AT&T: WarnerMedia, Discovery Merger Expected to Close in Q2

Scuttlebutt about a possible first quarter (ending March 31) close of AT&T’s $43 billion WarnerMedia minority stake asset sale to Discovery ended Jan. 26 after the telecom announced it expects the deal to be finalized in the second quarter ending June 30. After consummation of the deal, AT&T will own 71% of the new Warner Bros. Discovery company, while Discovery will assume operational control.

AT&T CEO John Stankey, speaking on the fiscal call, said confidence regarding a Q2 closing is due to feedback from regulatory bodies domestically and abroad.

“We’ve had several milestones in the past couple weeks, including passage in the [European Union] and filing process with the SEC,” Stankey said. “You look at where we are with national regulatory domains, and our exchange with regulators, and all of that is going right to pattern as expected. We don’t see anything that causes us concern.”

AT&T is anticipating a $8 billion – $9 billion shareholder dividend following close of the transaction.

WarnerMedia assets include Warner Bros. Pictures, HBO and Turner. AT&T said the media company generated fourth quarter revenue of $9.9 billion, up 15.4% versus revenue of $8.58 billion in the year-ago quarter, driven by higher content and other revenue, including the partial recovery from prior-year impacts of the pandemic and higher subscription revenue, partially offset by lower advertising revenue.

Operating income in the quarter plummeted almost 38% to $1.6 billion from $2.58 billion in the previous-year period. Income dropped due to continued HBO Max investments and incremental advertising revenue sharing costs were partially offset by higher revenues and cost savings initiatives.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

As previously reported earlier this month, there were 73.8 million combined global HBO Max and HBO subscribers at the end of 2021, up 13.1 million year-over-year and up 4.3 million sequentially, driven by international as well as domestic retail subscriber gains. At the end of the quarter, there were 46.8 million domestic Max and HBO subs versus 41.5 million in the year-ago quarter, up 5.3 million year-over-year.

“A year and a half ago, we began simplifying our business to reposition AT&T for growth and we’re extremely pleased with how we’ve executed on that commitment,” Stankey said in a statement. “We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business.”

Looking Ahead: Lessons From the Pandemic to Guide 2022 Home Entertainment Strategies

The uncertainty over the COVID-19 surge triggered by the emergence of the Omicron variant has made any and all predictions for the coming year suspect. Life could go back to normal fairly quickly or we will continue to battle surges and adjust our lives accordingly. Most observers don’t see us going back to the draconian shutdowns and lockdowns of the early days of the virus, but studio executives and exhibitors are understandably nervous about the current and any future surges since theatrical attendance could suffer — which ultimately affects everyone down the food chain.

The home entertainment business weathered the initial COVID crisis quite well, with streaming growing stronger and transactional video-on-demand (TVOD) winning a premium first-run window. That said, there are several “givens” as 2022 gets underway.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Netflix, Disney+, HBO Max and the other high-profile streamers will continue to battle for dominance, with Netflix doing everything in its power to reduce churn and not lose market share. The second tier of SVOD players, including Paramount+ and Peacock, will make as much noise as possible to win a seat at the table — as evidenced by Peacock’s recent announcement that it will be streaming the winter Olympics in their entirety.

On the transactional side, a lot depends on the fate of movie theaters as this pandemic lumbers on. The early pandemic led to an overall shortening of windows and new-release strategies that ultimately benefited both home entertainment divisions and digital retailers such as Vudu by Fandango, Redbox On Demand, Microsoft and Google Play.

Jim Wuthrich

But while TVOD, and physical media, benefit from shorter windows, it is also impacted by studios accelerating, or re-ordering, SVOD windows. A film available as part of an all-you-can-watch subscription streaming service simply isn’t going to sell or rent nearly as well as it would if there was no “free” competition. And that plays into the bigger picture that the more consumers tune in to SVOD services, the less likely they are to purchase or rent something a la carte.

Jim Wuthrich, president of content distribution for WarnerMedia, says he’s “optimistic that we’ll continue to adapt to the changing nature of COVID and learn to live with it.”

“Although there are many challenges, we’ve learned how to be productive with a distributed workforce, productions are largely back and there’s more consumer choice than ever before — both in amount of content and ways to view,” he says. “It’s a great time to be a fan of linear storytelling. We will continue to improve and expand HBO Max to more markets, while providing a la carte options for fans and collectors. SVOD services will continue to dominate viewing time, with transactional supporting a vital role in discovery, sampling and fandom. Physical media (4K/Blu-ray/DVD) continues to be a meaningful market, with approximately $2 billion in U.S. consumer sales, and largely immune to evolving distribution patterns.”

Follow us on Instagram!

On the WarnerMedia side, Wuthrich says, “We have a great movie slate, with four DC films coming to theaters and another installment of ‘Fantastic Beasts.’ We also have a number of series releasing, including the new ‘House of the Dragon,’ a ‘Game of Thrones’ prequel. History has shown these franchises to be powerhouses in driving catalog sales so we are looking forward to a great year.”

Michael Bonner

“Similarly to 2021, we expect a very healthy home entertainment market in 2022, with strong consumer engagement across multiple business models,” says Michael Bonner, president of Universal Pictures Home Entertainment. “Release patterns will likely continue to fluctuate and vary across studios on a title-by-title basis.   

“With the theatrical marketplace continuing to strengthen, the growth of PVOD and the expansion of various SVOD services, the distribution landscape is stronger than ever. As we look ahead, studios have more options and outlets to create value and reach consumers which strengthens our ability to continue investing in great content.”

Bonner maintains that Universal, with its slate of anticipated new releases including Jurassic World: Dominion, Minions: The Rise of Gru and Downton Abbey: A New Era, “is perfectly positioned to draw audiences back into theaters and fuel further transactional growth across the varying windows and platforms.”

Paramount Home Entertainment president Bob Buchi says that “as the global hub for transactional home entertainment across ViacomCBS, our division is exceedingly fortunate and singularly focused on delivering an extraordinary 2022 line-up of the company’s theatrical and television content, as well as third-party acquisitions through our extensive partnerships.”

