June 30, 2018
Technology and innovation have transformed home entertainment retailing in a way none of us could have imagined back in the early days of the business, when the only way to watch movies and other filmed content on demand was by renting a videocassette at the local video store.
Just as our home entertainment viewing options have proliferated, the distribution pipeline charged with getting this content to the consumer has branched out into a network of increasingly diverse delivery methods — from physical disc sales and rentals to digital subscription streaming or transactional VOD.
“While retail has taken many new forms over the years, the underlying premise has never changed,” says Jason Spivak, EVP of worldwide digital distribution at Sony Pictures Home Entertainment. “It is all about providing great environments for consumers to discover, enjoy and collect film and TV content. As physical retail has evolved and digital services have proliferated, we believe there has never been a better time for fans to access and consume our content in any way that they wish.”
“The retail landscape continues to evolve as advancements in technology have vastly expanded the ways in which we all enjoy content,” says Bob Buchi, president of worldwide home media distribution at Paramount Pictures. “The advent of digital storefronts and streaming services has been a boon to both consumers and content providers, and while the retail landscape has changed, consumer appetite for quality content has not. As content providers we must work closely with the wide range of retailers to satisfy growing consumer demand by clearly communicating the benefits and value associated with every option, from physical to digital and rental to ownership.”
Increasingly, home entertainment retailing is not an either/or proposition. Lines have blurred and blended between digital and physical, purchase and rental/streaming. Moreover, some of the top retailers have begun acquiring and distributing their own content. This is nothing new — back in 1998, when video rental was still driving home entertainment revenues, Blockbuster Entertainment Corp. launched its own film acquisition company, DEJ Productions — but never has this push toward proprietary movies and TV shows been as powerful as it is today, with Netflix setting an ultimate goal of 50% original content and Amazon expected to spend $5 billion on original content in 2018.
Back in January 1984, Video Store Magazine published for the first time a salute to the top 12 retailers, based on consumer video rental revenue their owners willingly reported to the magazine’s research team. The cover depicted the retailers as 12 golden eggs in an egg carton, a nod to the golden opportunity video rentals presented to even the smallest mom-and-pop entrepreneurs.
This year, Media Play News is doing so again (sans golden eggs) — only this time, our market research staff has relied on a variety of components, from interviews with studio heads and retailers to public financial reports, to assemble a list of what we believe are the 12 biggest retailers of content in the United States, based on total revenue.
As Entertainment Merchants Association president and CEO Mark Fisher says, “This diverse mix of top retailers offers the consumers access however they want to enjoy home entertainment.”
Fisher adds: “In our earliest days as a trade association, the only retail model was the VHS rental store. Today our support for retailing ranges from addressing challenges in physical DVD distribution, to what’s become our core focus, guiding the digital distribution industry toward more-efficient and more-effective processes. The one thing that hasn’t changed for us as a trade association is the need for a platform for industry community and
“The mix of top retailers illustrates the breadth of which consumers are engaging across various formats and business models — in some instances serving different audiences, interests and consumer behaviors,” says Michael Bonner, EVP of digital distribution at Universal Pictures Home Entertainment.
“The retail experience continues to evolve, and in a digital environment where there is unlimited access to libraries of content, retail partners have focused on developing broad ecosystems with rich playback experiences where enhanced discovery and personalization is becoming the norm,” Bonner says. “Technological advances coupled with data have provided a nice runway for innovation, which we expect to continue at a rapid pace.”
Innovation isn’t limited to digital storefronts.
“Across the retail landscape, bold innovation, smart execution and the willingness to embrace change all have been key drivers of our category’s vitality,” notes Eddie Cunningham, president of Universal Pictures Home Entertainment. “From department redesigns and striking in-store displays to compelling pre-order programs and event-level marketing, the collective redefining of the consumer experience has never been more prevalent.
“With an eye toward the future, Walmart has been an exceptional partner in its commitment to invest in the category’s longevity. From our partnership on the first WOW corrugate for Jurassic World to our more-recent collaboration in reimagining the home entertainment footprint in stores, Walmart has made exceptional strides in elevating our category and driving urgency for our products while creating newfound excitement around the shopper experience. Plans to build upon that momentum continue as we together are working to soon take WOW corrugate displays to a new level.”
