, top teams will appear more often, as a result of the agreement which provides ESPN the ability to showcase any four teams at least twice, “leading to even more compelling games,” according to Disney.

With comprehensive NFL highlights rights, ESPN will continue to offer and/or develop NFL-branded programming, pre- and post-game shows, news, analysis and highlights studio shows, storytelling vehicles, digital and social content and more. The deal also includes data rights (e.g. – NFL’s Next Gen stats), according to Disney.

In addition, ESPN has once again secured rights to the annual Pro Bowl. Other key elements include opportunities for alternate telecasts, extending and expanding ESPN’s international rights (including areas in Latin America, the Caribbean, Africa, Oceania, India), ESPN Deportes and more.

ESPN has also obtained rights to NFL Drafts, an event that has been an ESPN fixture since 1980, as part of the agreement.

The 2021 season will be the last in ESPN’s current arrangement with the NFL. ESPN and the NFL have reached a bridge agreement for 2022 — the year between when the previous agreement expires and the new 10-year extension begins. For both the 2021 and 2022 seasons, all the foundational components from the agreement expiring in 2021 will be included (e.g. – weekly “Monday Night Football” games), in addition to select elements from the new 10-year agreement. For example, in 2021, ESPN will be adding the two Saturday games with playoff implications on the last weekend of the regular season. For the 2022 bridge year, ESPN will showcase the two Saturday games with playoff implications on the last weekend of the season, a Sunday morning ESPN+ game and one ABC “Monday Night Football” broadcast on a week there is also an ESPN Monday Night Football telecast.

First Anniversary of Disney+ Finds Service’s Parent Grappling With Pandemic Fallout

Disney’s high-profile subscription streaming service Disney+ launched a year ago today (Nov. 12). Disney is set to report fourth-quarter financial results at the market close. With much of its businesses such as amusement parks, cruise ships, movie studio and television operations (and ad revenue) either shuttered or operating in limited capacity due to the coronavirus pandemic, streaming video is likely the only positive on what is expected to be a depressed corporate earnings call.

Disney+ had more than 60 million subscribers on the company’s last fiscal call, and CEO Bob Chapek has made it clear over-the-top video is at the core of company  going forward. Indeed, when combining Hulu and ESPN+, Disney’s SVOD subscriber base topped 100 million at the end of the previous quarter.

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The summer rollout of Disney+ Hotstar in India, which is operated by Disney subsidiary Star India, features two paid tiers: a VIP plan offering local language programs and live sports; and a Premium plan showcasing international (i.e. U.S.) movies and TV series from Disney, Showtime and HBO, among others. The service had nearly nearly 9 million subscribers in the last quarter.

“Disney+ has been the one shining star in the Disney empire in 2020,” Trip Miller, a managing partner at Gullane Capital Partners, told CNN Business. “The advent of the Disney+ platform could not have come at a better time.”

Yet, the SVOD platform is not projected to be profitable until 2024. The service could end up losing $2 billion in the just-concluded fiscal year — and even more in 2021.

“I think Disney+, and the rest of their direct-to-consumer assets like Hulu and ESPN+, are the most important units in the eyes of investors,” said analyst Michael Nathanson. “It’s a source of long-term growth and helps offset [pay-TV] cord-cutting and shifts in audience behavior.”

Nathanson, who believes ad-supported VOD is the streaming story in 2020, says Disney’s OTT platforms have the ability to expand with AVOD offerings depending on marketing conditions. Disney plans to launch an ad-supported international OTT service under the Star brand in 2021.

Indeed, growth of free ad-supported streaming TV (“FAST”) is exploding through services such as ViacomCBS’s Pluto TV, Comcast’s Xumo (and Peacock), Fox Corp.’s Tubi, The Roku Channel and IMDb TV, among others. And Disney doesn’t want to be left behind.

“They are really all in [streaming] now,” Nathanson said. “Disney has built a [OTT] lifeboat that gets them through the current storm in traditional media.”

Disney to Furlough Non-Essential Employees Beginning April 19

In the wake of the coronavirus pandemic, The Walt Disney Co. will start furloughing non-essential U.S. employees April 19, the company announced.

Disney committed to full pay and benefits for all employees through April 18.

“With no clear indication of when we can restart our businesses, we’re forced to make the difficult decision to take the next step and furlough employees whose jobs aren’t necessary at this time,” a Disney representative said in a statement.

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Furloughed workers will remain Disney employees through the furlough period and will receive full healthcare benefits with Disney will paying the cost of premiums.

Disney did not report the number of employees that would be affected.

Bob Chapek Named Disney CEO

Former home entertainment executive Bob Chapek has been named CEO of The Walt Disney Company.