Bob Buchi

“Our theatrical slate includes new entries in wildly popular franchises, including ‘Scream,’ ‘Top Gun,’ ‘Mission: Impossible,’ ‘Sonic the Hedgehog’ and ‘Jackass,’ which are not only highly anticipated, but also provide excellent opportunities to stoke fan interest in the earlier films and television shows available through home entertainment,” he says.

Follow us on Twitter!

On the catalog front, Buchi adds, the division’s most ambitious initiatives are the year-long 50th anniversary salute to The Godfather, “for which we anticipate massive consumer excitement for the film’s return to theaters, new 4K home entertainment releases, and licensed merchandise,” and the first-time-on-4K director’s edition of Star Trek: The Motion Picture, “with fantastic new VFX, which will be released first on Paramount+ and then on home entertainment platforms.”

Cameron Douglas, VP of home entertainment for Fandango, which oversees the Vudu digital retailer, also has high hopes for the new year.

“We expect the TVOD sector to deliver even more value to consumers, as fans sort through a fragmented streaming world, looking for a one-stop-shop entertainment service for movies and TV,” he says. “Because subscription services, by their nature, cater to specific audiences and content offerings, we continue to see consumers utilizing the flexibility, depth and breadth of Vudu’s new release and catalog offering of over 200,000 titles to complement their monthly entertainment needs.”

Cameron Douglas

Douglas says Vudu “is working hard to expand our catalog every day. It’s both a challenge and an opportunity, as we continue to secure new and previously unavailable titles. There’s a variety of titles where digital rights were originally unsecured, but with the demand increasing, there’s more pressure than ever to make these films available for fans to stream at home. We pride ourselves on providing the best quality of experience and we are always working to create a bigger, better home entertainment experience for our customers. We want to be that place where fans can find every beloved movie and show they desire.”

At the top of Vudu’s agenda for the coming year, Douglas says, are plans “to innovate new services for our customers and add new platforms and devices to meet the fan demand in an ever-changing marketplace. We also plan to offer deeper integration with our sister sites, Rotten Tomatoes, for entertainment discovery, recommendation and curated content, and Fandango for crossover promotional opportunities to help enhance the theatrical experience. With our entertainment lifecycle marketing strategy, we look forward to helping new and returning partners more effectively and efficiently reach high-value entertainment audiences at scale.”

The big challenge for home entertainment executives in the coming year is to apply lessons they learned during the pandemic and react quickly to market conditions.

Paramount’s Bob Buchi says that “with two years of experimentation and the expedited evolution of our business, we know we need to remain agile in our windowing and co-promotional strategies as we continue to support the return to theaters and the rapid growth of our streaming service, Paramount+.”

Adam Frank

Adam Frank, SVP of global digital sales and distribution at Lionsgate, says what happens at the box office will trickle down into all aspects of home entertainment.

“Our expectation, given the quality and quantity of the theatrical release slate, is that box office sees significant increase and momentum in 2022 vs. 2021,” Frank said. “The old adage of content is king still rings true, and with more product in the marketplace, consumers will ultimately have more choices and more opportunities in the home entertainment space.”

Jed Grossman, EVP and GM of worldwide sales and distribution at Lionsgate, adds, “We expect all business segments — transactional digital, packaged media, SVOD and AVOD/FAST — to grow year-over-year driven by five key factors:

    • A more robust theatrical release schedule, inclusive of major tentpoles and franchises like ‘Jurassic World,’ ‘Top Gun’ and ‘Black Panther’ that were delayed during the pandemic. Lionsgate has a strong slate that includes Unbearable Weight of Massive Talent, starring Nicolas Cage; Are You There God? It’s Me Margaret; and White Bird, among others; 
    • A more viable theatrical marketplace, with theater-going comfort increasing as vaccine/booster shot rates increase and tentpoles drive attendance;
    • The continued unprecedented demand for new release and library product from SVOD and AVOD/FAST platforms. Lionsgate has achieved record library revenue over the past year;
    • The ability to capitalize on home entertainment consumer behavior, consumer content thirst and technology enhancements — across all offer types — as accelerated by the pandemic lockdowns of 2020 and early 2021; and 
    • Continued collaboration with our theatrical exhibition partners to release films with dynamic windows to meet demand across all platforms.”
Jed Grossman

For independent film distributors, don’t expect much variance in 2022 from established policies of continuing to take aim at the collector and niche markets, particularly on the physical media side.

“For disc sales, MVD and our label partners are focusing on collectible content in deluxe packaging,” says Ed Seaman, COO of MVD Entertainment Group. “We anticipate a similar trajectory for disc sales, which have steadily grown over the last several years. The pandemic certainly gave them a boost, but the resilience and resurgence of disc sales may have more to do with the frustrating customer experience our industry has created in the OTT space. Finding what you want is now very challenging. How many streaming services do you need to subscribe to only to not find the film you want to watch, when you want to watch it? You can more easily find what you want transactionally, but it is still a search. Why not just pay a bit more and own the deluxe-edition disc?”

On the digital front, Seaman says “AVOD/FAST will continue to grow dramatically as consumers clearly embrace and enjoy that model. TVOD is tricky; considering Amazon’s tight curation of non-fiction, we expect some other platforms to step up and become more dominant in that space. There is a real opportunity for platforms focusing on non-fiction to deliver to fans what they want when they want it.”

At MVD, Seaman notes, “we’ve just added Zach Fischel to our leadership team; Zach is a veteran in the entertainment industry and is leading our label management team and marketing department. We’ve additionally moved longtime MVD staffer Chris Callahan to lead our digital sales and operations team. Chris has been with MVD since 1999 and has served in sales management, label management and international licensing. Both of these leaders are committed to improving their areas of responsibility; they have great ideas particularly in digital marketing, an area of overlapped responsibility. We are really excited about 2022!”

