|Source: “Blood Diamond,” Warner Bros.|
So, you think because your intentions are good, they'll spare you, huh?”—Danny Archer, Blood Diamond, Warner Bros., 2006
You may not realize it, but the entertainment food chain has changed dramatically over the past few years.
In fact, according to MPA’s (Motion Picture Association’s) head Charles Rivkin, it’s on the cusp of some fantastic growth. He reported in their recent Theatrical and Home Entertainment Market Environment (THEME) report that the industry grew a very healthy 24% since 2020 to $99.7 billion—even better than 2019’s results.
The production of new shows and movies by MPA members skyrocketed last year with more than 2,600 projects being released, with more than double that figure completed by non-members and indies. Moreover, 940-plus films entered production in 2021 in the US and Canada, in addition to the release of 1,800 original scripted series that included children’s programming, daytime dramas, and unscripted shows.
Good, but—Studios held their best tentpole projects for theaters first and home screens sometime in the distant future because they had to claw back as much as possible to deliver shareholders a return on their investments on the expensive films. The appeal was to the younger crowd; more specifically, guys.
Yes, a lot of those video stories went direct to home screens rather than the big, big screen, but for God’s sake, folks got used to the idea of instant entertainment gratification at home rather than trudging off to the movie house. Families had gotten used to paying for five streaming services (Ampere Analytics’ average) and still having access to a couple of free (ad-supported) services. At least it’s a known cost and much better than going to one of Adam Aron’s AMC theaters to see a killer flick like Tom Cruise’s long-awaited Top Gun: Maverick, which will fire up the afterburners beginning May 27.
AMC owns/operates 10,500 of the worldwide 200,000-plus screens, and Aron creatively thought outside the box by charging “a little more” (surge pricing) so people in the ticket booth can say “surprise!” when it comes to hot films people are starved to see. Waiting for 36 long years for Maverick (Cruise) to light up the big screen certainly qualifies. Now you—and more than a few studio execs—may call it greedy, but Aron prefers to call it being creative and imaginative.
We have an even more creative option for Aron… install a Vegas wheel of fortune by the ticket booth, and let the theatergoer spin the wheel and see where it lands. Now that’s creative!
Better, but—Last year, theater houses and studios around the world touted the fantastic increase in movie house attendance compared to 2020. They were better, but totals were terrible compared to the last decent year, 2019.
Even though ticket sales climbed dramatically last year ($21.3 billion—compared to 2020’s $11.8 billion), global box-office revenue was still down 50% compared to 2019’s $42.3 billion.
True to his out-of-the-box thinking, Aron recently invested $27.9 million in a hole in the ground. OK, it’s a gold/silver mine, but one hole (owning theaters) is as good as another (Hycroft Mining) as far as Aron is concerned.
Numbers can lie—While ticket sales have been on a downward trend for years, theater owners like to tout how much their box office steadily increases. Of course, they forget to note that they keep raising ticket prices and pushing concession sales.
As Nash Information Services has consistently reported in recent years, ticket sales have fallen steadily since 2002 while box-office receipts rose steadily until 2018, thanks to higher ticket prices and mouth-watering concession goodies. But even AMC’s Perfectly Popcorn hasn’t been enough to offset the rapid shift to streaming video services, which is probably why Aron came up with the idea of selling his popcorn delicacy at retail in shopping malls, grocery stores, and food delivery services.
A delicacy—AMC thinks its popcorn is so good that people want it even when they don’t put their seats in the movie chain’s seats, so they began selling it everywhere. Yes, it does taste good when you’re watching a movie on your big home screen.
It shouldn’t come as a surprise to anyone that the global home/mobile entertainment market is huge and getting even bigger. The number of global online video service subscriptions rose to 1.3 billion (multiple subscriptions per household) last year for an increase of 14% over the previous year.
Streaming dollars—Studios kept content developers/producers busy last year, turning out movies and series to keep up with streaming services’ (and consumers’) demand for new, original content.
Even though there are already well-established global streaming video services, there are 220-plus organizations jockeying for a larger piece of the home streaming market, as well an estimated two to three times that number of regional and local services.
Leaders everywhere—While there are a few (very few) global streaming service leaders, there are still opportunities for regional, local, and specialty video services to meet consumers’ ever-changing entertainment interests.
The rush to “get in on the ground floor” reshaped the entire content development, production, and delivery industries. Folks pulled back their content from those who started the industry (Netflix), so they turned around and set up long-term contracts with many of the M&E industry’s A-list creators/actors in Hollywood and major production hubs around the globe to produce 40% of the original content they offered in 2021.
By 2025, Netflix Co-CEOs Reed Hastings and Ted Sarandos estimated that 75% of their offerings will be original. And more than 214 million subscribers in 190 countries will be able to choose from more than 80 films and a growing list of series this year from studios and regional A-listers around the globe.
Genre varies—It’s a fact that not everyone likes the same thing, but there are certain film/series theme buckets that consumers like to dip into. Netflix knows that the best way to determine what subscribers want to watch next is by studying the data.