Chapek most recently served as chairman of Disney Parks, Experiences and Products.

Former CEO Robert A. Iger assumes the role of executive chairman and will direct the company’s creative endeavors, while leading the board “and providing the full benefit of his experience, leadership and guidance to ensure a smooth and successful transition through the end of his contract on Dec. 31, 2021,” according to a Disney press release.

(L-R): Bob Iger and Bob Chapek at the opening of Star Wars: Galaxy’s Edge at Disneyland. (Photo by Business Wire)

In Chapek’s new role as CEO, he will directly oversee all the company’s business segments and corporate functions and will report to executive chairman Iger and the board of directors. He will be appointed to the board at a later date. A new head of Disney Parks, Experiences and Products will be named at a future time.

“With the successful launch of Disney’s direct-to-consumer businesses and the integration of 21st Century Fox well underway, I believe this is the optimal time to transition to a new CEO,” Iger said in a statement. “I have the utmost confidence in Bob and look forward to working closely with him over the next 22 months as he assumes this new role and delves deeper into Disney’s multifaceted global businesses and operations, while I continue to focus on the company’s creative endeavors.”

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“I am incredibly honored and humbled to assume the role of CEO of what I truly believe is the greatest company in the world, and to lead our exceptionally talented and dedicated cast members and employees,” Chapek said in a statement. “Bob Iger has built Disney into the most admired and successful media and entertainment company, and I have been lucky to enjoy a front-row seat as a member of his leadership team. I share his commitment to creative excellence, technological innovation and international expansion, and I will continue to embrace these same strategic pillars going forward. Everything we have achieved thus far serves as a solid foundation for further creative storytelling, bold innovation and thoughtful risk-taking.”

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Chapek served as Chairman of Disney Parks, Experiences and Products since the segment’s creation in 2018, and prior to that was chairman of Walt Disney Parks and Resorts since 2015.

Bob Chapek (right) with fellow home entertainment division presidents Mike Dunn (20th Century Fox), David Bishop (Sony Pictures) and Steve Beeks (Lionsgate) at the 2007 CES, showcasing Blu-ray Disc.

From 2011 to 2015, Chapek was President of the former Disney Consumer Products segment. Prior to that, he served as president of distribution for The Walt Disney Studios and was responsible for overseeing the studios’ overall content distribution strategy across multiple platforms including theatrical exhibition, home entertainment, pay TV, digital entertainment and new media.

He also served as president of Walt Disney Studios Home Entertainment, where he spearheaded the successful “vault strategy” for the company’s iconic animated classics. They would be released on home video for a limited time before being returned to the “vault,” a practice that led to spikes in demand — and a series of home video sales records.

Chapek also played a key role in transitioning home entertainment from DVD to Blu-ray Disc, characterizing the latter as an “evolutionary” format — a prediction that has come true, as Blu-ray Disc is now the conduit for the latest technological advance in home viewing, 4K Ultra HD.

Speaking on an investor call shortly after the transition announcement, Iger said that even though he has nearly two years left on his contract, the change was being made now because he felt he needed to start focusing on the company’s creative strategy in the wake of the acquisition of the 20th Century Fox studio assets and the launch of the Disney+ streaming service.

“With the asset base in place and with our strategy essentially deployed, I decided I should be spending as much time as possible on the creative side of our business,” Iger said. “That becomes the biggest priority. Getting everything right creatively would be my number one goal. The best way to do that was to turn over day to day management of the company to Bob [Chapek] and free me up to focus on the creative side.”

 

Kelly Campbell Promoted to President of Hulu

Hulu chief marketing officer Kelly Campbell is being promoted to president of Disney-owned SVOD service Hulu.

In this role, Campbell will manage Hulu’s suite of on demand and live streaming businesses. She will work closely with Disney’s television and film studios on Hulu’s original content, and with other Direct-to-Consumer and International leaders on the integration of key aspects of Hulu’s operations across the segment, according to a Disney press release.

Her promotion follows the departure of Hulu CEO Randy Freer earlier this month.

“Kelly is an immensely talented leader who has been a driving force in defining Hulu’s brand vision and strategy,” said chairman of Disney’s DTCI segment Kevin Mayer, to whom Campbell will report, in a statement. “She has built a tremendous multi-talented team and developed strategic campaigns that helped double Hulu’s subscriber base. Our senior leadership team is excited to welcome her aboard and can’t wait to work together to further grow Hulu’s footprint in the US and beyond.”

