Red Ink And Piracy Dominate The Landscape 19 Weeks Into 2023

The good news or the bad news first?

Let’s get the bad news out of the way.  One week ago, the new theatrical trend projection jumped up to a possible 523 new films hitting screens nationwide during 2023.   After posting 510 and 511, a move up to 523 was welcomed news.  This week, we are back to 510 and the number of top box films ($25 million plus; $100 million plus) dropped back to 64.  See chart below.

That’s the bad news.

The good news is writer/director James Gunn’s Guardians of the Galaxy Volume 3 (Disney) opened in top box territory with $118.4 million in ticket sales.

That was about all of the good news on the Disney front for the week.  The studio reported out earnings for the quarter, the last of the streaming studios to do so.  It wasn’t pretty.   There was a $659 million loss on the streaming front, coupled with a loss during the quarter of the number of subscribers to the Disney+ platform. 

That didn’t sit well with the investment community and before you could catch your breath and say “Jimmy Crickets” over $16 billion (that’s right, with a “B”) in stockholder equity was wiped out … you can expect that some of that will be recovered in the days and weeks ahead.

Warner Bros. Discovery reported a $55 million profit for the quarter for their streaming operation.   That’s fine, they also took a massive write-off during the period related to the merger of Warner Bros. and Discovery, and therefore the studio was not concerned with any tax liabilities for profits on the streaming front.

These were helped along by changing the amortization rate of film and series production investments … Harry Potter waved his wand and there was accounting magic.

In all fairness, that accounting change is legit and it did give Warner Bros. Discovery CEO David Zaslav sometime positive to talk about.  Indeed, both Disney and Warner in their quarterly earnings presentations touted an overall improvement in the loss trend for streaming.   Which, technically is true.

Last year, the studios lost roughly $800 million per month on their streaming obsession.   The first quarter of this year, the average loss for each of the three months was down to $606 million, so that is at least going in the right direction.

Streaming losses continue to mount, the theatrical release front is stagnant and the once dominate “Hollywood” studios presence in the home entertainment packaged media marketplace is but a memory.

For example, through the period ending May 12, 2023 (19 weeks into the calendar year), there have been 11,475 new DVD releases.  The “Hollywood” studios accounted for a combined SKU count of just 140 titles (which includes the soon to be history affiliate labels), or 1.22 percent of the release share. 

One-Point-Two-Two Percent … let that sink in. 

Traditional labels — legitimate sources, for lack of a better description (173 active during the period) —contributed another 1,271 new DVD titles during the same period, or 11.08 percent.  

This means that 87.7 percent of all DVD releases that took place during the first 19 weeks of 2023 fell outside of what analysts view as the home entertainment marketplace.  Revenue guesstimates are based on what is perceived to be the state of the home entertainment arena, as opposed to what it actually is.  

Release and asset management decisions are then made based on the view that consumers are no longer involved with DVD.   Just look at the studio counts … it is a self-fulling prophecy.

Right now, the release pattern is … maybe a theatrical run, immediately followed by streaming and then home entertainment packaged media for some, but not all film and series programming.   That sequence is not in line with the tried and true “Promo, Better, Best” system.

Best: A theatrical launch where the studio, with exhibitors, control the revenue stream and how the film is viewed.  

Better: The home entertainment packaged media follow-up, where once again the rights’ owner controls the revenue stream by selling individual copies of the production to consumers who are willing to pay a premium price for a DVD, or a Blu-ray, or a 4K Ultra HD edition of the movie.

Promo: All other forms of viewing … in the current world cable viewings have been replaced by streaming subscriptions to various platforms.

This model — which had its origins in the garment industry — has been tossed aside in favor of unsustainable losses.   Sure, blame the pandemic, but that nonsense has passed.  Nevertheless the insanity continues.

It is worth repeating … streaming losses continue to pile up, the theatrical release front is stagnant and the once dominate “Hollywood” studios presence in the home entertainment packaged media marketplace is but a memory.

But wait, we’ve been talking in terms of DVD.   Maybe the action is with the Blu-ray format, right?

For the same 19-week period, there have been 2,982 new Blu-ray arrivals.   The “Hollywood” studios churned out 138 new releases, or 4.63 percent of the total output.   Hardly leadership.

