June 16, 2019
Welcome to Media Play News’ second-annual look at the top home entertainment retailers. As we noted last year, technology and innovation have completely revolutionized home entertainment retailing in the more than 40-year history of this industry.
For the first 20 years, home entertainment retailing consisted first of a network of independent mom-and-pop videocassette rental shops, and then a handful of powerful national video rental chains such as Blockbuster Entertainment and Hollywood Entertainment.
The 1997 launch of DVD moved home entertainment retailing into the hands of the big mass merchants such as Walmart, which at one point controlled 40% of disc sales, as well as consumer electronics chains such as Best Buy.
But for the past 10 years, just as home entertainment viewing options have proliferated, the distribution pipeline has split into all sorts of different directions, with the only common ground being that filmed content, either digitally or physically, is being delivered to consumers on an on-demand basis.
Accordingly, studios that used to generate the bulk of their revenue through physical product sales to traditional retailers now have several other ways to generate money from their content. With transactional video-on-demand (TVOD), particularly digital sales, on an upswing, digital-only retailers such as Microsoft Movies & TV and Google Play Movies & TV have become an increasingly important component of the home entertainment food chain.
Similarly, the rise of subscription streaming, led by Netflix, Amazon Prime and Hulu, has led to a whole other source of studio revenue. Since streamers also distribute content — or, rather, access to content — to consumers, they, too, can be considered “retailers.” That’s in accordance to the Merriam-Webster definition of retail, which is “the sale of commodities or goods in small quantities to ultimate consumers.”
In short, retailers today are any enterprise that connects consumer eyeballs to filmed content produced by the studios and independent content suppliers.
“Clearly, technology is increasingly enabling consumers to view content in a rapidly increasing number of ways,” says Eddie Cunningham, president of Universal Pictures Home Entertainment. “It is our job, as distributors, to ensure that we are not only servicing these new retail opportunities but are helping them grow, while continuing to support the more-traditional retail formats that still appeal to large swathes of the population.”
“The definition of ‘retailer’ may have evolved, but as content providers our mission remains the same — to deliver great entertainment to consumers in all the ways they choose to enjoy it,” adds Bob Buchi, president of Paramount Home Entertainment. “While that has certainly become more complex, the good news is that we work with an extraordinary group of retailers whose expertise ensures we can reach every consumer segment. Whether buying or renting, on digital or physical, consumers have more choice and flexibility than ever before.”
Mark Fisher, president and CEO of the Entertainment Merchants Association (EMA), says he’s always maintained that home entertainment is about convenience and value. “The digital retail experience, in itself, offers the consumer the convenience of aggregation across studios, just as it does in physical stores,” he says. “And each retailer creates its own unique value proposition for the consumer. What impresses me most is how the home entertainment retail sector uses its deep understanding of its consumers to continuously recalibrate the convenience and value equation to respond to the ever-evolving delivery mechanisms and changing consumer desires.”
The 2019 edition of Media Play News’ “Top Home Entertainment Retailers: The Golden 12” — selected by Media Play News researchers based on consumer spending estimates — remains largely unchanged from last year. The exception is the addition of Microsoft Movies & TV, which according to several key studio executives is now bigger than Best Buy, Target and Dish/Sling TV.
Dish/Sling TV drops to the “bubbling under” list of eight other key retailers — not as mighty as the Golden 12, but still important. On the bubbling under list, troubled Trans World Entertainment has been replaced with Meijer Inc., a supercenter chain throughout the Midwest, which was founded in 1934 as a supermarket chain and is credited with pioneering the modern supercenter concept in 1962. Insiders say the chain last year outperformed the category by 10 points and even grew the catalog business.
And growing the business — parts of the business, such as catalog, as well as the overall business — is really what it’s all about, for content providers as well as their retail partners.