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“This is a time of extraordinary growth and transformation for Hulu, and I am incredibly energized by the opportunity ahead as we enter into this next chapter,” said Campbell in a statement. “The Hulu team is among the brightest, most technologically and creatively audacious in the industry, and I know we are going to do great things as part of the pioneering and equally bold team Kevin has built at DTCI.”

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As Hulu’s chief marketing officer, Campbell was responsible for subscriber growth; brand, content and business-to-business marketing; creative development; research and insights; and viewer experience. Prior to joining Hulu, she spent 12 years at Google in various leadership and marketing roles across the Google Ads and Google Cloud businesses, including a year in Google Japan building the online sales and operations functions. She began her career in finance as an investment banking analyst at JPMorgan Chase.

20th Century Fox Home Entertainment: A History of Distinction

With the March 20 closure of Walt Disney Co.’s acquisition of 20th Century Fox, much has been written about the storied history of the celebrated film studio, responsible for nearly a century’s worth of big-screen favorites, from Shirley Temple musicals to Star Wars, from The Sound of Music to Avatar.

And yet hardly anything has been said about the legacy of the studio’s home video division, which in many respects is the birthplace of home entertainment.

“It was the first,” recalls Bill Mechanic, the veteran film producer — and chairman and CEO of Pandemonium Films — who later ran 20th Century Fox studios.

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More than 40 years ago, in 1978, entrepreneur Andre Blay licensed 50 films from 20th Century Fox, including The Sound of Music and Patton, and released them on his own Magnetic Video banner. The occasion marked the first time movies were available for home viewing on demand, a key tenet of home entertainment. The films were sold through an ad in the back of TV Guide.

A year later, Blay — who died last August at the age of 81 — sold Magnetic Video to 20th Century Fox and became the first president and CEO of the industry’s very first studio home video division.

“Fox was the first studio that instead of fighting the videocassette, recognized that it was another market for its product,” says former Warner Home Video president Warren Lieberfarb, the celebrated “father of DVD” who at the time was a marketing executive at Lorimar Productions, the largest independent television production company. “Fox was a pathfinder that saw the videocassette as a new way for people to watch movies at home.”

Beginnings

In those early days of home video, the business was split apart by a format war between Sony’s Betamax and JVC’s Video Home System, or VHS, cassettes. Meanwhile, studios like Fox that were putting movies out on cassette were looking for consumer sales but weren’t counting on enterprising retailers to buy them and then rent them out repeatedly to the public, pocketing the proceeds.

In early 1980, 20th Century Fox launched a pilot program with the Plitt Theater chain directly, and United Artists Theaters through a distributor, to sell videocassettes in select theater lobbies.

But Fox, like the other studios, soon found that consumers didn’t necessarily want to buy movies — particularly when they could rent them for a fraction of the cost. The concept of being able to bring movies home and watch them, at will, was a novelty; consumers wanted to watch as many movies as they could as cheaply as possible, and the burgeoning rental trade allowed them to do precisely that.

The format war was effectively resolved when VHS sales began to mushroom, primarily because VHS was an open format while Betamax was a proprietary one. The proliferation of video rental stores frustrated the studios and they went to court, seeking injunctions against retailers from renting their movies. But the First Sale Doctrine, which holds that a copyright owner’s exclusive right to distribute a particular copy ends with the “first sale” and the new owner can then distribute it as he or she pleases, was ultimately upheld — and the wave of video rental stores grew into a veritable tsunami.

In March 1982, Fox changed the name of its home video enterprise to 20th Century Fox Home Video. By then Blay had been ousted and veteran Fox executive Steve Roberts — who had struck the initial licensing deal with Magnetic — was placed in charge in his capacity as president and CEO of Twentieth Century Fox Telecommunications. Roberts, who died in May 2017 at the age of 78, was a native of Manhattan who began his career in 1958 at Columbia. He later moved to the international sales division of Fox and ultimately became president of two Fox units: president of the International Theaters Division and Licensing Corp., and then president of Fox’s Telecommunications Division and Chairman of Fox Video. In 1996, Roberts was inducted into the Video Hall of Fame.

Roberts in the early 1980s directed Fox’s rapid and early expansion into home video and pay-per-view television. In June 1982, just three months after the Magnetic Video name was dropped, Roberts oversaw the merger between Fox’s video operations and CBS Video Enterprises, resulting in the creation of CBS Fox Video. He served as president of the new venture until January 1983, when the unit got a new president, Larry Hilford, a former Columbia Pictures executive. Hilford was a vocal critic of the rental business, but when it became clear the studios had no say in the matter, he tried to make the best of the situation.

To maximize revenue, Hilford and his fellow studio home video chiefs instituted a steady progression of cassette price hikes, from $60 to $65 to as high as $100.