The traditional labels (132 active during the period) combined for 592 new titles, which accounted for 19.85 percent of the total.  

75.52 percent of the SKU counts for the Blu-ray format were outside of the traditional home entertainment purview … from an analyst POV, it didn’t happen … consumer activity is limited to what “we” see.

About now you are asking, “What’s all this phantom release activity?”  

It works like this, if you are streaming it, they will steal it.  Thank you very much for a pristine master of your film or series.  

Rights owners — the studios along with Amazon Prime, Netflix, Apple TV and others — are not releasing DVD or Blu-ray purchasing options to meet consumer demand.  If you stop releasing movies on DVD and Blu-ray, someone will fill the void. 

If you do not enforce copyright protections, then everything is in the public domain … you may think you own the rights to a film (or a series), but if you turn a blind eye to the enforcement of these rights, they are gone.

Returning to the DVD release front, for the first 19 week of 2023, there have been 8,088 pirated titles.   “Helpers” and “void-fillers” are having a field day to the tune of 70.48 percent of all new releases.   What is the dollar loss?   Who knows. 

When you are losing hundreds of millions of dollars each month on streaming, do you really care what you are losing elsewhere?

Blu-ray?   The “helpers” have delivered 1,939 pirated titles in just 19 weeks … that’s 65.02 percent of the total number of Blu-rays released so far in 2023.

If you are doing the math, there’s 17.22 percent of all DVDs (1,976 SKUs) and 10.50 percent of Blu-rays (313 SKUs) that are unaccounted for.   What?   How can this be?

When you add up the studios, the legitimate secondary labels and the “helpers” you come up short in the totals.  These missing SKU-counts are from broadcast specialists … micro-broadcasters, for lack of a better name.  They serve regional and local markets … some are actually pretty good at what they do.  

Consumers want things!  These micro-broadcasters have discovered this during the past 10 to 15 years.  

Think about it, what does it take to produce a baseball game?  A basketball game?   The girl’s high school lacrosse game?   The local high school (or regional college) is going to play the game anyway, but if you are broadcasting it on your local micro-broadcast network, all you need is a video feed and someone to do play-by-play (amateurs; volunteers; parents; fans … would be broadcasters in training).

They’ve discovered a market exits for this.  How much?   Who knows?   But it keeps expanding and this segment is nowhere to be seen on the home entertainment radar. 

It’s not just sports.   The local high school has a band concert, there’s a DVD.   Summer concert in the town’s park, there’s a DVD.  

Blu-ray too … during the first 19 weeks of 2023, these sources have put out more than twice the studio output on Blu-ray.   Micro broadcasters are putting out more Blu-rays than the “Hollywood” studios.   That’s crazy.  

They are not using Blu-ray for the HD benefits, but instead for storage capacity.  Ditto for the “helpers,” who will cram an entire 10-episode series on one Blu-ray disc.

Turning to this past week’s activities, what got pirated?   What were the studio “helpers” and “void-fillers” up to?

Dungeons & Dragons: Honor Among Thieves (Paramount), The Pope’s Exorcist (Sony Pictures) and Renfield (Universal) all got “help” with Blu-ray product offerings.   The Lucas Films Animation/Disney+ series, Star Wars: Visions, Season 2 got both DVD and Blu-ray releases from two separate “void-fillers” during the week.

The Vertigo Entertainment/Nuyorican Productions film production of director Niki Caro’s The Mother dropped on Netflix this past week and within hours it was available on Blu-ray. 

A Jennifer Lopez action film — with a production budget north of $20 million — skips theatres and you wonder why there are only 510 new theatrical releases projected for 2023.

Amazon Prime, Hallmark, Peacock, Netflix, Disney+ … and on and on all got clipped for DVD and/or Blu-ray releases this past week.

And, if that wasn’t bad enough, there is still no formal DVD, Blu-ray or 4K Ultra HD release date for director James Cameron’s blockbuster, Avatar: The Way of Water.   Disney must have their reasons.   Maybe next week we will finally have news.   Ditto for Prey, Mandalorian, Barbarian and more.