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Friday, October 30, 2015

Friday, Oct. 30, 2015

Good Morning HHSE Friends, Fans & Followers -- Today is an important day for HHSE in that it marks the first ever "simultaneous" national theatrical release as customarily defined in the industry.  Starting today, the youth-appeal dance feature, "DANCIN' IT'S ON" will appear in theatres in all of the top 65 DMA Markets, and on screens that are within the physical city-limits of 59 of the top 60 largest USA cities.  In fact, the only major market where this film is NOT playing is the San Francisco Peninsula - although there are quite a few theatres in the suburbs and greater metropolitan Bay Area (where our theatre buyers felt were more supportive of "family fare"). 

Why is it important for HHSE to have an industry-defined national theatrical release?  In a word: Netflix.

The license fee for "Subscription Video-On-Demand" from Netflix for Qualifying theatrical films is greater than some recent years of total revenues for HHSE.  The Netflix model shows that films with the level of broad visibility that national theatrical releases deliver, are the titles that Netflix subscribers want to stream - and the demand is not dictated by the film's box office results (in fact, in many cases, films that performed poorly at the box office become even more popular on Netflix under the "meant to see it, but missed it" viewing practice). 

For the past 6-weeks, "DANCIN' IT'S ON" has pretty much sucked all of the air out of the HHSE room.  Parkinson and Shefte have been focused almost solely on the release, and new staffers (and temps) were brought on board to make sure that the mandatory release conditions were achieved.  The HHSE Team expanded from 8 persons to 16 (although, until the next major theatrical - late January - it's likely that this number of staffers will be reduced slightly).

While "DANCIN' IT'S ON" is today's focus - there are many other important issues that Shareholders have requested updates on, including:  status of filing revised Form 10 (and audits), status of prosecution against bashers / stock manipulators and the status of TCA and other toxic loan structures that have (in the past) caused painful share dilutions.  Today, Parkinson is in New York City and Shefte is in Los Angeles (both supervising "opening day" special events, respectively for Black Entertainment Television and M-TV).  Accordingly, these "other" important corporate issues will be addressed on Tuesday in both a Blog posting (and for appropriate items, via a SEC Form 8 filing).  There's also several other issues that longs will find to be very good developments.


When the company first announced the title in late September, we targeted 600 locations, and October 16 as our release date.  This was based upon initial feedback from key theatres, most notably, Regal Entertainment Group, Inc., the nation's largest circuit (with theatres branded under Regal, United Artists and Edwards Cinemas). 

By early September, a new dynamic twist hit the theatrical exhibition marketplace:  Paramount Pictures announced a new strategy to ignore the NATO (National Association of Theatre Owners) mandatory "hold back" window of 89-days from initial theatrical release to home video or Video-On-Demand launch.  The NATO theory is that if consumers can "stream" a film directly to their homes for an amount of money that's comparable to a movie ticket price, that many will choose to stay at home, skip the drive, save the babysitter fee, and make their own popcorn.  NATO sees "short release windows" of Home Video and V.O.D. as a competitive threat to its member theatres.

So this is what Paramount did:  they announced a break on the V.O.D. windows for "Paranormal Activity 5" and "Scouts Guide to the Zombie Apocalypse."  The reaction from major chains was swift and almost unanimously negative.  Certain theatrical circuits, including Regal, Carmike, Cinemark and Marcus all suggested to Hannover House that there could be an opportunity to capture screens for "DANCIN' IT'S ON" from auditorium inventory previously planned for the two Paramount releases (before the release strategy change was announced).  So in early October, Hannover House decided to try to step-up and reach for one-thousand (1,000) screens - and to do so on the date that Regal felt was most conducive, specifically October 30 (as "counter-programming" to the Paramount titles as well as the abundance of other horror-themed titles in the marketplace).  So we moved the date and announced our plan to reach out for more screens. 

Expanding from a prior release record of 250 locations ("On Any Sunday: The Next Chapter") to 600 was already proving to be exponentially challenging... but the 1,000 level was far harder than merely adding 40% more locations... to achieve that high screen count meant that HHSE would have to reach into many of the smaller markets (often "single theatre" operators), set up new vendor relationships, establish "Virtual Print Fee" agreements with aggregators that do not handle the major circuits, and seek to obtain "multiple runs" in existing markets (such as four locations in Las Vegas, fifteen locaitons in Atlanta, etc...). By October 12 (after meetings at the ShowEast confab in Miami), it was beginning to become evident that 1,000 screens was too aggressive at this time for a growing distributor like Hannover House, and too ambitious for a smaller, PG film like "DANCIN' IT'S ON."  Since the primary release goal was to satisfy Netflix requirements, which do not demand such an ambitious screen count, the push to open he film on "X" number of screens became less important than focusing energies to assure that the release requirements were fulfilled. 