See a photographic retrospective of 20th Century Fox Home Entertainment

At the same time, they doubled down on their quest to get consumers to buy rather than rent their movies by wooing established retail chains with the promise of direct sales. In July 1985, CBS Fox Video signed the industry’s first direct deals with Toys R Us and Child World, prompting Walt Disney Home Video to immediately announce its own plans to go direct with Toys R Us.

Meanwhile, the video rental business soared throughout the 1980s and early 1990s. At one point there were more than 50,000 separate video rental stores, most of them independents, generating billions of dollars from consumer rentals. Many of them attended the annual Video Software Dealers Association (VSDA) conventions, mostly in Las Vegas each July, where studios spent hundreds of thousands of dollars wining and dining upwards of 15,000 retailers and treating them to elaborate booths on the show floor and even more extravagant parties each night.

Over time, the indies were gobbled up by fast-growing chains such as Erol’s and National, and ultimately an outfit out of Texas called Blockbuster Video would conquer much of the country with its ubiquitous blue-and-yellow motif and “Make It a Blockbuster Night” tagline.

As the 1980s came to an end, studios began to experiment with lower cassette prices on hit movies geared toward families and kids. Banking on the repeat viewing factor, they hoped enough consumers would buy these movies to compensate for the lower unit cost, which drove down revenue from sales to rental dealers.

In June 1991, Fox announced plans to release Home Alone at a suggested list price of $24.98, a new low. Then VP of marketing Bruce Pfander said the studio expected to sell more than 10 million copies.

By then, the CBS-Fox joint venture had taken a back seat and 20th Century Fox began distributing its movies on videocassette under the FoxVideo banner. The newly created division also had a new president, Bob DeLellis, who had joined CBS Fox in 1984 and risen to group VP and, ultimately, in 1991, president.

DeLellis got into the home video business when it was hot — red hot — after selling air-conditioners with another future home video executive, Len White. His bombastic personality and tendency to boast to the trade press whenever a rental title set a new advance-order, or “prebook,” record, seemed to fit in well with the Wild West atmosphere of the video industry in the early 1990s.

“He was doing great numbers,” recalls Peter Balner, who in the 1980s ran Palmer Video, a Union, N.J.-based video chain he sold to West Coast Entertainment Corp. in 1990.

“They were putting out a lot of great movies, and selling the larger ones in record numbers,” he recalls. “We had a great relationship with them.” Indeed, years later, after they had both exited the home video business, Balner and DeLellis would team up on Quintessentials, a retailer of home leisure equipment such as pool tables, shuffleboard courts and jukeboxes.

The Bill Mechanic Era

Three years after DeLellis was named head of FoxVideo, he found someone looking over his shoulder. In 1993 Bill Mechanic was named the first president and COO, and then chairman and CEO, of Fox Filmed Entertainment. Mechanic had spent the previous nine years running home video, among other divisions, for Walt Disney Studios. He aggressively drove Disney into sellthrough, and was the architect of the studio’s celebrated, and successful, moratorium strategy, in which animated classics were available on videocassette for only a short time before they were returned to “the vault.” This sense of urgency led to impressive sales. A high-water mark under Mechanic was set in October 1993 when Aladdin in its first week of availability sold more than 10.6 million videocassettes. By the end of the year, Disney had sold more than 21 million VHS cassettes.

“I came to fix all of Fox,” Mechanic recalls. “It was the weakest of the studios, and I began by setting up multiple creative divisions. I also set out to bring FoxVideo, which I thought was a solid company, but not extraordinary, into what I saw as the modern age — doing not just what everyone else was doing — rental — but taking them into sellthrough.”

Mechanic initially let DeLellis run the home video show. He even promoted him, elevating DeLellis in May 1995 to domestic president of 20th Century Fox Home Entertainment, a newly created distribution entity that would handle sales and inventory management for FoxVideo, three other labels and a pair of new media outfits. The new business unit “leaves us open to any kind of shrinkwrapped product,” DeLellis told Billboard at the time. “We felt the umbrella was necessary to take advantage of studio resources.”

Over time, however, Mechanic made his presence known. “He couldn’t help himself,” said one longtime industry observer. “He had built Disney into the most successful home video studio of all time, and he felt he knew all the tricks.”

Disney had a library of animated classics, which were relatively easy to sell because they were aimed at children, and kids tend to watch the same film or show over and over again. Fox didn’t have nearly as many cartoons as Disney, but Mechanic still saw a sellthrough business just waiting to happen, with the right films at the right price.