“In our business of delivering premium content to global audiences, our relationship with our retailers is the key to our success, and as our business continues to evolve, so does the retailer’s,” says Mike Takac, EVP and general sales manager for Warner Bros. Home Entertainment. “Whereas endcap or corrugate placement are critical for our physical product, now carousel placement or targeted CRM efforts with our digital clients’ platforms are equally important. Additionally, we are continually challenging them to keep pace with our ever-changing high-definition digital product offerings, and they are proving to be up to the challenge.”
The Top 12 Home Entertainment Retailers
As the largest Internet retailer in the world, Amazon has its hands in everything entertainment. It is one of the leading sellers of home entertainment product, physical as well as digital.
Amazon offers a huge selection of new Blu-ray Discs and DVDs, with new titles available every Tuesday, the traditional “street date” for packaged media. The company recently sweetened the free shipping deal to next-day delivery instead of two-day.
Amazon also offers transactional (both purchase and rental) and subscription streaming through Amazon Prime Video, continuing to forge partnerships with cablers such as Cox, which added the service to Contour, and Comcast, which added it to the X1 platform. Amazon Prime also has been a supporting retailer of the digital library service Movies Anywhere since its 2017 launch. Keeping an eye on the hot ad-supported streaming trend, Amazon launched an AVOD service through its subsidiary IMDb.com in January. Meanwhile, Amazon Channels aggregates numerous other streaming services from top content suppliers.
Amazon Prime Video has been one of the biggest competitors to Netflix in streaming, coming in No. 2 in estimated domestic subscribers, according to Parks Associates estimates last fall.
U.S. subscribers have surpassed 100 million, according to Amazon, with eMarketer recently estimating 26 million of those used the video service (and not just free shipping) in 2018. The firm also found Hulu had taken over the No. 2 spot in domestic streaming from Amazon, but only by a slim margin of less than 1 million subscribers. Whether No. 2 or No. 3, Amazon continues to be a prime player in originals, including recent films such as Beautiful Boy and series such as “Jack Ryan” starring John Krasinski, “Homecoming” starring Julia Roberts, and “The Romanoffs” from the producer of “Mad Men.” Amazon Studios’ Cold War was recognized for three Academy Award nominations this year, including Best Foreign-Language Film. Amazon content also picked up 10 Golden Globe Award nominations and two wins in 2019: Rachel Brosnahan for Best Actress in a Television Series — Comedy or Musical for “The Marvelous Mrs. Maisel” and Ben Whishaw for Best Supporting Actor in a Series, Limited Series, or Motion Picture Made for Television for A Very English Scandal. Next up is a “Lord of the Rings” original series.
On the packaged-media side, Amazon led with deals. During its Prime Day promotion in July, these included hundreds of $14.99 4K UHD Blu-ray movies, as well as discounted boxed sets, such as The Godfather three-movie collection ($10.20), Game of Thrones: Seasons 1-7 ($74.99) and the Harry Potter Complete 8-Film Collection 4K UHD ($79.98).
Apple TV (formerly Apple iTunes)
Less than three months after the June 2006 launch of Blu-ray Disc, Apple’s then 3-year-old iTunes Store birthed the digital movie sales business. More than a decade later, the service has a lot more competition — including a split focus with Apple’s impending Apple TV+ subscription streaming service scheduled to launch this fall. In an elaborate event featuring such stars and filmmakers as Steven Spielberg and Oprah Winfrey, Apple announced Apple TV+ would feature original content, as well as access to 100,000 iTunes titles and third-party online TV channels and SVOD services.
In June, during its annual developers conference, Apple announced it is retiring the iTunes brand and is replacing it with separate macOS apps: Podcasts, TV, and Music. Apple TV will be the new home of filmed content. The new service is expected to maintain its strong footprint in electronic sellthrough and transactional rentals despite the expanding digital marketplace. Apple TV is the new home to a still-growing library of what now numbers about 112,000 movies and 300,000 TV shows for sale or rent. A “Family Sharing” feature lets up to six people in a family share each other’s iTunes purchases. Apple also has supported the digital library service Movies Anywhere since its launch in fall 2017.