So is Mark Fisher, president and CEO of OTT.X, a streaming industry trade group.

“2022 will be a year that portends the future of our industries — a future that, enabled by OTT distribution, is more egalitarian, more global and more diverse,” Fisher says. “While Hollywood continues to make great movies and TV shows, smaller distributors and independent producers from all over the world are making a lot of great content, too — enabling the consumer to be less reliant and dependent on content from the big studios and on domestic-produced content. And, while the big ‘Pluses’ and ‘Maxes’ continue to grow, consumers are finding plenty of additional content on indie and niche channels, both FAST and on demand.”

AT&T CEO: HBO Max ‘Unstoppable’ Following Discovery Merger

AT&T may be selling operational control of WarnerMedia and HBO Max to Discovery for $43 billion, but that didn’t stop the telecom’s CEO John Stankey from gushing about Max’s purported year-end achievements. AT&T said Max and HBO ended 2021 with 73.8 million combined subs, which exceeded previous year-end estimates of 73 million.

Speaking Jan. 5 at Citi’s AppsEconomy Conference, Stankey attributed the Max subscriber gains to “really good” international launches.

“We are now a product that has moved from just not only mid-40 million domestic subscribers, to one that is got momentum in Latin America,” Stankey said. “Our early launches in Europe have been really strong and have demonstrated that there is a market for the library [content] that Max brings … as well as our new content performing incredibly well in all markets, not just in the U.S.”

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Stankey said that following the launch of Max in May 2020, he hoped user engagement would reach one hour daily. He now says that projection was too conservative.

“We have been so far beyond that and have done so much better,” he said. “I just couldn’t be more pleased.”

The executive contends that with movie and TV program production emerging from the COVID hiatus, further rollout of HBO content will see “great longevity into the cultural zeitgeist” from Max users.

“The platform, the technology is getting better,” Stankey said. “More features are coming in. Like any software development that you have to globally scale, you’re always making tradeoffs between time to market and the functionality of the platform. Once you get through another year of those cycles, the product gets better. It adds more features. It does things where people can engage with it more, they can find more content because search starts to improve.”

Stankey lauded WarnerMedia CEO Jason Kilar for doing a “remarkable job” driving Max growth through the company’s controversial same-day theatrical/streaming movie release strategy in 2021. While Kilar is not expected to remain at the helm following the merger with Discovery, Stankey has faith Discovery CEO David Zaslav can take Max to greater heights.

“I think 2022 is going to be even a better year for [Max],” he said. “And once David closes Discovery and can start to bring in the strength of what Discovery does so well into that portfolio, it’s going to be unstoppable.”

AT&T: HBO, HBO Max Ended 2021 With 73.8 Million Subs

WarnerMedia’s HBO and HBO Max platforms ended 2021 with an estimated 73.8 million combined subscribers — exceeding company estimates of 70 million to 73 million subs, according to an AT&T regulatory filing.

The disclosure comes ahead of the appearance today (Jan. 5) of the telecom’s CFO, Pascal Desroches, at the Citi AppsEconomy Conference.

The data would suggest WarnerMedia weathered two significant hurdles in 2021: The same-day theatrical/streaming movie release strategy, and the third quarter loss of almost 2 million HBO Max subs after the service’s departure from the Amazon Channels platform.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Critics contend that after a strong start with Wonder Woman 1984 and Godzilla vs Kong, Warner Bros. theatrical releases suffered at the box office due to their concurrent free availability on Max.

Indeed, just two of the studio’s North American theatrical releases (Godzilla vs. Kong and Dune) sold more than $100 million worth of tickets in North America. Warner generated less than $650 million at the domestic box office, fourth among major studios.

The new year finds AT&T finalizing a $43 billion spin-off of WarnerMedia to Discovery for the new proposed Warner Bros. Discovery media company. With WarnerMedia CEO Jason Kilar likely exiting the company, the former Hulu boss continues to defend his controversial theatrical/streaming release strategy.

“We were the first one over the wall with this,” Kilar said in a media interview last fall. “So, we took a position of leadership. We’re the only company, for the last year-plus, that has delivered 18 movies. Nobody else has done that, nobody else has come even close. If you take a look at what the exhibitors have been saying, we were their lifeline in their period of greatest need.”

Amit Malhotra Exits Leadership of HBO Max in Southeast Asia

Amit Malhotra, who was named managing director of HBO Max Southeast Asia last June, has reportedly exited WarnerMedia after just seven months on the job. No reason for Malhotra’s departure was given, with WarnerMedia only confirming that the former Disney+ executive was no longer employed at the company.

As first reported by Content Asia, Malhotra’s position will be assumed by his former boss Johannes Larcher, who heads up HBO Max International operations.

Malhotra was hired to help launch Max into Southeast Asia, including Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. The streamer has yet to bow service in the region.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Max, which launched in spring 2020, aims to roll out in 61 countries, beginning last June in the Caribbean and Latin America.

Prior to WarnerMedia, Malhotra served as regional lead for Disney+ in Southeast Asia, where he was responsible for overseeing the launch and operations of the streaming service, including Disney+ Hotstar and Hotstar. He also led the content sales and distribution division as part of The Walt Disney Company’s Direct-to Consumer & International (DTCI) business in South APAC and Middle East, pivoting Disney’s linear business in the region to streaming by working closely with local telcos and MVPDs, creating localized payment strategies and developing deep content studio relationships throughout Southeast Asia.

Looking Back at 2021: Home Entertainment Struggles to Find the New Normal

NEWS ANALYSIS — The shadow of COVID-19 continued to hang over 2021, despite rosy predictions the previous summer that the worst would soon be over.

By mid-year, with a vaccine rollout in full swing, most restrictions were lifted and theaters were welcoming back moviegoers, particularly after studios once again began stepping up movie production. This theatrical recovery continued, unchecked, through the emergence of the summer Delta variant and the beginning of the winter Omicron surge. Indeed, the December 2021 theatrical opening of Spider-Man: No Way Home generated $260 million in domestic ticket sales, the second-highest North American box office opening. Domestic box office revenue for 2021 is estimated at $4.5 billion, more than twice what it generated in 2020 but still down 61% from 2019, the last year before the virus hit.