“It was the same as when I first came to Disney — nobody wanted to sell cassettes because there was no business,” he recalls. “Video stores didn’t want to sell, and to reach the big retailers like Walmart and Kmart you had to go through third-party wholesalers, known as ‘rackjobbers.’ So it was impossible to build a business until Disney went around the rackjobbers and set up direct distribution deals with retailers, from mass merchants to grocery stores and drug stores.”

Shortly after Mechanic’s arrival, Fox issued the Robin Williams comedy Mrs. Doubtfire at a low sellthrough price — and sales far exceeded expectations at about 10 million units, Mechanic recalls.

“From my perspective, I saw my role as letting other people do the work, but I would help guide them, and kind of get to a shared vision,” he recalls. “I would get them to see what’s possible and not be afraid to fail.”

In August 1995 FoxVideo released the three original “Star Wars” movies and, taking a page from the Disney playbook Mechanic had helped write, announced they would be placed on moratorium four months after their release. “This is not a joke,” DeLellis told Billboard at the time. “Star Wars is going off the market forever.” The other two movies in the trilogy, The Empire Strikes Back and Return of the Jedi, would be removed until the fall of 1997, he said. Sales ultimately topped 30 million copies, exceeding expectations.

“Again, people were saying, ‘You can’t sell a 20-year-old movie,’ and, again, people see only what they see — they don’t see what they can’t see,” Mechanic says. “Everybody’s a doubter, and you can’t let the doubters ruin it. You can’t be afraid of failing.”

In 1996 the FoxVideo release of Independence Day became the industry’s bestselling live-action home video release, with an 18 million-unit sales tally.

Also in 1996, Steve Feldstein took over as the division’s first communications chief. Hired by DeLellis, Feldstein had previously worked under Mechanic at Walt Disney Home Video, and in the words of one observer, “spoke Bill fluently.”

DeLellis left Fox Home Entertainment in May 1997 and Mechanic promoted international chief Jeffrey Yapp, a former Pizza Hut and Gallo Winery marketing executive, to lead the division. Yapp lasted only four months, leaving to head up Hollywood Entertainment Corp., at the time the nation’s No. 2 video rental chain behind Blockbuster.

Mechanic turned to Pat Wyatt, head of Twentieth Century Fox Licensing & Merchandising, and appointed her interim president of Fox Home Entertainment in September 1997.

In the meantime, Mechanic had become even more vocal when DVD was launched in March 1997 with an initial batch of movies from Warner Bros. — and a strategic vision to shift home entertainment from rental to purchase through convenience, affordability and higher quality than VHS. Warner Home Video had a vested interest in the format, and its president at the time, Warren Lieberfarb, is in the history books as “the father of DVD.”

But Mechanic was not so quick to chime in. Under his direction, Fox sat out the DVD launch and instead advocated first digital VHS and then Divx, a “watch it and toss it” DVD variant launched in June 1998, more than a year after DVD, by the Circuit City consumer electronics chain.

Asked by a reporter in 1998 when Fox would start issuing movies on DVD, Mechanic quipped, “Ask Warren Lieberfarb.”

Aimed at perpetuating the rental model, which Mechanic believed would generate more revenue for the studio than a single sale of a low-priced DVD, Divx cost consumers about $4.50 for unlimited viewing for a 48-hour period. After that, consumers could pay more to have the viewing time.

But with consumers enamored by DVD’s promise of being able to buy — and own — first-run movies for as little as $20, Divx died a quick death — and Fox and the handful of other studios that supported it ultimately did join the DVD juggernaut.

“Eventually, Bill got on board for the greater good of Fox and News Corp.,” Feldstein recalls. “[News Corp chief] Rupert [Murdoch] was launching Fox News and he wanted carriage in New York City on Time Warner’s cable system, and Fox entering the DVD business played right into it. Once we were in, Bill’s competitive nature took over and he wanted us to win … so we all went for it, big time.”

Lieberfarb says another factor was that Fox wanted a lower dial position on Time Warner cable systems for its family channel, and sought to curry favor with Warner by supporting DVD.

Big Business

In the meantime, Wyatt’s interim role as division president turned into a permanent one. She ended up running Fox Consumer Products, a combined video and licensing unit, although she eventually had to shed licensing as FoxVideo became all-consuming. In the five years that Wyatt ran the division, DVD sales soared and the industry routinely enjoyed double-digit revenue gains. Studios struck up direct sales deals with big national chains such as Best Buy, Target and Walmart, and consumers switched from renting movies for the night for $2 to buying them for $20 or more.

“There was so much DVD money flooding the town it was insane,” Feldstein says. “Potential DVD revenues were a big factor in the greenlight process, and as DVD became the industry cash cow, home entertainment all of a sudden went from the studios’ stepchild to the studios’ ATM.”