Retailers are ranked alphabetically; assigning even a relative revenue value is next to impossible. Amazon, for example, said in a filing with the Securities and Exchange Commission that it generated $6.4 billion in revenue related to retail subscriptions in 2017, which shakes out to about 65 million to 80 million Prime members. But how much of that should be allocated to the “free shipping” element rather than the “free streaming” component?
Retailer profiles were originally compiled for the EMA annual report, which Media Play News editors — through parent company JCH Media Inc.’s custom publishing division — also produced.
The Top 12 Home Entertainment Retailers
Amazon.com, the largest Internet retailer in the world, is also one of the leading sellers of home entertainment product, physical as well as digital. And its Amazon Prime Video service is a strong No. 2 to Netflix in streaming, giving subscribers unlimited access to thousands of movies, TV shows and other filmed content.
Amazon in April said it had exceeded 100 million Prime members globally since launching the $99 annual membership loyalty platform with free two-day shipping 13 years ago. Prime membership includes free access to Prime Video, Prime Photo, Twitch Prime (video games), Prime Now deliveries and Prime Music, among other services. Shortly after that announcement, Amazon bumped up its annual Prime membership fee by $20, to $119.
Amazon reported total 2017 sales of $177.9 billion, a 31% spike from the prior year. In July 2017 The Wall Street Journal reported that Amazon had about a 20% share of the digital sellthrough and streaming business, thanks to both its Amazon Prime subscription service and its standard Amazon Video catalog.
Amazon has promised an even bigger push into original content as it competes globally against Netflix and other SVOD platforms. In early 2018, JPMorgan’s Doug Anmuth estimated the company will spend $5 billion on video content this year, keying in on big-budget original shows and sportscasts.
In 2017, Amazon’s most-popular original content included the Oscar-winning Manchester by the Sea, the Emmy-winning series “Transparent,” and Amazon Studios’ Paterson. “We’re going to continue to invest in video and increase that investment in 2018,” CFO Brian Olsavsky said on an October 2017 earnings call. “We’re very bullish on what we’re seeing both with how customers are responding and the quality of the [original] content.”
More than a decade ago, Apple’s iTunes Store launched the digital sellthrough/rental market when its revolutionary digital music store, which opened in 2003, began offering video content. Today, the iTunes Store features more than 112,000 movies and 300,000 TV shows for sale or rent, playable across a broad array of Apple devices.
In July 2017 The Wall Street Journal reported that Apple’s share for selling and renting movies, TV shows and other video content has dropped to between 20% and 35% — down from over 50% as recently as 2012. Apple responded to requests for comment by the Journal by saying it focuses on providing users with content from HBO, Netflix and other subscription services through the App Store. Apple also told the Journal that its movie rentals and purchases had risen over the last year and had reached their highest level in more than a decade.
Despite revolutionizing digital media consumption, Apple until recently hadn’t put much focus on original content. Interviewed by CNN last March at the SXSW Film Festival in Austin, Texas, Eddie Cue, SVP of Internet Software and Services, said this is changing. “We’re completely all-in,” he told CNN, noting that Apple’s focus is on quality rather than quantity. “You need to have a great story,” he said.
Last year, Apple hired former Sony executives Zack Van Amburg and Jamie Erlicht to run its original content team — which over the past year has grown to about 40 people. Cue told CNN that Apple was after someone who “really knew the business but was also willing to think about it differently.” Since hiring Van Amburg and Erlicht, Apple has signed deals for more than 10 TV shows, many with big-name actors, producers and directors. Just this month, Apple inked a content deal with Oprah Winfrey.
Apple Services (which includes the App Store and iTunes) has been the fastest-growing revenue segment for Apple, adding 270 million customers in the latest quarter — up 100 million from the same period in the previous year. “Services is fast becoming Apple’s primary growth driver,” Morgan Stanley analyst Katy Huberty wrote in a May note.