Apple markets aggressively around theatrical releases. For instance, for the release of Captain Marvel, the iTunes store discounted numerous Marvel movies, dropping the purchase price to $14.99 for such recent hits as Black Panther, Avengers: Infinity War and Ant-Man.
Apple’s movie service has also made inroads in the consumer electronics space. On the eve of the January CES in Las Vegas, Samsung Electronics announced Apple movies and TV shows availability and Apple AirPlay 2 support on 2019 Samsung Smart TV models.
The entertainment division of giant telecom AT&T Inc. 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.
DirecTV Now ranks No. 10 in number of domestic OTT subscriptions, according to Parks Associates and eMarketer. The service reported 1.5 million subs at the end of March. AT&T in April raised DirecTV Now’s monthly price from $39.99 to $49.99 and suffered sub losses. 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. Epix in May announced it would join the DirecTV and DirecTV Now team.
Meanwhile, AT&T has completed its acquisition of Time Warner (now called WarnerMedia), which includes Warner Bros., and is preparing for a fourth-quarter soft-launch of a branded subscription streaming video service. AT&T CEO Randall Stephenson in May said the company will look to partner with — rather than antagonize — third-party pay-TV operators with the new service, which he said would be centered on HBO and be included with a pay-TV subscription. Still, a report from The Informant in May quoted anonymous sources saying key shows would hit the new streaming service before cable. “The streaming service is going to be king,” one of the sources told The Informant.
Best Buy, which has more than 1,200 stores in the United States, Canada and Mexico, has been a key player in packaged-media sales since the launch of DVD in 1997 triggered a shift in consumer habits from rental to purchase.
The nation’s largest consumer electronics retail chain reported a 12.7% drop in domestic same-store entertainment sales to $424 million for the quarter ended May 4; sales dropped 14% internationally. The business unit includes DVD/Blu-ray Disc movies, video game hardware and software, books, and computer software. Still, the news came on the heels of a better fourth quarter for the chain’s entertainment unit. Best Buy in February reported a 2.7% increase in domestic fourth-quarter (ended Feb. 2) entertainment comparable store sales. The entertainment segment generated 10% ($1.34 billion) of Best Buy’s $13.4 billion in domestic revenue for the quarter.
Internationally, same-store entertainment sales dropped 2.5%, representing 9% ($117 million) of international revenue.
Indeed, the fourth quarter holiday season is a key disc promotional period for the chain, in which consumer enthusiasts can pick up discounted titles on DVD, Blu-ray and even new format 4K UHD (sometimes at around $10) as well as consumer electronics. Last year, the chain mounted a “20 Days of Doorbusters” fourth-quarter promotion, offering text alerts to customers about big deals. Throughout the year, the chain offers special treatment to various home entertainment discs, most notably Steelbook editions of key titles. Best Buy this month is taking Steelbook preorders for Fox’s Alita: Battle Angel (due July 23), Paramount’s Pet Sematary remake (due July 9) and Disney’s Cinderella (due June 25) and live-action Aladdin, which doesn’t yet even have a home entertainment release date.
Comcast Corp., the country’s largest cable TV company, also is a key player in digital movie sales, with its Xfinity Digital Store. Way back in 2013, Comcast was the first pay-TV operator to sell subscribers digital movies with the launch of its Xfinity X1 platform, and in December 2018 it became the first pay-TV service to join digital movie collection locker Movies Anywhere. Access to the Xfinity Digital Store is promoted through Comcast’s cloud-based X1 set-top. In December 2016, Comcast inked pacts with Lionsgate, Paramount Pictures, Sony Pictures and Universal Pictures to include bonus material and related movie extras on digital releases.