Meanwhile, the entertainment world in 2021 was rocked by two major announcements: Amazon bought a movie studio, MGM, for $8.45 billion, and AT&T announced plans to spin-off WarnerMedia through a merger with Discovery, resulting in a new media powerhouse, Warner Bros. Discovery, under Discovery Inc.’s CEO David Zaslav. The deal, approved by the European Commission in December, is expected to be completed in mid-2022, pending Discovery shareholder and federal regulatory approval.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Sadly, the year ended on a down note, with Omicron leading to theater closures in Europe and the cancellation or postponement of several key entertainment-industry events, including The Critics Choice Awards, the National Board of Review’s annual gala, the Palm Springs Film Festival, and BAFTA Los Angeles’ annual tea party for the awards season.

The year also saw the vindication of WarnerMedia’s controversial plan, announced at the end of the prior year, to release its entire theatrical slate simultaneously on its HBO Max streaming service. Initially railed against as a death blow to the movie business, the strategy in retrospect kept the business alive, providing a steady stream of high-profile new product to movie theaters hungry for fresh films, even if they no longer would be exclusive to the big screen.

Jim Wuthrich

“2021 marked the first anniversary of HBO Max and, with it, a whole new distribution pattern for movies,” said Jim Wuthrich, president of content distribution for WarnerMedia. “Due to the pandemic and uncertainty of closures, WarnerMedia made all of its movies available on HBO Max and in theaters at the same time. This was great for movie fans, as they could watch movies such as Wonder Woman 1984 or Godzilla vs. Kong at home or in theaters.”

Mixed Results

On the home entertainment front, 2021 was the proverbial mixed bag for the industry’s two segments, subscription streaming and transactional/physical.

The first few months of 2021 were clouded in uncertainty, as the winter surge of the virus delayed the reopening of movie theaters well into the spring. Studios held back their big releases until their opening strategy — theaters, PVOD or both — could be determined.

Streaming, not surprisingly, continued to flourish at the accelerated pace that began a year earlier with the onset of the pandemic. Consumer spending on subscription video-on-demand services soared more than 20% in the first half, according to DEG: The Digital Entertainment Group estimates — and those numbers don’t include Amazon Prime Video, which is considered in the same league as Netflix.

Amy Jo Smith

“The growth in subscription streaming in 2021 can be attributed to consumers who continued to spend time at home, increasing their engagement with content offered through an abundance of new direct-to-consumer subscription services, including Disney+, HBO Max, Paramount+, Peacock, AMC+ and many others,” said Amy Jo Smith, DEG president and CEO. “These services provide consumers premium content with convenience and value.”

Disc and digital sales of movies in the first half of 2021, meanwhile, were off by more than 25% from the prior year, while combined disc and digital rental (TVOD) revenue suffered a first-half decline of more than 30%, according to estimates prepared by DEG: The Digital Entertainment Group.

TVOD Recovers

As the year progressed, subscription streaming continued to clearly dominate home entertainment, even as the transactional side of the business began to recover in the wake of theatrical reopenings that remained on track despite the summer emergence of the more contagious Delta variant. Final year-end DEG numbers are not yet in, but by the third quarter disc and digital sales had trimmed their quarterly decline to 12% while rentals were off just 14%.

“Factors limiting transactional growth in 2021 include few new theatrical releases, which are historically a key driver of home entertainment spending,” Smith said. ”This was particularly true early in the year. Spending on library titles, however, has been notably strong throughout the pandemic, and with theatrical new releases restarting mid-year, we saw spending on home purchases of new releases beginning to pick up in the third quarter. We expect to see this trend continuing when the full year is tallied.”

“Looking back at the year, 2021 certainly had its challenges, but there were some high notes as well for our business,” notes Jason Spivak, EVP of distribution for North American Television & Home Entertainment at Sony Pictures Entertainment.

Jason Spivak

“Early in the year, we were blown away by the tremendous success of Monster Hunter on both physical and digital formats. We achieved strong PVOD results on The Father and Don’t Breathe 2. And throughout the year we saw consistent strength in our digital catalog,  particularly our drafting efforts around the ‘Spider-Man’ franchise.

“The biggest highlight for our business, however, has been the fourth-quarter theatrical performances of Venom: Let There Be CarnageGhostbusters: Afterlife and, of course, the worldwide phenomenon that is Spider-Man: No Way Home.  These films demonstrate that consumers are excited to return to theaters and that they crave the communal experience that can only be achieved in a movie theater.”

WarnerMedia’s Jim Wuthrich said his company’s strategy of releasing its news films to theaters and streaming on the same day “did add an element of unpredictability to [traditional, transactional] home entertainment in forecasting demand, as it was unique to have streaming as the first window.” Ultimately, he said, “we found that there is robust demand for transactional (EST/TVOD/physical), despite the change in windowing.”

Bob Buchi

Bob Buchi, president of Paramount Home Entertainment, said that while 2021 “certainly did not go as planned, consumers again turned to home entertainment options in record numbers.  Throughout the year’s unprecedented circumstances, Paramount continued to experiment with new release windowing, maximized the power of our exceptional library, and supported the ongoing growth of Paramount+.”

With very different release strategies, Buchi added, A Quiet Place Part II, Snake Eyes and Paw Patrol: The Movie “delivered tremendous results across each studio window thanks to the cumulative marketing muscle and cross-company promotional efforts, which bodes well for the ongoing coexistence of every platform.”

Paramount also saw consumer spending on catalog titles remain strong, “representing nearly 60% of annual revenue and holding steady to slightly up compared to the extraordinary sales in 2020 across physical and digital worldwide,” Buchi said.  “Digital sales, in particular, have been exceptionally strong during the pandemic, with a compounded annual growth rate of over 25% compared to pre-pandemic 2019 levels globally.”