The entertainment division of giant telecom AT&T includes TV streaming service DirecTV Now, in addition to pay-TV units DirecTV, AT&T U-verse and broadband. Both DirecTV and U-verse offer digital sales of movies to subscribers. In its year-end report for 2017, AT&T said DirectTV Now tallied 368,000 net adds to reach nearly 1.2 million DirecTV subscribers. DirecTV Now offers linear channels from major media companies such as A&E, AMC, CBS, Discovery, Disney, Fox, MLB, NBCUniversal, Turner, Univision and Viacom. The service also allows users to add on Cinemax, HBO, Showtime and Starz for an extra charge, giving them access to HBO Go, Showtime on Demand and Starz on Demand, respectively.
Meanwhile, AT&T has completed its acquisition of Time Warner (now called WarnerMedia), which includes Warner Bros., after a judge ruled June 12 that the merger could go forward. The U.S. Justice Department had sued to block the merger on the grounds that the combined companies would force rivals to pay more for “must-have” content from the Turner Networks, including CNN, TBS and TNT, and that the result would be higher prices for consumers.
Since the launch of DVD in 1997, Best Buy has been a key player in home entertainment software sales. The company was founded by Richard Schulze in 1966 and called Sound of Music before the name changed to Best Buy in 1983. Best Buy generates nearly $40 billion annually. Best Buy has more than 1,500 stores in the United States, Canada and Mexico, and contends that more than 70% of the population lives within 15 minutes of a Best Buy store.
In February 2018 Best Buy announced plans to close all of its roughly 250 smaller-format mobile phone stores by the end of May. Around the same time, Best Buy announced it will no longer sell CDs as of July 2018. But while observers fear cutbacks in DVD and Blu-ray Disc may be next, there has been no indication of this. Five years ago, CEO Hubert Joly said store floor space optimization mandated shrinking packaged-media space and redoubling emphasis on growth areas. But when asked about DVD and Blu-ray Disc, he said, “I love these categories.”
Today, the nation’s largest consumer electronics retailer continues to sell packaged media in stores and online — including 4K Ultra HD Blu-ray. In May 2018 the company said entertainment segment same-store sales for the first quarter were flat, after a 16.8% increase in the fourth quarter.
The entertainment segment, which includes products such as DVD and Blu-ray Disc movies, video game hardware and software, books, music CDs, and computer software, in Q1 generated just 7% ($589 million) of Best Buy’s $8.4 billion in domestic revenue.
Comcast Cable, the country’s largest cable TV company, also is a key player in digital movie sales, with an estimated 15% share of the market, according to a July 2017 report by The Wall Street Journal.
Comcast in 2013 became the first pay-TV operator to sell subscribers digital movies with the launch of its Xfinity X1 platform. As Michael Bonner, EVP of digital distribution at Universal Pictures Home Entertainment, told Home Media Magazine in January 2017, “Comcast’s 2013 entrée into EST was an unequivocal game changer for the digital sellthrough market. Overnight, Comcast took its place among the industry’s top digital retailers.” In December 2016, Comcast inked pacts with Lionsgate, Paramount Pictures, Sony Pictures and Universal Pictures to include bonus material and related movie extras long associated with packaged media. Access to the digital store is promoted through Comcast’s cloud-based X1 set-top. X1 upgrades include a so-called “smart” keyboard, a simplified transactional VOD folder, a personalized screensaver, a power saver and DVR.
Earlier this year, ABC News observed, “Comcast has turned its X1 TV set-top box into something resembling a Roku or Apple TV streaming player, complete with app-like menus and a voice-activated remote. During the Olympics, X1 merged both TV and online videos to give viewers a one-stop experience.”
Comcast has also embraced Netflix, with the streaming service launching on Comcast’s X1 cable set-top box in November 2016. Philly.com at the time said the launch “broadens consumer appeal for their respective services and helps Comcast with federal regulators who say that pay-TV companies should integrate traditional TV and streaming services on set-top boxes.”
Dish Cinema/Sling TV
Sling TV, the streaming TV service owned by Dish Network, was launched in January 2015, marking the first time a multichannel video programming distributor (MVPD) offered non-subscribers access to both live TV channels and on-demand content. Dish in February 2018 said Sling TV had 2.212 million subscribers as of the end of 2017, putting it well ahead of such
rivals as DirecTV Now (1 million subscribers as of December 2017), PlayStation Vue (455,000 as of December 2017), Hulu with Live TV (450,000 as of January 2018), and YouTube TV (300,000 as of January 2018).