Wyatt also reorganized Fox Home Entertainment and reengineered the division into a mighty distribution enterprise, thanks to a unique partnership with replicator Cinram. She also pioneered the use of data mining to drive margins for the division’s retail business partners. Fox was well ahead of the other studios and began to distribute product from other labels, with the fees more than covering the division’s overhead. Fox handled all backroom functions for its distributed labels, and at the same time forged partnerships with the industry’s leading retailers to manage the entire home entertainment category for them and won multiple Vendor of the Year awards. The system Wyatt built gave Fox a significant edge for years to come.

“Coming from a consumer products background, she embraced not only what the business was, but also what it could be,” Mechanic says. “There’s that shared vision again — I have the push, but that’s about it. It wasn’t me doing it, it was Pat.”

While at Fox, Wyatt also pioneered the TV-on-DVD business by releasing whole seasons of “The X-Files,” “The Simpsons” and “24.” Feldstein noted, “These TV on DVD packs established the concept of binge-watching, which is now a given for anyone watching Netflix, Hulu, Prime or whatever.”

Meanwhile, the videocassette rental business was in a state of decline. Blockbuster and other retailers cut “revenue-sharing” deals with the studios so they could bring in more copies of the hits at a lower price and then share the spoils with the studios on the backend, satisfying more customers.

Mechanic left Fox in June 2000, replaced by Jim Gianopulos, who ran the studio until 2017 and now holds the same post at Paramount Pictures.

In December 2002, Wyatt resigned to start an indie film production and financing company specializing in Japanese-style animated programming produced specifically for home viewing. Wyatt’s departure came as Fox was enjoying one of its biggest holiday sales seasons ever, with huge tallies for marquee titles such as Ice Age and Star Wars: Episode II — Attack of the Clones.

Mike Dunn, who as EVP of domestic marketing and sales was one of Wyatt’s top lieutenants, was tapped as her successor. Dunn had joined FoxVideo in 1987 as manager of marketing and steadily progressed up the ranks. In 1995, he was promoted to SVP of international marketing and in 1998 was named SVP and GM for Fox home video operations in Europe. Two years later, he was promoted to EVP of domestic marketing and sales.

“I think Mike Dunn’s leadership set the company on a trajectory that put it in a leadership position, along with Disney and Warner Bros.,” Lieberfarb recalls.

The Glow of DVD

Dunn had it made those first few years running home video for Fox. DVD was the most successful consumer product launch in history, and consumer spending on home entertainment soared, with the industry posting double-digital sales gains, year after year. Aside from new theatricals, TV on DVD became a significant business, with consumers collecting complete seasons, and even series, of their favorite shows — something that due to space constraints simply hadn’t been feasible in the VHS era.

“DVD became a lifestyle,” Feldstein says. “Owning movies may have been a novelty, but DVD turned it into a way of life — it was an impulse purchase, an any-occasion gift, something you collected and treasured and showed off. Just like people used to collect books to tell guests what kind of person they were, now they were doing the same things with movies.”

Accordingly, studios revved up their marketing as well, and Feldstein and Fox were leading the charge. New DVD releases were heralded with creative stunts and elaborate parties. “There were so many new and catalog movies and we made events out of all of them,” Feldstein recalls. “We did The Simpsons on Ice in Bryant Park, turned the Empire State Building yellow and handed out yellow Santa hats that were all over town. For Cast Away, we did a promotion with the Coast Guard where we ‘rescued’ Tom Hanks’ co-star ‘Wilson,’ the volleyball, at sea via Coast Guard helicopter, as part of their water safety awareness campaign that was all over TV through local and national newscasts. And we held a 75th birthday party for Marilyn Monroe at the Playboy Mansion — her diamond birthday — and had De Beers, the ‘Diamond Is Forever’ people, as a sponsor. We teamed with AMC as a media partner and produced an amazing documentary about her last film. At the mansion, I had a flawless 75-carat rock on my hand and four security guys trailing me all night.”

“We had the good fortune of providing PR services to Fox Home Entertainment for over 17 years, and one thing truly stands out — their creative ability to support their titles,” says veteran Hollywood publicist Dean Bender, head of what is now Bender/Helper Impact. “Led by Bruce Pfander, the marketing group at that time was extremely bold in the creation of collateral materials, trailers and launch events. Because of the huge revenue created by the selling of DVDs in those years, marketing budgets were at their highest and Fox was not shy about supporting their titles.”