Paramount also scored with the 40th anniversary of the “Indiana Jones” franchise with the first 4K Ultra HD release of the films on both disc and digital platforms, Buchi noted. “And on the television front, home entertainment consumers continue to flock to ‘Yellowstone,’ with nearly 3 million digital transactions for season four, which launched in November.”

Michael Bonner

Universal Pictures Home Entertainment president Michael Bonner said that while 2021 “remained unpredictable and challenging on several fronts … consumers’ engagement with content has never been stronger. During these unprecedented times, the studios have served audiences well by embracing unconventional release patterns and new business models giving consumers more ways to access and enjoy movies.”

Bonner added that “engagement is up, and it’s happening across various services and business models. For Universal, our new release home entertainment business remained very strong in 2021 as we saw with F9, The Croods: A New Age, Let Him Go, Promising Young Woman and several others, with a significant contribution coming from our new PVOD window and followed by our traditional home entertainment offering.  On top of that, similar to 2020, we saw our library business reaching historical levels.”

Distribution Deals

On the physical side of the business, Sony Pictures Home Entertainment and Lionsgate in February 2021 announced a multiyear agreement in which Sony will handle distribution of Lionsgate’s DVD/Blu-ray Disc releases in the U.S. and Canada beginning in July. Lionsgate’s North American packaged-media distribution had been handled by the former 20th Century Fox Home Entertainment, which was acquired in 2019 by Disney.

Lionsgate continues to maintain its own independent sales and marketing teams, but is leveraging SPHE’s supply chain and distribution services. At the time Sony’s Jason Spivak said, “By working together, we can identify and leverage efficiencies in the supply chain that will benefit not only our respective studios, but also retailers and, ultimately, the millions of consumers who enjoy Sony Pictures and Lionsgate feature films and TV programs in the 4K UHD, Blu-ray and DVD formats.”

Two months after the Sony-Lionsgate deal was announced came the official launch of Studio Distribution Services (SDS), a joint venture between Warner Bros. Home Entertainment and Universal Pictures Home Entertainment to distribute packaged media in the United States and Canada.

“Starting any business in a pandemic is challenging, but one that relies on delivering physical goods to stores across two countries during a supply chain upheaval is not for the faint of heart,” WarnerMedia’s Wuthrich said. “The SDS team, along with the studios, did a great job managing through a challenging time.”

Eddie Cunningham, the former Universal Pictures Home Entertainment president who was tapped to run SDS, told Media Play News earlier in the year, “We, with our many supply chain partners in manufacturing, distribution and freight, are doing everything in our power to mitigate those pressure points.

“Sometimes meeting delivery dates and keeping retail on-shelf availability at our usual high industry standards has been difficult. It is a huge focus across our company and everything in supply chain that we used to check weekly is now daily, and everything we did daily is almost hourly, as we constantly re-assess priorities.”

Streaming Fatigue and the Rise of AVOD

While disc sales continue to be a priority for the big Hollywood studios, along with digital movie sales and rentals, streaming clearly remains the dominant force in home entertainment. As of the end of the third quarter, streaming accounted for nearly 80% of total consumer spending this year on home entertainment, or $18.6 billion. Total consumer spending on disc and digital sales and rentals in the first nine months of the year was just $5 billion.

And yet subscription streaming did face several challenges, including consumer fatigue — stemming largely from the rising costs of subscribing to multiple services — and rapid gains in free ad-supported platforms such as Pluto and Tubi. In professional consultancy Deloitte’s 2021 Digital Media Survey, more than half of the respondents said they are re-evaluating multiple streaming subscriptions, and 40% said they planned on terminating at least one subscription. Adriana Waterston, SVP of insights and strategy at Horowitz, told Media Play News in November that streamers are feeling overwhelmed by the proliferation of services, with many struggling to figure out what to watch, and where.

In December, a TVision survey found that time spent on subscription video-on-demand platforms decreased 8.6% from the first quarter to the third quarter of 2021, while time spent on ad-supported VOD increased 9.3%. It should be noted that the SVOD decline may be due, at least in part, to the vaccine rollout and people once again venturing out into the world, while AVOD growth includes not just SVOD dropouts but also linear TV audiences. Regardless, speaking in December at an OTT.X conference, Colin Dixon of nScreenMedia said the FAST/AVOD business is projected to reach $4 billion by 2024.

Mark Fisher

Mark Fisher, president and CEO of OTT.X, the trade association for streamers, said free ad-supported streaming is just one more option that is leading to continued growth for the overall home entertainment business.

“Internet-based delivery today gives the consumer so many more opportunities and more choices to enjoy great content — both on demand and linear,” he said. “Some prefer long-form, some short-form; some prefer to watch without ads, while others watch ads to avoid paying; some like to watch what they want, when they want, while others like the sit-back FAST experience; some want to build their cloud-based collections and others just want to watch once; some like to watch big-budget spectacles and other enjoy good indie-produced stories; and many are adding the diversity of international content and niche content and channels. Opportunity and choice benefit everybody.”

He’s got a point. Overall, the home entertainment business is on track for another record year. The DEG’s estimate of $23.6 billion in total consumer spending in the first nine months of this year is up 6.3% from the spending total at this same point in 2020.

Converging Businesses

And the two sectors of the business, streaming and transactional, are converging.

One of best examples of this is that while Redbox’s legacy disc-rental kiosks remain the company’s cash cow, a massive digital transformation — fueled by the company going public in October — is expanding the Redbox brand into digital, with a particular emphasis on streaming. Redbox Free Live TV, an ad-supported streaming service that launched in February 2020, now has more than 100 channels offering viewers free access to movies and television shows, news, and lifestyle and sports entertainment programming. In December, Redbox began advertising its digital products on its kiosks.

Galen Smith

Asked how Redbox fared in 2021, CEO Galen Smith said that on the kiosk and TVOD side, “ We continued to see a significant impact on the quantity of new release movies due to production being paused as a result of COVID, with fewer movies in 2021 than 2020. The good news is we anticipate the number of new theatrical movies releasing in 2022 should be back to levels not seen since 2019.”

