Welcome to the Hannover House Investor Relations Blog

Sunday, January 18, 2015

Sunday Thoughts - Pre-MLK Day

Greetings HHSE Friends & Followers - There's so much happening at Hannover House - both from a release standpoint to new ventures and corporate governance - that it can be daunting to follow for some shareholders.  Over the past couple of weeks, there have been requests for HHSE to make predictions of Q1 / Q2 revenues, including title-specific forecasts.

As stated previously, we have found that title-specific forecasts can be a dicey subject to predict... so many factors can impact the retail market's receptivity to a title... from street date and pricing, to genre' and packaging.  The biggest issue for non-blockbuster DVD and Blu-Ray releases seems to be selecting a release window with the least amount of similarly-themed competition.

Most of the titles that Hannover House distributes are - candidly speaking - titles that the major retailers COULD survive without carrying.  Not that we want such an outcome, but that we must admit that shoppers at Best Buy are far less likely to boycott that chain if Best Buy decided NOT to carry "Valley of the Witch" as opposed to Best Buy deciding NOT to carry "The Avengers."  The latter had huge box office momentum leading to its home video release; the former example did not. Accordingly, the strategy behind selecting new releases is a delicate dance, and one which must often be adjusted based upon the ever-changing competitive marketplace.

Listed below are FIVE (5) titles that HHSE will be releasing to theatres in the next few months - all of which will hit the home video market in Q3 or Q4.  Below these theatricals is a list of SIX (6) titles that are considered to be the "locomotive" major theatrical titles for HHSE for late 2015 and into early 2016.  These are much-higher profile titles than the Company has ever previously released... and several are "event-level" releases with the potential impact to elevate the Company's stature substantially.

Below the Theatrical Releases and the Film Productions are FIFTY-TWO (52) video releases that HHSE and / or Medallion Releasing are representing on an exclusive basis for all primary retailers and wholesalers.  It's a LOT of product - five of which titles are shipping out RIGHT NOW to key accounts - and this video line up represents a very likely gross revenue target in the realistic-and-obtainable range of $8-mm.  This forecast is NOT counting revenues from theatricals, VODwiz, publishing, international and production income - or from the other titles in the catalog (nor from those titles that are already acquired, but not yet listed below).  It's a MAJOR leap forward for Hannover House to go from a boutique distributor - with only a handful of titles each year - to being a mini-major independent powerhouse, with 50+ titles in solicitation for the FIRST HALF of 2015.  Very exciting times.

One title that you will not see in the listing of exclusive rights below is the Redbull Media House documentary, "ON ANY SUNDAY: THE NEXT CHAPTER."  As most of you know, Hannover House released this film to more than 250-theatres, commencing November 7th, and the results were reasonably good (more than $500,000 in box office - very high for a motorsports documentary... # 2 for all time in this subgenre', in fact).  

When the movie first opened theatrically, some shareholders began wondering about the film's potential value for HHSE onto Video and streaming media.  Some vocal stock "critics" immediately marginalized any likely revenue impact for HHSE, a position with which HHSE managers did not disagree.  Accordingly, HHSE did not release any revenue forecasts for this item's prospective video results, because the nature of the agreement with Redbull Media was non-exclusive, and divided the market into several segments (key accounts, specialty accounts, direct-mail, internet and streaming / VOD).  The video rights offered to HHSE for this title represented the first time ever for Hannover House (and for Parkinson in 30-years in the home video industry with over 900-titles being released), in which the video rights being granted were "non-exclusive."  Redbull made a case for specialty distribution and their own existing infrastructure and prior relationships.  This was what was presented, take it or leave it.

After further consideration of the financial impact of taking on partial video rights to this title, HHSE lenders balked at the license fee size relative to the title's likely video revenues.  Accordingly, Hannover House will not be representing this title for any form of home video release.

HHSE very much appreciated the opportunity to work with Redbull on the theatrical, and we wish them (and their other distributors) the best of success with the upcoming home video release.  The release model for this title does not work for how HHSE is set-up, or for the lenders that would have been required to otherwise advance such a large license fee for rights.

Over then next few business days, HHSE will work with Redbull to move video order commitments over, and thus eliminate the non-exclusive video license fee obligation.

HHSE loves the video distribution business, but we cannot risk working capital, cash flow or debt financing.  Not every deal that comes along will make sense for HHSE, and we have learned from prior mistakes (remember "Twelve"?), that paying a big license fee is not always a good idea for the Company.

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Big stuff this coming (short) week... stay tuned!  *(see bottom of blog)

Onward and Upward in 2015!

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(Previously announced titles not currently in solicitation or set for theatrical include:  Bonobos, Championship Soccer, Cowboys & Heroes, The Lion Prince, All-American Cowboy Pack, Family Movie Night, Martial Arts Marathon and six more budget re-issues from the HHSE Library).

* Footnote:  Communications and Disclosure to Shareholders can be a challenging task to balance, and it's clearly impossible to ever please all shareholders.  Today, some shareholders asked HHSE to remove the "Big stuff..." line in yesterday's blog, and instead, "just do it."  Others said, "No, put it back in" because mom's cooking smells good.  With respect to other posts, some have DEMANDED that HHSE use this blog to rebut the absurd criticisms of one  particular chat board poster... and others have DEMANDED that we NOT rebut his misrepresentations "because it's not dignified to respond to an anonymous poster who refuses to proudly stand behind such statements."  As there's no way to please everyone, HHSE will continue to ride the line in balancing the issues of disclosure / non-disclosure in this blog and other forums.