Only Disney, Universal Offset Decline in Home Entertainment With Streaming Dollars

Finding Dory Disney
Courtesy of Disney

Home entertainment revenue for the major movie studios has shrunk in recent years as consumers switch from DVDs and Blu-ray discs to streaming video. In theory, revenue from licensing movie rights to TV and subscription-VOD providers like Netflix should be increasing to make up the difference, but for several big studios that isn’t happening.

The major movie studios tend to report revenue in three big buckets: box office, home entertainment, and TV licensing. Box office may make up only one-third to half of the total, with home entertainment and TV licensing accounting for the rest.

A look at those percentages and how they’ve changed over the past four years for five of the major studios shows significant variance. While Disney made up to 72% of its movie revenue from home entertainment and TV licensing over that period, Lionsgate made just slightly more than half of its revenue in those two areas.

sources: Company Reporting, jackdaw research Analysis

For the six studios that provide enough detail in their financial reporting to measure the trend, total home entertainment revenue dropped from $8.4 billion in 2012 to $7.2 billion in 2015, falling over each of the last three years.

Meanwhile, TV licensing has risen over the same period, driven by the big budgets for content at Netflix, Amazon, and Hulu. The total revenue in this category for the six studios rose from $7.3 billion in 2012 to $8.7 billion in 2015, more than offsetting the shrinkage in home entertainment revenue.

On the face of it, that sounds like good news, because there’s growth overall between these two categories. But in reality, the benefits of that shift are unevenly distributed among the major studios, with some struggling to make their content pay in a streaming world.

An examination of the combined home entertainment and TV licensing revenue for each of the six studios over the past four years indicates that Disney has fared by far the best, benefiting from big deals for library content with SVOD services and riding the home entertainment coattails of its major recent box office successes.

sources: Company Reporting, jackdaw research Analysis

Universal was the only other major studio to see a broadly positive trend in combined home entertainment and TV revenue during this period, with 2016 looking strong for the first three quarters off the back of a robust 2015 performance at the box office.

Meanwhile, Warner Bros. and Paramount have trended steadily downward over the past three years, and Lionsgate has been down over the last two. These studios simply haven’t made the deals or had the quality content needed to drive home entertainment and TV licensing revenue, failings that have led to the biggest overall declines.

Some have criticized Disney for signing away its lucrative movie rights to Netflix. But at this point, that’s looking like a smart deal, driving far higher post-theatrical revenue at a time when others are struggling.

Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.