As for streaming, he said, “2021 was a growth year for us — as we rapidly scaled both our AVOD service and FAST channels.”

Redbox going public, Smith noted, “provided us with additional capital to invest in the ongoing digital transformation of Redbox, as we built on our transactional video-on-demand service with growth in AVOD (more than 5,000 titles on demand) and FAST (more than 125 linear channels including five that are Redbox branded) and a subscription channels business coming in 2022.”

On the Indie Front

Independent film distributors, meanwhile, are finding the plethora of streaming services a whole new market for their films, augmenting their traditional TVOD and physical release.

“It’s always a good thing when new channels appear where we can license our films,” said Joe Amodei, president and CEO of Virgil Films & Entertainment. “The major accounts still rule in this area, but as they have dwindled down their buying in favor of original films and series we’ve enjoyed doing business with this new group of folks. It’s great.”

Indies also say they are finding their disc businesses remarkably resilient. Ed Seaman, COO of MVD Entertainment, said 4K Ultra HD Blu-ray “continues to surprise us. Sales are really strong, possibly because there aren’t a ton of products in this space, but mainly because our trade partners/content providers are choosing excellent content and do a great job lovingly restoring and filling these editions with great bells and whistles.

“Compared to last year, 2021 was far more stable. We knew we were in a pandemic and we didn’t have the fear of the unknown like last year, where we didn’t know what impact a lockdown would have on our business and our customers. We learned in 2020 that when everyone is stuck at home during a pandemic, home entertainment products and services are pretty popular. We were able to execute our plans with greater confidence in 2021 that the market was not going to fall apart, and we had a really strong year as a result.”

John Rotella

John Rotella, SVP for Shout! Factory, said the company saw “unbelievable growth in catalog and new-release sales” during the pandemic year of 2020, “and that swell carried forward into 2021.”

Shout! Factory, he said, “saw one of our best years ever on gross shipments and an equally impressive net business. We also saw growth in POS revenue in 2021. The DVD and Steelbook/4K business grew again as Blu-ray sales stayed even compared to 2020. New-release and catalog as a whole all improved from a surprising and productive year, led by our new Western, Old Henry, and 4K ‘Halloween’ releases.”

Some of this success, Rotella said, “can also be attributed to a less competitive new-release marketplace, upgraded and repackaged catalog, developing more valuable collectable products at a higher price and managing the right genre that works for mass [merchants]. Walmart and Amazon continue to offer new-release and catalog opportunities, and we saw an e-commerce surge in business. Looking back, 2021 unexpectedly managed to match 2020 in POS and shipments and remained far superior to 2019 in every area.”

On the downside, the supply chain crisis has compounded ongoing problems with limited replication opportunities, resulting in delays in bringing product to market.

“We were hugely affected by inbound transportation challenges, mostly from the U.K. and Europe, where many of our top clients reside,” MVD’s Seaman said. The situation improved toward the end of the year, he said. “I doubt the Omicron strain will cause lockdowns again, and I’m keeping my fingers are crossed that the labor challenges at the border are mostly conquered,” he said.

New Ways of Doing Things

Another home entertainment trend that continued in 2021 is the consolidation of theatrical and home entertainment teams. Warner Bros., Sony Pictures and Lionsgate went through their respective integrations in 2020; Paramount Pictures followed in March 2021 with a restructuring that led to the exit of 23 home entertainment marketing and distribution personnel, including marketing chief Vincent Marcais, respected publicity head Brenda Ciccone, and Dina Marovich, SVP of worldwide media and interactive marketing.

A new way of doing things sometimes finds home entertainment executives branching out beyond their wheelhouses.

“Somewhat out of the traditional course of business, our team successfully managed the launch of Virtual Reality experiences at the new Harry Potter store in New York City,” Warner’s Wuthrich said. “These two experiences allow Potter fans the ultimate experience of visiting Hogwarts or flying high above London on broomsticks while battling Death Eaters. The experiences have sold out since launching this summer and have been garnering rave reviews.  We look forward to expanding the number of locations in 2022 so more Potter fans will have a chance to live the experience.”

Top 10 for 2021: The Biggest Home Entertainment News Stories

The year 2021 has been an eventful one across the home entertainment landscape as consumers further embraced streaming, while companies operating in legacy transactional markets adjusted their business strategies to survive.

Here are the top 10 home entertainment news stories of 2020 as chosen by the Media Play News editorial staff.

1. The Rise of AVOD and FAST — Numerous new subscription streaming services began to strain home entertainment budgets, with the average consumer, according to a TiVo study, spending $142.20 monthly on high-speed internet and SVOD — significantly more than the average $100 cable bill. Nearly 60% of respondents in a Trade Desk study said they spend too much money on multiple OTT subscriptions, with more than 66% saying escalating fees were a source of frustration. In a Future Today report, 50.6% of respondents said they opted for AVOD to end paying for SVOD. As streaming fatigue and the hit to their wallet began to set in, consumers increasingly turned to free, ad-supported services (FAST, AVOD) such as Tubi. Tubi in fact rose to one of the top 10 apps downloaded by U.S. consumers in 2021 at No. 6, just behind SVOD services HBO Max, Netflix, Disney+, Peacock and Hulu, in order.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

2. Media Mergers: Two bombshell announcements came in May, both geared toward streaming. The first was AT&T and Discovery’s announcement of a plan to  combine WarnerMedia’s Warner Bros., HBO, Turner and CNN media assets with Discovery’s reality TV-based HGTV, Food Network, Animal Planet, Magnolia, Eurosport and international entertainment businesses to create a new standalone global entertainment company focused on streaming video. Discovery CEO David Zaslav was slated to lead the new company, later dubbed Warner Bros. Discovery, with a management team and operational and creative leadership from both companies. A week later came word that Amazon would acquire MGM Studios for $8.45 billion, which CNBC at the time said marked “its boldest move yet into the entertainment industry and turbocharging its streaming ambitions.” Amazon at the time said it wanted to leverage MGM’s filmmaking history and catalog to boost Amazon Studios. “The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team,” Mike Hopkins, SVP of Prime Video and Amazon Studios, said in a statement. “It’s very exciting and provides so many opportunities for high-quality storytelling.”