A Maturing Business — and the Shift Toward Digital

However, by 2005 sales growth had slowed, as the novelty of DVD began to wear off. With the advent of high-definition TVs studios realized they needed a high-definition disc to compete. Unfortunately, by the spring of 2006 it became apparent that two competing formats would come to market — and in the summer of that year they did, with half the major studios behind Blu-ray Disc, the other half behind HD DVD, and one or two choosing to release movies in both formats.

The crucial fourth quarter of 2006 got off to a good start when 20th Century Fox’s X-Men: The Last Stand and Buena Vista’s The Little Mermaid: Platinum Edition generated $80 million in consumer spending in a single day. And despite the format war, Dunn had high hopes for Blu-ray Disc, the format that Fox was betting on.

“We’re seeing tremendous growth in household penetration for high-definition displays and big-screen televisions,” he said at the time. “Given the popularity of purchasing and collecting movies, the next logical step is making those films available in a packaged-media format.”

As 2006 gave way to 2007, however, it became clear that the home entertainment business was not rebounding. As if the format war wasn’t bad enough, disc sales were further hit by the emergence of digital delivery options. Eager to capitalize on the steady increase in bandwidth capacities, Netflix in 2007 augmented its disc-by-mail rental business with the launch of a subscription streaming service, allowing consumers to watch an unlimited number of movies and TV shows over the Internet for less than $10 a month.

And yet 20th Century Fox Home Entertainment had one of its best years ever, buoyed by a new distribution pact with MGM — headed by former Paramount Home Video president Eric Doctorow. The studio rose to No. 2 in the annual market share sweepstakes, behind Warner Bros. — and, notably, ahead of Walt Disney Studios.

In October 2007, 20th Century Fox became the first studio to include a digital copy of a movie on a physical disc. As The Hollywood Reporter noted at the time, “the special-edition DVD of Live Free or Die Hard will come with an electronic copy of the complete movie that can be played on a computer and select portable video players.” Dunn commented at the time, “This may be the killer app, where you have physical media that allows you to have a big-screen experience and at the same time move the file around to other devices and have a great experience there as well.”

Things looked even better in 2008, when the format war finally ended and studio executives hoped the death of HD DVD would give Blu-ray Disc a chance to really catch on with consumers — particularly with the rapid rise of high-definition TVs.

“Consumers are telling us that Blu-ray is the future of home video entertainment,” Dunn told Home Media Magazine. “If you have an HDTV, you can’t maximize your entertainment experience without Blu-ray.”

Also in 2008, Mary Daily joined Dunn’s team as North America marketing chief. Earlier in her career she had worked in Fox’s London office and helped market the release of Titanic and Braveheart outside the United States.

As the year progressed, the expected resurgence in disc sales didn’t materialize. The triumph of Blu-ray Disc as the sole high-definition format didn’t get consumers buying their movie libraries all over again, as some observers had hoped. And then came the Great Recession. Consumer spending, which had continued to inch upward, all of a sudden reversed course and began to decline. And while studio executives and retailers put on a brave face and talked up home entertainment’s resiliency in hard times, it was becoming clear even tougher times lay ahead.

In early 2009 Feldstein left and later that year James Finn was hired as the division’s second PR chief. Finn had been VP of national publicity at Fox Searchlight Pictures for six years; he first joined the studio in October 2000, doing theatrical publicity.

In 2010, 20th Century Fox Home Entertainment scored the year’s top-selling title with Avatar. The film also became the top Blu-ray Disc seller since the format’s launch, with 5 million Blu-ray units sold.

The following year, Fox issued the entire “Star Wars” theatrical catalog — which at the time consisted of six films — on Blu-ray Disc. The nine-disc “Star Wars” saga sold 1 million units its first week in stores, an unprecedented number for a premium-priced box set. First-week sales generated an estimated $84 million in worldwide consumer spending.

In February 2012 Daily was promoted to president of worldwide marketing with the mandate to give a high priority to integrating the digital ownership of films. Accordingly, Fox that year pioneered the early window policy that is now commonplace among all studios, in which the digital version of a hit movie is made available through digital retailers two or three weeks before the physical disc.

Fox launched the concept in September 2012 with the sci-fi thriller Prometheus. The release kicked off the studio’s Digital HD initiative, which allowed consumers to download or stream more than 600 Fox films on connected devices. The titles, which cost less than $15, could be accessed through Amazon, CinemaNow, Google Play, iTunes, PlayStation, Vudu, Xbox Live and YouTube.

The Digital HD name would soon be dropped, however, as the industry was already preparing for the next-generation format with an even clearer, more lifelike picture than HD. Initially dubbed “4K” at the 2012 CES, the new format failed to make much of splash, so a year later it was introduced as Ultra HD, or UHD. This time, people noticed.