Comcast has been a little slower than others, notably Disney, WarnerMedia and Apple, to embrace the over-the-top market, with executives maintaining its legacy cable pay-TV service and Xfinity X1 set-top box offer superior content and access options. But in March Comcast Cable joined the OTT video ecosystem with the launch of Xfinity Flex — a $5 monthly service offering Xfinity broadband-only subscribers direct access (for a separate fee) to Netflix, Amazon Prime Video and HBO Now, in addition to ad-supported content, and digital movies for sale and rent.
Xfinity Flex comes with more than 10,000 free online movies and TV shows — including live streaming TV — from ESPN3, Xumo, Pluto, Tubi TV, Cheddar, YouTube and more. In January, Comcast CEO Brian Roberts announced it would launch a free streaming service for its pay-TV subs in 2020 offering current and prior seasons of NBC Universal programming, some original content and a “light” advertising load.
Meanwhile, in other OTT news, Comcast Dec. 5 announced the launch of Amazon Prime Video on its broadband-based Xfinity X1 platform, joining Netflix and YouTube as major third-party over-the-top video services afforded direct access to Comcast subscribers.
Google Play Movies & TV
Dedicated to the transactional VOD space, Google Play Movies & TV is a digital retailer that sells and rents movies, TV shows and other filmed content. It is part of Google Play, which launched in March 2012, bringing together the Android Market, Google Music and Google eBookstore under one brand. Other services operating under the Google Play banner are Google Play Books, Google Play Console, Google Play Games and Google Play Music.
Like the other Google Play services, Google Play Movies & TV uses the power of the cloud to manage digital entertainment — so customers can access their movies and TV shows on their phones, and have them available instantly on their computers, tablets or connected TVs. It has also been a participating retailer in the digital library service Movie Anywhere since its inception in 2017.
On the promotional front, the service has offered 99-cent movie and TV show rentals around holidays such as Thanksgiving and to power users of its site. In advance of the 91st Academy Awards, Google Play offered deals on past Oscar-winning movies as well as the latest Oscar-nominated films. Google Play also featured apps and games inspired by the Best Picture nominees.
Its 4K upgrade feature particularly pleased movie enthusiasts. Last October the service announced in a blog posting that when 4K titles are available, Google Play will automatically upgrade customers’ past movie purchases “so you can stream in 4K, even if you originally bought the movie in SD or HD.” The blog added, “It’s all on us, just open the Play Movies & TV app and we’ll let you know which titles have been upgraded.” Google Play also announced a price drop for 4K movies, with prices as low as $14.99 to own (and $4.99 to rent).
In addition to 4K Sony Bravia TVs, the app is available on most 4K Samsung Smart TVs. In addition, the Google Play app for Samsung, LG and Vizio TVs has been updated.
Hulu is one of the big three streaming giants, vying with Amazon Prime behind Netflix. The biggest news for Hulu in the past year is its acquisition by previous co-owner the Walt Disney Co. Once jointly owned by Comcast Corp., Fox, WarnerMedia and Disney, Hulu saw its number of owners shrink to one, as Disney acquired 20th Century Fox Film Corp. and the other owners relinquished their stakes. Disney reportedly plans to use Hulu as an outlet for more mature content that doesn’t fit into its planned Disney+ SVOD service launching at $6.99 a month in November.
Hulu offers three streaming subscription plans: one with limited commercials for $5.99 a month, a commercial-free plan for $11.99, and the limited commercials service plus Hulu Live TV for $44.99 a month. The Live TV platform, which launched in May 2017, offers access to more than 60 channels, including ABC, CBS, FOX, NBC and local affiliates; Cartoon Network/Adult Swim; CNN; ESPN; FX; and USA Network.
Hulu has a big library of films, although its strength lies in TV series. Hulu offers next-day streaming of network TV shows and a growing slate of original series, including “The Handmaid’s Tale,” “The Act,” “Catch-22,” “All That We Destroy” and “Ramy.” Hulu also has expanded its Marvel partnership with two new live-action series, “Ghost Rider” and “Helstrom,” slated to debut on Hulu in 2020, joining Marvel’s “Runaways” and an animated slate. Not coincidentally, Netflix is ending its Marvel shows as Disney expands into streaming via Hulu and Disney+.