3. Sudden Impact: WarnerMedia made headlines at the end of last year when in response to the coronavirus pandemic, it announced plans to make its theatrical slate through 2021 concurrently available on the HBO Max subscription streaming platform — beginning with Wonder Woman 1984 on Christmas Day 2020. Results were mixed. Under the direction of CEO Jason Kilar, a former chief executive at Hulu, the landmark distribution strategy obliterated the legacy theatrical window. It also caught most of Hollywood off guard, including directors, producers and actors whose compensation agreements revolved around the box office take. Kilar later apologized for the abrupt decision, but doubled down on the strategy, which resulted in $463 million in domestic theatrical revenue through June 30 while growing Max subscriptions and consumer awareness. While the concurrent release strategy appeared to have little negative impact on Warner’s Godzilla vs Kong monster movie release in March, the studio would have to wait until the October release of sci-fi reboot Dune to realize another box office hit. Entering 2022, Kilar’s days seem numbered as Warner Bros. reverts back to a shortened 45-day theatrical window for most movie releases, and corporate parent AT&T awaits regulatory approval for its $43 billion minority stake WarnerMedia asset sale to Discovery.

4. Attack of the ‘+’ Sign: Discovery Jan. 4 launched its own branded SVOD service Discovery+ with little fanfare. Exactly two months later, Paramount Pictures became the latest Hollywood studio seeking to establish a foothold on the SVOD bandwagon with the launch of Paramount+. The erstwhile CBS All Access streaming platform adopted the Paramount Pictures brand to better resonate with consumers worldwide. Paramount+, along with AVOD/FAST platform Pluto TV, embodied corporate parent ViacomCBS’s belated resolve to become all things streaming. Then, in July, WarnerMedia announced plans to launch a branded news subscription streaming video service in early 2022. The name: CNN+.

5. Disc Distribution Shuffle: As physical media sales continued to decline, several studios looked for ways to cut costs and boost efficiencies. April marked the official launch of Studio Distribution Services (SDS), a joint venture between Warner Bros. Home Entertainment and Universal Pictures Home Entertainment to distribute packaged media in the United States and Canada. The JV, run by former Universal Pictures Home Entertainment president Eddie Cunningham, combines sales, retail marketing and distribution for the two physical home entertainment operations and is responsible for Blu-ray, DVD and 4K UHD distribution for up to 10 years. Both partner studios continue to operate their digital distribution businesses independently and retain content and consumer marketing for both physical and digital. In February, Lionsgate signed a multiyear agreement with Sony Pictures Home Entertainment for the distribution of its DVD/Blu-ray Disc releases in the United States and Canada, beginning in July. Lionsgate still has its own sales and marketing teams, but is leveraging SPHE’s supply chain and distribution services.

6. Out of the Box: Redbox aggressively embraced digital distribution — notably ad-supported video-on-demand (AVOD) and free ad-supported streaming television (FAST) — to piggyback on its legacy kiosk disc rental brand. The move resulted in numerous content license distribution agreements, as well as further development of Redbox-branded content acquisitions, including feature films. With about 40,000 kiosks in operation across the country, Redbox deployed digital video signage on thousands of boxes as a new way to partner with Hollywood studios to promote new-release movies, promote the company’s free streaming service, and provide a platform for third-party media campaigns. The company signed separate distribution agreements with LG Electronics and Sony PlayStation to include its FAST channels on LG Smart TVs, including their LG OLED Smart TVs, as well as the PS5 and PS4 video game consoles. Taking a page from the Amazon Channels playbook, Redbox also began featuring third-party apps on its digital platform. The company inked separate agreements with Roku and Vewd to pre-load the Redbox app on all new Vewd-powered TVs and set-top boxes in the U.S., including Hisense, Funai and Tivo, as well as pay-TV operators such as Evoca. In October, Redbox made its biggest move: Finalizing a business combination with Seaport Global Acquisition Corp., a special purpose acquisition company, and launching Redbox Entertainment as a publicly traded company.

7. TVOD Consolidation: Fandango in August merged its FandangoNow streaming platform with Vudu, which it had acquired from Walmart in 2020. The combined platforms operate under the Vudu brand, which has established itself as a digital transaction market leader, while the Fandango brand is known for theatrical ticket purchases, movie reviews and showtimes. Vudu is available in more than 75 million U.S. TV-connected device households, according to The NPD Group. The service has more than 60 million registered users and serves “millions of consumers daily” across smart-TVs, connected devices, mobile and online. “During a time where consumers have myriad viewing options, we’re proud to deliver a service that presents an unparalleled library of content, many titles that are not available on subscription services, and the flexibility to pay as you go,” said Fandango president Paul Yanover.

8. Free Agent: Sony Pictures Entertainment celebrated its role as the only studio not attached to a big media company with streaming ambitions through a series of deals and a stunning end-of-the-year victory as Spider-Man: No Way Home became the biggest theatrical release of the year. In April, SPE signed a distribution deal with Netflix for exclusive U.S. access to Sony theatrical releases following the box office and home entertainment windows. The agreement, which begins in 2022, replaces Sony’s existing digital deal with Lionsgate-owned Starz. Days later, SPE announced another deal with Disney’s streaming and TV platforms for their Pay 2 window. And in November, Sony Television signed a distribution deal with Redbox that gives the latter streaming access to Resident Evil: Retribution, Underworld: Evolution, We Own the Night and Universal Soldier: Day of Reckoning

9. Home Entertainment Consolidation: Paramount Pictures in February became the latest studio to merge its theatrical and home entertainment marketing teams, a move that saw the exit of 23 home entertainment marketing and distribution personnel, including EVP of marketing Vincent Marcais, longtime publicity head Brenda Ciccone, and Dina Marovich, SVP of worldwide media and interactive marketing. In a Feb. 26 memo obtained by Media Play News, Jim Gianopulos, chairman and CEO of Paramount Pictures, wrote that after an extensive review, “we have concluded that the best path forward for the company is for all home entertainment marketing functions, with the exceptions of brand marketing and customer marketing, to merge into the existing theatrical marketing departments.” The Paramount move followed similar restructurings at Warner Bros. in August 2020, Sony Pictures in October 2020, and Lionsgate in December 2020.

