For the first time, financial results for Sony Pictures Television’s Crackle have been made public — and the free, over-the-top streaming network appeared to be in the black, at least for the first quarter of 2019.
The disclosure came from Chicken Soup for the Soul Entertainment, which this week assumed control of Crackle as majority owner under its joint venture with Sony, as first reported by Variety. The deal closed May 14.
CSS Entertainment, a subsidiary of the company that owns the “Chicken Soup for the Soul” book franchise, provided pro-forma estimates that included Crackle, as if the service had been part of the company’s business for that period, in reporting its Q1 2019 results.
According to the unaudited financial results, Crackle took in revenue of approximately $11 million for Q1 and had operating income of $3.5 million, as well as adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $3.4 million.
Industry sources have said that Crackle was burning through significant amounts of cash. It’s possible that the results as reported by CSS Entertainment exclude certain off-balance-sheet investments or content costs.
CSS Entertainment chairman and CEO Bill Rouhana, in announcing the results Wednesday, said it presented the pro-forma results “to allow investors to understand the impact of the Crackle transaction. We believe the estimated pro forma information presented herein is the best currently available indicator of our business and validates our excitement for, and demonstrate the potential of, the joint venture.”
The question is, with the transition to the new joint venture, whether Crackle will continue to deliver the same levels of performance. Rouhana has told investors he intends to cut back Crackle’s operating costs under the new joint venture.
Without Crackle, CSS Entertainment’s revenue for the quarter ended March 31, 2019, was $2.5 million — a 58% decrease from $6.0 million in the year-ago period. The company said the year-over-year decrease was the result of “an exceptionally successful first quarter in 2018 due to episode completions getting pushed from Q4 2017 into Q1 2018 and also due to a successful film that generated significant revenue in the distribution business in Q1 2018.” The company’s adjusted EBITDA for Q1 was -$900,000 compared to $1.6 million in the year-earlier quarter.
CSS Entertainment previously said it expects Crackle to more than double overall revenue. In 2018, CSS Entertainment reported sales of $27.8 million.
Under the terms of the deal, CSS Entertainment issued Sony the right to purchase 4 million shares of Class A common stock of CSS Entertainment at various prices.
Sony Pictures Television and CSS Entertainment are calling the new venture “Crackle Plus.” They currently don’t own the rights to crackleplus.com but CSS Entertainment claims this is a non-issue because that won’t be the consumer-facing brand.
CSS Entertainment will continue to run Crackle as a free, ad-supported VOD service, consolidating operations with its other ad-supported platforms including Popcornflix, Popcornflix Kids, Popcornflix Comedy, Frightpix, Espanolflix and Truli, as well as subscription VOD platform Pivotshare.
Under the deal with SPT, TV series and movies from the studio’s library will be licensed to Crackle Plus. Rights to Crackle’s originals, which have included “The Oath” from executive producer 50 Cent and “SuperMansion,” a stop-motion animated series featuring Bryan Cranston, will be retained by SPT but will be made available for licensing to the joint venture.
All told, Crackle Plus in the U.S. has a combined audience of nearly 10 million monthly active users and over 26 million registered users (combining Crackle and the other AVOD networks). The OTT venture has access to over 38,000 combined hours of programming, including access to SPT’s library assets. CSS Entertainment plans to bring at least two original series — “Hidden Heroes,” originally slated for CBS, and “Going From Broke,” a financial show about of millennials executive produced by Ashton Kutcher — to its own AVOD networks.
In 2008, Rouhana, who previously founded and was CEO of telecom provided Winstar Communications, acquired Chicken Soup for the Soul LLC from Mark Victor Hansen and Jack Canfield, the creators of the best-selling “Chicken Soup for the Soul” book series. Privately held Chicken Soup for the Soul LLC is the parent company of CSS Entertainment, whose shares are Nasdaq-traded.