Like other SVOD services, Sling TV allows users to choose between various tiers, with prices that start at $20/month for a small amount of channels and go up as more channels are added.
Google Play Movies & TV is an online video store considered one of the big four digital sellthrough dealers, along with Amazon, iTunes and Walmart’s Vudu. The store sells and rents movies, TV shows and other filmed content, as well as video games, digital music, magazines and newspapers, and various Android devices.
Google Play was launched in March 2012, bringing together the Android Market, Google Music and Google eBookstore under one brand. The services operating under the Google Play banner are Google Play Books, Google Play Console, Google Play Games, Google Play Movies & TV, Google Play Music and Google Play Newsstand.
Google Movies & TV periodically runs promotions, like the 2017 holiday season’s “The 12 Days of Play,” with 99-cent movie and TV show rentals.
In March, Google unveiled a major revamp of its Google Play Movies & TV app and an update to the Google Play Store itself “that show you which streaming services have the content available, in addition to whether it’s available for rent or purchase, as before,” according to Tech Crunch. “In the updated Google Play Movies & TV app, you’ll now find three tabs in the new bottom navigation bar which will direct you to your “Home,” “Library” or your “Watchlist.” The watchlist is a feature the app recently gained as well, but now it has a much more prominent position. As you browse through the app, you can click on titles to read more about them, as before, but now you’re also able to see where the item can be streamed.”
Hulu is one of the big three streaming giants, behind Netflix and Amazon. The SVOD service is jointly owned by Comcast Corp., 21st Century Fox, WarnerMedia and the Walt Disney Co. It offers two streaming subscription plans: one with limited commercials for $7.99 a month, and a commercial-free plan for $11.99.
Hulu has a big library of arthouse and foreign films, although its strength lies in TV series. Hulu offers next-day streaming of network TV shows and it is also developing a growing slate of original series, including “The Path,” with Aaron Paul of “Breaking Bad” fame, and the teen superhero drama “Runaways,” based on the Marvel comic book. In 2017 Hulu won eight Emmy Awards for “The Handmaid’s Tale,” a web television series about a dystopian future following a Second American Civil War in which women, called Handmaids, are forced into sexual and child-bearing servitude.
In May 2017 Hulu launched a live online TV platform, offering access to more than 50 channels for $39.99 per month. Those channels include ABC, CBS, FOX, NBC and local affiliates, along with Cartoon Network/Adult Swim, CNN, ESPN, FX, USA Network and many more. At the same time, Hulu announced that it had signed a deal with Scripps Networks Interactive to bring their channels — including Food Network, HGTV, and Travel Channel — into the on-demand and live-TV service.
In March 2018, Hulu launched a personalized March Madness experience that included push notifications for game start times.
Netflix is the 800-pound gorilla of the streaming world. Originally a disc-by-mail video rental service aimed at consumers frustrated with late fees and return trips to video stores, founder Reed Hastings took the monthly subscription model to the nascent streaming world in 2007 and never looked back.
Based in Los Gatos, Calif., Netflix expanded its rapidly growing subscription streaming business internationally, beginning with Canada in 2010, and within six years was operating in 190 countries. Netflix began producing original content in 2013 with its first series, “House of Cards,” and now vows to ultimately produce 50% of the content it airs.
CFO David Wells in February said Netflix will spend more than $8 billion on content in 2018 and expects to have around 700 original TV shows on the service worldwide this year, on top of 80 original movies.
Current hit digital originals include “Orange Is the New Black,” “13 Reasons Why,” “Arrested Development” and a reboot of the 1960s sci-fi series “Lost in Space.”
Netflix said it ended the first quarter (March 31) with 125 million subscribers worldwide. Hastings in March said the company expects to generate $15 billion in user fees in 2018 — almost twice the $8 billion it will spend on original content. Netflix now has more domestic subscribers than all of cable television, combined. Speaking at a Los Angeles tech event, he reiterated Netflix has no desire to pursue live sports — unlike rival Amazon Prime Video — focusing instead on original episodic programming and feature films.
In May, Netflix’s market cap hit $153 billion, higher than that of the Walt Disney Co. — which is planning to launch its own SVOD service in 2019.