10. Supply Chain Crisis: Toward the end of the year, studios as well as independents were reporting delays in bringing their DVDs and Blu-ray Discs to market due, in part, to the global supply chain crisis. The other factor: limited replication opportunities. Most of the big Hollywood studios use Technicolor to replicate their discs, which is down to a single facility in Mexico. “It’s a huge problem,” said Bill Hunt, who as editor of The Digital Bits website closely monitors disc releases. “Almost every title is getting delayed, and those that aren’t are hard to find on street date.”

Jason Kilar: ‘The Batman’ Movie Streaming on HBO Max April 19, 2022

The Batman, Warner Bros. Pictures’ reboot of the venerable superhero franchise featuring Robert Pattinson as the newest caped crusader, is set to begin streaming on HBO Max on April 19, 2022. The Matt Reeves-directed movie hits theaters on March 4.

The release dates were reiterated by WarnerMedia CEO Jason Kilar in a recent Vox’s Recode podcast — the executive’s second Q&A session in 2021.

With WarnerMedia’s controversial 2021 day-and-date theatrical/Max distribution strategy in its final days, the media company is looking to implement an industry-standard 45-day exclusive theatrical window for its box office slate in 2022. That includes pending DC’s Black Adam, The Flash, and separately, Elvis, among others.

“I feel really, really good knowing that [those movies], and a whole host of other movies, are literally going to be showing up on day 46 on Max in a variety of territories all over the world,” Kilar said. “That is a very, very big change that I don’t think people appreciate, and I feel really good about it.”

Subscribe HERE to the FREE Media Play News Daily Newsletter!

Indeed, HBO traditionally does not have access to theatrical titles for at least eight months after their box office runs.

Kilar, who is likely to exit his position at WarnerMedia after its sale to Discovery passes regulatory approval sometime next year, said the concurrent release strategy has helped drive Max subscriptions — while at times undermining a non-blockbuster film’s box office potential. Warner’s last weekend box office winner was Godzilla vs. Kong on March 31.

“Think about when movies [used to show] up on HBO,” Kilar said. “That is a huge change from where things were in 2018, 2017, 2016.”

Chris Wallace Departs Fox News for Pending CNN+ Streaming Service

Chris Wallace, the longtime host of “Fox News Sunday,” is leaving the Fox News network for the new startup streaming service CNN+, which is set to launch in early 2022. Wallace made the announcement Dec. 12 on his show.

“Eighteen years ago, the bosses here at Fox promised me they would never interfere with a guest I booked or a question I asked. And they kept that promise,” Wallace said in a statement.

Fox, in a statement, said it remains “extremely proud” of its journalism and the “stellar team” Wallace was a part of.

“The legacy of ‘Fox News Sunday’ will continue with our star journalists, many of whom will rotate in the position until a permanent host is named,” Fox said.

Without mentioning CNN, the liberal-leaning network owned by WarnerMedia, Wallace, son of late CBS “60 Minutes” icon Mike Wallace, said he left to pursue “something new … beyond politics” covering topics he’s also interested in.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

CNN+ will feature original, live, on demand and interactive programming as a standalone direct-to-consumer service with offerings that are separate from CNN, CNN International, HLN and CNN en Español linear TV channels. At launch, the unpriced platform will stream upwards of 12 hours of live, daily programming offering topical deep dives and lifestyle content with viewers able to connect directly with anchors and experts in real time conversations.

“I’m ready for a new adventure,” Wallace said. “And I hope you’ll check it out.”

In a separate statement released by CNN, Wallace said he looks forward to the new “freedom and flexibility” streaming affords in interviewing major figures across the news landscape.

AT&T CEO: Congressional Concerns Over WarnerMedia Sale ‘Unfounded’

On the heels of concerns from some Democrat lawmakers regarding AT&T’s $43 billion minority stake asset sale of WarnerMedia to Discovery, the telecom’s CEO said the issues presented by lawmakers are “unfounded,” but expected for a mega merger that includes Warner Bros., HBO and Turner and the parent of HGTV and other media brands.

Rep. Joaquin Castro (TX), Sen. Elizabeth Warren (MA), Rep. David Cicilline (RI), Rep. Pramila Jayapal (WA) and 29 other Congressional members sent a letter to the U.S. Attorney General Merrick Garland asking the DOJ to examine whether the merger would reduce diverse content in a more consolidated and less competitive market.

“I believe the context of our discussion with regulators up to this point has centered around those [diversity] issues, and we feel very good about the data we put on the table that have, it’s clearly indicated that there’s nothing unusual about this transaction,” Stankey told the UBS Global TMT Virtual Conference on Dec. 6.

Castro contends there remains a lack of diversity of people of color in media. The lawmaker cited a 2021 analysis by the Latino Donor Collaborative found that Latinos account for less than 3% of TV show leads, showrunners and directors.

Subscribe HERE to the FREE Media Play News Daily Newsletter!

“Latinos are nearly 20% of the U.S. population, one-in-five Americans, but we’re almost invisible on-screen and behind the camera,” Castro wrote in the letter.

Stankey said issues involving minority representation may have been relative to past media mergers, but not so today.

“I would also tell you that those [Congressional] letters … are not very strong in the foundation of their concerns, nor do I have concerns about what they’re articulating in terms of our ability to navigate through that,” Stankey said.