Hulu on May 1 said it has 28 million subscribers, including 26.8 million paid and 1.3 million promotional accounts.
Microsoft Movies & TV
Microsoft Movies & TV is one of the top players in the digital transactional rental and purchase market, offering hit movies and TV shows. Consumers with a Microsoft account can rent or buy content from the Microsoft Store on Xbox, Windows and Microsoft.com and it will appear in the Movies & TV app on Microsoft devices.
In August, Microsoft Movies & TV became the sixth digital retailer to join the digital rights locker service Movies Anywhere, allowing film fans to sync their Microsoft account to Movies Anywhere and centralize their digital movies purchased from Microsoft alongside those purchased from other connected retailers. Microsoft joined Apple iTunes, Walmart’s Vudu, Amazon Prime Video, Google Play and FandangoNow in supporting the service.
Movies on Microsoft Movies & TV are offered in 4K UHD with HDR or 1080p HD across a wide variety of genres. Titles can also include bonus content such as director’s commentaries, deleted scenes, and interviews with the cast and crew.
TV shows, some offered the day after they air on broadcast networks, can be purchased by episode or via a season pass to save up to 30% per episode with the latest episodes automatically delivered to the consumer’s library.
Netflix has graduated from founding king of subscription streaming to a disrupter of the entire studio system — and now the studios and others with deep pockets are coming for it. Disney with its impending SVOD service Disney+ and consolidation of Hulu ownership; WarnerMedia with its own impending SVOD service; and Apple with its Apple TV+ streaming service are among the entities lining up to join Amazon Prime in challenging the Netflix kingdom starting this fall. Netflix executives in April said they were “excited to compete.”
As of now, Netflix ranks No. 1 in domestic subscribers, according to both Parks Associates and eMarketer estimates. Netflix ended the first quarter of 2019 with a total of 148.86 million paid subs: 60.2 million domestic and 88.6 million international. And that’s as the service raised prices domestically. Back in January, the company upped its monthly basic $7.99 single-viewer, non-HD plan to $8.99; the standard $10.99, two HD streams plan rose to $12.99; and the premium $13.99, four-stream HD plan was increased to $15.99. Meanwhile, Netflix’s legacy by-mail disc rental service continued to generate significant operating income, contributing $46.7 million in operating income on revenue of $80.6 million in the quarter ended March 31. The service ended the period with more than 2.5 million disc subs.
Netflix also rattled the Academy of Motion Picture Arts and Sciences’ board of governors, which in April announced it would continue to welcome movie nominations from streaming services, such as Netflix, despite protests from luminaries including Steven Spielberg, who argued for more stringent requirements for any film considered for an Oscar. At the 2019 Oscars, Netflix racked up three awards (though not yet a Best Picture) for Alfonso Cuarón’s Roma.
On the originals front, Netflix made good on its promise to continue to spend billions. The service made deals with the production companies of Regina King, Dark Horse Entertainment, and Michelle and Barack Obama, among others, and planned series with the likes of Mike Myers and the director of the popular “High School Musical” franchise. Meanwhile, Bird Box, starring Sandra Bullock, was streamed by more than 80 million households worldwide (26 million domestically) in its first four weeks, Netflix announced in January — a rare peek into actual viewership of Netflix.
With more than 5 billion rentals to date, Seattle-based Redbox is the leading rental chain in the United States. The company offers DVD, Blu-ray Discs and video game rentals from $1.75 a night through more than 41,500 self-service entertainment kiosks stationed outside Walmarts, supermarkets and drug stores.