Then another interesting and unexpected development happened.  Paramount began scrambling for additional screens about two weeks ago.  The chilly reception among theatre circuits to their collapsed V.O.D. window was suggesting that the total screen count for these two releases might not hit contractual or ancillary license requirements.  And since both films are "horror" related, the push for October 30 grew urgent.

Accordingly, several theatre circuits made the decision to "postpone" some of the theatrical locations previously allocated to "DANCIN' IT'S ON" in order to accommodate the two, controversial Paramount releases (under "new terms" that are rumored to include significant "per location" guarantees to the theatre circuits - dollar amounts that rival pure "rental" rates in many locations - and which also rendered the "maybe" of revenues from "DANCIN' IT'S ON" less interesting than the "assured" location guarantees that were now being offered by Paramount).  So late last week, HHSE received the news that one circuit was moving "DANCIN'" to Nov. 13, and another circuit was cutting their initial screen count from 118 to 42 locations opening today.  This meant that about 300 locations that were previously slotted for our film, were either cancelled or postponed, in order to make room for the Paramount titles under the lucrative new terms being offered.

This left HHSE with 407 locations for today - with 45 locations in Canada on deck (Dec. 4), 82 locations still intact that were already scheduled for Nov. 13, and an offer (for Dec. 4) of approximately 55 discount / second run locations.  How many of the 300 locations that were "postponed" will actually manifest ss new bookings on Nov. 13?  That would be a guess, but it is likely to be a far lesser number that ultimately "come back" to the release, unless the box office results surprise us all.

That said, "DANCIN' IT'S ON" opens today in approx. 407 locations.  On Nov. 13, about 82 more theatres will be added, and Dec. 4, it will be a new release in Canada and a second-run reissue in the USA for a total of approximately 592 total screen dates.  If ANY of the postponed / cancelled dates return, then this number of total screens will increase even more.  What does this mean relative to the Company's goal of satisfying the Netflix requirements? Nothing. Those requirements have been achieved.  The goal of satisfying the lucrative license has been met by virtue of satisfying the national release requirement (in fact, approx. 94.2% of the USA population is within DMA zones for the film's release today).

So what about the box office results?  Is it going to be a HIT?

No, HHSE has always predicted that the film will have minimal box office results.  The theatres agree, which is why a "tough" weekend (Halloween) was recommended for the film - as it's a weekend that usually LOSES an entire day to costumed parties (and has a 35% "dip" in total ticket sales as compared to the prior weekend).  Except for horror films, the major studios usually shy-away from releasing films on Halloween for this reason (it's a weak weekend at the box office).  But that same dynamic of LESS NEW RELEASES arriving in theatres is what makes "DANCIN' IT'S ON" an interesting option for theatres this weekend - as opposed to Thanksgiving (in which a modest indie release would stand little chance of getting screens).

But regardless of how the film performs at the Box Office, achieving the national release is a milestone for HHSE - and our next national release (late January) will be that much easier to achieve.

The previous business model of low-cost, direct-to-video releases was limiting to HHSE revenues.  The Medallion Releasing strategy of pooling tonnage of direct-to-video-releases has helped stem the tidal movement.  But the real revenues in the industry are from significant theatrical releases - and how this level of exposure drives ancillary home video and V.O.D.  The new business model for HHSE - to have several significant theatricals as the locomotives of our annual release slate - is what will elevate the company in stature, visibility and revenues.

TV Spots are currently airing for "DANCIN' IT'S ON."  Digital banners and presence extend from major sites such as FANDANGO and IMDB to local market TV and Radio stations that are also advertising outlets for the film.  In almost every ad, the HHSE stock symbol has been included, including the New York Times and Time Out New York. 

If you're in NEW YORK CITY, at 6:30 pm tonight, Russell Ferguson will be appearing in Times Square for Black Entertainment Television in a "DANCIN'" Promotion - then will pose for pictures with fans at the lobby of the Regal E-Walk, 247 E. 42nd St., at about 7:15 pm.  If you're in LOS ANGELES, disc jockey Ray Isaac (from the film) will be spinning music at the Regal L.A. Live Theatre / Downtown Staples Center (1000 W. Olympic Blvd.) with cast members at 6:30 - before a 7:30 pm special event screening in the luxury lounge auditorium (all activities being covered by a crew for M-TV).  Director David Winters and cast members will also be appearing in two Miami locations tonight. 

More to follow!