Redbox is the country’s leading video rental dealer, operating not a chain of physical stores but, rather, a fleet more than 40,000 bright-red video rental kiosks at Walmarts, supermarkets and drug stores. Consumers can rent DVDs, Blu-ray Discs, video games and, in a growing number of kiosks, 4K Ultra HD Blu-ray Discs.
The Seattle-based company for years was at odds with studios that claimed its low-cost rentals cannibalized movie sales, prompting three of the six majors to institute month-long holdbacks. But those battles are now largely over, with all studios selling new product to Redbox — direct and either on street date or within a week of it — with the exception of the Walt Disney Co., which is suing the kiosk operator over the sale of digital movie codes.
Selling anything is new ground for Redbox. A little more than three years after abandoning a failed SVOD venture with Verizon, Redbox in December 2017 launched Redbox On Demand, a digital distribution service with more than 6,000 movie and TV show titles available for on-demand streaming or purchase and digital deals with all major studios except for Disney.
“Our customers come to us for that transactional experience — it’s Friday night, and they want to watch a specific movie,” Redbox CEO Galen Smith told Media Play News in January 2018. “We try to satisfy them with our kiosk network, but there are occasions where you might not want to go out and rent a movie from a kiosk. So rather than lose that transactional occasion, we’re giving them the chance to get it online.”
Making good on a promise it made in January at CES, Redbox in May announced the launch of 4K Ultra HD rentals in six test markets. 4K Ultra HD Blu-ray Discs rent for $2.50 per night, 50 cents higher than the rental rate for regular Blu-ray Discs (DVDs are $1.75). The test is rolling out across more than 2,500 kiosks in Los Angeles, Seattle, Austin, Detroit, Miami and New York City.
Target Corp. is the second-largest discount store retailer in the United States, behind Walmart. The Minneapolis chain, with 1,812 stores as of 2017, has long been a big seller of DVDs and Blu-ray Discs, and along with Walmart was a key player in driving mass adoption of DVD, using discs as a loss leader to drive traffic into its stores.
In February, Billboard reported that in the fourth quarter of last year Target told music and video suppliers that it wants to switch to scanned-based trading. As of Feb. 1, the chain only pays for DVDs after they are rung up at the register, Billboard says, with music suppliers sent down the same path two months later.
Unlike fellow mass merchant Target, Walmart Inc. shows no signs of cutting back on packaged-media sales. The footprint devoted to product has been reduced a bit over the years, but the company remains one of the top retailers of DVDs and Blu-ray Discs, as well as video games.
Based in Bentonville, Ark., Walmart as of Jan. 31, 2018, had 11,718 stores and clubs in 28 countries, operating under 59 different names. Of those stores, 4,761 are in the United States, accounting for more than 62% of total sales.
Walmart in February reported a low single-digit increase in same-store entertainment sales during the fourth quarter (ended Jan. 31), driven by the winter holidays. It was the strongest entertainment quarter in the fiscal year. (Walmart doesn’t disclose actual revenue figures.) “Entertainment” includes electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan contracts and prepaid service, DVD and Blu-ray Disc movies, music CDs, video games, and books.
In May, Walmart said U.S. comp-store sales were up 2.1% from the prior year, while total revenue for the quarter rose 4.4% to $122.7 billion.
Walmart also owns Vudu, a digital movie platform that celebrated its 10th anniversary in June 2017 by offering 10-cent movie rentals on select catalog titles. Other special offers included $4.99 weekend movie rentals and $10-and-under TV weekends. Vudu in March 2017 upgraded its app, giving users — for a fee — access to cloud-stored digital versions of their DVD and Blu-ray Disc collections from a smart phone or mobile device. Converting DVD to standard-definition or Blu-ray to high-definition costs $2 each, while up-converting DVD to HD (1080p) costs $5. The app effectively extends Walmart’s in-store disc-to-digital service, which was launched with studios in 2012. Consumers can also convert discs from a computer at Vudu.com.
In August 2017, Vudu arrived on Apple TV. The new app allows users to watch the movies and TV shows saved to their Vudu libraries, but like its iOS counterpart, the Apple TV version of Vudu doesn’t allow them to rent or buy videos through the app directly. Instead, they have to make a purchase through the browser or another device first.