On the digital side, Redbox On Demand offers movies and TV shows via electronic sellthrough and streaming rentals, without a subscription. Launched just a year and half ago, the service was established as a complement to the disc-rental kiosks to service transactional customers who don’t want to travel to a kiosk. Nearly 60% of Redbox On Demand consumers are people who have either stopped renting discs at Redbox kiosks or never patronized Redbox before, Redbox CEO Galen Smith says. And the new arm of the company is expanding aggressively. Redbox apps are featured on all Vizio SmartCast TVs and on TVs made by Samsung and LG. The service has grown its library since launch to include more than 12,000 titles.
Redbox has also stepped up its marketing. In one continuing campaign launched in August 2018, the company is extolling the virtues of watching movies together (an activity facilitated by Redbox). Called “Back to the Movies” and informed by research that found 61% of Americans miss days when movie nights were a planned activity with family and friends, the campaign is aimed at combating digital isolation and creating meaningful consumer dialogue around the power of movie nights in bringing people together. It has been promoted through video spots on social media, among other efforts. Next up, engaging studio partners in the cause and a wider media campaign.
Also, in a major strategic expansion this year, Redbox in April announced its first exclusive, Bob Saget’s film Benjamin. The dark comedy bowed exclusively on Blu-ray Disc and DVD at Redbox kiosks nationwide April 23. On the same day, the film was available for a la carte streaming or digital purchase on Redbox On Demand. The film was the first “Redbox Original” released on Redbox On Demand.
Target Corp. is one of the largest discount retailers in the United States, with more than 1,800 stores. Like Walmart, Target has long been a big seller of DVDs and Blu-ray Discs, and in the early days of DVD drove mass adoption of discs by using them as a loss leader to drive traffic into stores.
Target is also known as a strong merchandiser of discs, routinely placing them on endcaps by the cash registers. This past January, Target wheeled out a display of titles from the previous year with the banner “Rewind: Best of 2018.” Titles such as Crazy Rich Asians, Smallfoot and Mamma Mia! Here We Go Again were offered on DVD and Blu-ray Disc for up to 40% off.
In a shot across the bow at online behemoth Amazon, Target during the holiday season announced it would offer free two-day shipping on hundreds of thousands of items with no minimum purchase and no membership requirement beginning Nov. 1. Free two-day shipping had previously only been available to customers who spent $35 or used the chain’s proprietary Red Card.
Walmart Inc. is still the big brick-and-mortar goliath in packaged-media sales, with more than 5,000 outlets in the United States and more than 6,000 international stores. 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.
Among other promotions, the chain continues to offer exclusives such as an April $22.96 DVD collection of three movies teaming Will Ferrell and John C. Reilly — Holmes & Watson, Step Brothers and Talladega Nights: The Ballad of Ricky Bobby; or a Lego mini-figure packaged with the May release of The Lego Movie 2: The Second Part. In another recent exclusive, Walmart May 21 began offering Universal’s faith-based Run the Race, a family drama executive produced by athlete Tim Tebow and his brother Robby Tebow, on Blu-ray and DVD a month before its availability on disc at other retailers nationwide June 18. Boosting its entertainment departments, Walmart last October also started the rollout of collectibles sections selling movie, TV show and pop culture-themed merchandise.
On the digital-delivery side, the chain owns Vudu, a transactional digital movie platform that celebrated its 10th anniversary two years ago, but Walmart reportedly toyed in the past year with starting a branded over-the-top streaming service and then scuttled those plans. Still, the chain has just hired Suresh Kumar to a “new elevated” chief technology officer and chief development officer role, with experience at Google, IBM, Microsoft and Walmart nemesis Amazon, who reports directly to president and CEO Doug McMillon. Reports also say the chain is looking into original productions for streaming. Meanwhile, Vudu, which is a founding digital retailer in the digital locker service Movies Anywhere, continues to be Walmart’s digital standard-bearer. In addition to movies to buy or rent, Vudu also offers ad-supported free streaming of a selection of titles, and pundits have speculated that business is set to expand.