Specialist
Former EVP & Deputy COO at Metro-Goldwyn-Mayer Studios Inc (MGM)
Agenda
- Operating environment for independent studios, focusing on MGM Studios, Lions Gate and Sony – recovery outlook for theatrical
- Like-for-like comparison of theatrical release vs SVOD licensing and expected trends and preferences at studio level
- Downstream window profitability implications if box office fades in importance
- Outlook for 2021 and beyond – consolidation likelihood, value of library and downside risks
Questions
1.
What trends or drivers are impacting the broader studio landscape?
2.
Do you think a hard window of opportunity exists in the vertical integration trend? Will laggards need to partake in JVs, partnerships or consolidations to avoid jeopardising their long-term viability?
3.
Do you expect aggregate content spend to flatline? Content spend has been greatly increasing due to the proliferation of streaming services, but it seems that some of the streaming services can’t maintain this spend long term and the larger ones such as Disney+, Netflix and Amazon might not be able to fully make up the absence of that spend over the next 5-10 years.
4.
You mentioned the challenged environment for exhibitors. What are your expectations for the long-term haircut around admissions? Are there certain categories of movie-goers who are more likely to be gone long term or at least making trips to the theatres less often per year? Or will that not be a material impact?
5.
What changes would you expect to how a theatre business would be run if it were acquired by a company such as Disney?
6.
You mentioned franchise films are likely to stay in theatrical release long term as theatrical can drive buzz to generate revenues in parks and consumer products. Is it largely franchise film that drives that? What is the nuance even within franchise that will drive what stays theatrical vs what goes direct-to-platform as we consider for example the nuance that must have existed for Mulan vs Black Widow?
7.
How will the shortening of the theatrical window flow through to how exhibitors and studios are likely to strike business? Do you expect a lot of downside in favour of the studios over time? Could there be improvement for studios as exhibitors become less uniquely positioned as the sole distributors of the IP? What does that mean for the 55% box office revenue share?
8.
What economic differences should be considered about the AMC-Universal deal? Does the maths work for other studios? Will exhibitors have to settle with other studios?
9.
Are there any limitations around exhibitor viability? Consolidation will probably be necessary as exhibitors continue to secularly decline, which leads you to assume that Disney might seek to acquire. How contentious do you expect exhibitors to be about defending their revenue share?
10.
Do you think a lot of Disney’s franchise films are increasingly becoming four quadrant? WandaVision is arguably an example. How do you expect content to evolve due to seeking broader reach in the streaming environment?
11.
Is there any nuance you think is worth pulling out when we consider the various studios? It seems you can group Lionsgate, Sony and MGM together from a subscale distribution standpoint and Paramount, Universal, Warner Bros and Disney all intend scale up their respective streaming platforms.
12.
Which streaming platforms do you think can sustain themselves long term? You mentioned consumers probably won’t tolerate all the distribution channels that exist now, so how do you expect the market to consolidate?
13.
Do you think that the free aspects of user-generated content platforms such as YouTube and TikTok could have generational pricing power implications once their users become the crux of the streaming base?
14.
Is a lot of the hesitancy around the Hulu merger a function of Comcast’s continued stake and its option to cash out up to 2024? Do you think that merging Hulu into the Disney+ service is not of the utmost priority for Disney even if Comcast sold its stake in 2021?
15.
Do you think independent studios will still be able to stand alone over the next 5-10 years, or will they need to resort to JVs the way home entertainment did when it went through secular decline?
16.
Do you think that the way second-run deals and subsequent deals are structured will be margin
detrimental to agnostic sellers? How much waterfall will AVOD [advertising video-on-demand] platforms offer either on film or episodic television?
17.
Do you expect a convergence of premium video production and gaming licensing opportunities to evolve into full-fledged M&A?
18.
There was an USD 11bn box office domestically pre-coronavirus. Presumably if admissions go down that box office will get lower. What do you think that haircut might be? How much of it might get made up by pressing on the revenues shares? Will studios offset lost theatre revenue through alternative licensing opportunities?
19.
The major TV shows that drive subscriber acquisition and retention seem to typically cost around USD 10m per episode. Do you think there is potential for more to be co-produced over time? Is there propensity from the majors to self-produce those types of IPs longer term?
20.
Do you think studios have the appetite to spend more than USD 10m per episode? Will a lot of the increased spend over the next 1-3 years be driven by more shows on average or by more expensive shows?
21.
What is a better engine for driving strong ROI on content spend at Netflix? Is it a case of incredible subscriber scale and strong recommendation engines or consistently producing great shows? Netflix has had great success, with shows such as You, Lucifer and Cobra Kai – which were relative failures originally – becoming some of its top viewed shows. Is this going to move one way or the other long term?
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