It was a busy, and confusing, time — for Fox, and for the home entertainment industry. On the one hand, studios were working to transition consumers from buying discs to buying digital copies of movies, with far better margins and no additional expenses for manufacturing, shipping or returns. Yet at the same time, with the lion’s share of home entertainment revenue still coming from physical discs, and UHD TVs coming onto the market, studios were working with CE companies on a next-generation Blu-ray Disc, initially called UHD Blu-ray, and more formally referred to as 4K Ultra HD Blu-ray.

And in the midst of all this, Netflix, with its inexpensive all-you-can-watch subscription streaming service, “was eating everyone’s lunch,” one observer quipped.

Studios plowed ahead on both fronts: promoting digital movie sales while at the same time laying the groundwork for UHD Blu-ray.

In December 2013, Dunn acknowledged the growing importance of building a digital business, which he said was fueled by the rapid rise in popularity of tablets, smart phones and other mobile devices. “We are in a renaissance of connectivity, fueled by technology, and this is driving consumer appetites for high-quality digital content,” he told Home Media Magazine.

The following year, 2014, saw the launch of the Fox Innovation Lab, a high-tech think tank. The lab was established under the auspices of Dunn, research and tech strategy EVP Danny Kaye, and chief technology officer Hanno Basse as a way to meld the often disparate worlds of technology and entertainment, of Silicon Valley and Hollywood.

In September 2015, Samsung unveiled the industry’s first Ultra HD Blu-ray player at IFA 2015, the big global trade show for consumer electronics in Berlin. And 20th Century Fox promptly announced its intent to release upcoming movies on Ultra HD Blu-ray on the same day as standard Blu-ray and digital copies. The studio also said it would go back and reissue recent hit films in Ultra HD.

“When my colleagues and I at Fox first saw the side-by-side comparison of Ultra HD with high dynamic range versus HD, it was reminiscent of the difference between standard-def and high-def,” Dunn said in Berlin. “This is a massive leap forward for the consumer experience.”

The first Ultra HD Blu-ray films hit the market in March 2016. Fox was one of four studios participating in the launch, with more titles than Sony, Warner or Lionsgate: The Martian, Kingsman: The Secret Service, Exodus: Gods and Kings, X-Men: Days of Future Past, The Maze Runner, Maze Runner: The Scorch Trials, Wild, Hitman: Agent 47, Fantastic Four and Life of Pi.

In December 2016 Dunn was given a new title: president of product strategy and consumer business development. “2016 was the year of connection,” Dunn told Home Media Magazine at the time. “The consumer journey is more diverse and more connected than ever before. They are inundated with choices that range from traditional cable to OTT services to user-generated content, and everything from their actual devices to their viewing habits are connected.”

The Fox and the Mouse

In March 2017, Dunn gave up his old title, president of worldwide home entertainment, to Keith Feldman, who previously had been president of worldwide home entertainment distribution, and, before that, president of international. Feldman began his career in 1987 as a sales rep for the E & J Gallo Winery and joined Fox in 1995 as international business development director in London.

While disc sales overall continued to slide, there was a new sense of optimism, not just at Fox, but throughout the entire home entertainment industry. Digital sales at last began to show signs of life, and Ultra HD Blu-ray sales, while a small part of the overall business, climbed faster than anyone had expected. At Fox, spirits were particularly high due to the culture of innovation fostered by Dunn and his team.

Then came D-Day: Disney’s announcement in December 2017 that it had agreed to buy 21st Century Fox’s filmed entertainment, cable entertainment and direct broadcast satellite divisions, including 20th Century Fox, FX Networks and National Geographic Partners, for $52.4 billion.

After a competing bid from Comcast, Disney upped its offer to $71.3 billion, a 10% premium over Comcast’s offer, and in July 2018 the U.S. Department of Justice gave the deal its antitrust approval.

The end came on March 20, 2019. Until then, it was business as usual at 20th Century Fox Home Entertainment. Indeed, the division in the summer of 2018 launched one of its biggest marketing campaigns ever for the August home release of the superhero comedy Deadpool 2, with a massive presence at San Diego Comic-Con International that included a panel discussion, “Super Duper Dance Party” on the show floor, and a partnership with Walmart and its Vudu digital storefront. Fox and Vudu decorated a suite at the San Diego Hard Rock Hotel to look like Deadpool’s apartment and held a sweepstakes for one Comic-Con attendee to stay in “Deadpool’s Dream Suite” on the Saturday evening of the convention.

Editor’s Note: 20th Century Fox’s home entertainment division remains operational, since there are still several releases in the pipeline. There has been no word yet on whether it will continue to operate concurrently with Walt Disney’s own home entertainment arm or whether it will be absorbed.