In addition to looking at data on the most popular genre globally and regionally, the company is also using its own secret sauce to determine which films/series to green light that will have the greatest chance for subscriber appeal to help grow their subscriber base and reduce subscriber shrink (switching to another service). OK, detailed subscriber data is the world’s worst kept secret, but by studying the information in painstaking detail, they are better able to predict which shows/series will best resonate with viewers around the world to optimize their project budget investments.
Does it work? It’s proven to be rather effective in helping them select and launch South Korean, Japanese, Indian, Spanish, Mexican, French, Nigerian, and other waves of content around the globe—especially in the Americas.
To expand their subscriber appeal, they also made a move into the online gaming industry, which is projected to be a $196 billion market this year according to NewZoo and is expected to have steady growth of 10% annually through 2025 and beyond!
It’s true, Amazon Prime has similar drill-down information on their 200 million-plus subscribers, but sometimes it’s difficult to determine if people want more Reacher, Upload, Hustle, or a new pair of boots. Of course, closing the $8.5 billion deal to add MGM to its inventory might make Andy Jassy, Amazon’s CEO, more anxious to replace Jeff Bezos on the red carpet so Bezos can play with his rocket ships.
Disney+ breadth—Easily one of the most widely recognized entertainment names around the globe, Disney has the depth and breadth of film/series content to tempt almost any viewer, anywhere. But even the mighty mouse is expanding its viewing subject categories to continue its global subscription growth.
Although Disney CEO Bob Chapek is finding it a little difficult right now in what he communicates/doesn’t communicate with his team and the outside world. He’s done a pretty good job of keeping the company’s content train on the track over the past years when no one seemed to know where the tracks were.
While his predecessor, Bob Igor, brought all the content pieces together—Disney, Marvel, Pixar, Star Wars, National Geographic, Fox, Touchstone, Lucasfilm, History Channel, Hulu (80% ownership), Star, and more)—Chapek and his team have been able to grow Disney+’s global subscriber base to more than 130 million in the past two years and plans to equal Netflix’s in the next few years.
|Source: Warner Bros. Discovery|
New big kid—With the merger of Warner Bros. and Discovery, the new streaming video (and movie house) provider has the potential of becoming one of the five leading content services around the globe. All they have to do is clean up some of the past messes, blend their far-ranging content into one branded service, and keep in mind that consumers, not bosses, control their future success.
Taking the reins of the new Warner Bros. Discovery, David Zaslav (Discovery boss) is bullish about bringing together two already-established streaming services—HBO Max and Discovery—to develop one of the strongest, most aggressive streaming services on the planet. His transition team is already busy reducing corporate overhead for the combined media assets, which his CFO, Gunnar Wiedenfels, is confident can “easily” produce $3 billion in annual savings for the new DTC (direct-to-consumer) company. But they’ll need to move more than that to the bottom line to justify Zaslav’s eye-watering compensation package of $246.6 million.
In the months ahead, the organization will be focusing on harmonizing the technology platforms, building one very strong/responsive service. You can expect the new organization to maintain (not increase) its content production spend over the next year or two and to also mend a lot of bridges with entertainment A-listers, which cost Warner a few hundred million dollars because of the actions of past team members.
Everyone in the pool—The streaming video market showed dramatic growth this past year for the movie/series producing industry, literally saving many of the organizations from closing their doors. Even with such great results, there’s still plenty of growth opportunity for the fledgling market around the globe.
MPA’s Rivkin noted that the young, emerging streaming content marketplace produced 72% of the M&E’s combined theatrical and home/mobile entertainment market. Pretty good growth for an industry started by a guy who was tired of licking red envelopes 17 years ago.
Now everyone is stepping up to say they are reinventing the way people watch their entertainment… any time, any place, any screen. With nearly two billion TV households worldwide and more than 5.68 billion people projected to have TV sets by 2026, there are still plenty of growth opportunities for global, regional, and local streaming services to sign up/retain at-home subscribers/viewers.
After all, “they” all say pay-TV is so yesterday… or is it?
Rivkin said appointment TV folks took in more than $328.2 billion in income last year, 6% over the previous year.
Don’t ignore—While streaming video services are the hot, sexy thing in the M&E industry, you can’t ignore the ongoing entertainment potential for pay-TV. There’s still plenty of potential profit in the good old reliable service.
In fact, pay-TV subscriptions were 70% of the total M&E market last year.
Not bad for a has-been!
While each segment player (theatrical, streaming, pay TV) can brag about their growth and potential for the future, it doesn’t make much difference to us.
What the THEME Report and every analyst’s projections tell us is that there are a lot of great opportunities for content developers, creators, producers, and postproduction folks in the years ahead.
|Source: “Blood Diamond,” Warner Bros.|
The one thing all those movie houses and program listings, as well as ad-supported and subscription services, need is the same thing… damn good content!
As Danny Archer said in Blood Diamond, “That’s for breaking my TV!”