Greetings HHSE Friends & Followers - the last week or two have been historic, transformative, frightening and enlightening, as the nation and the world "hunker down" in an effort to suppress the spread of COVID-19 among the general population.
With the Dow Jones and general stock market crashing - and businesses of all sorts forced into a temporary shut-down - it's hard to see anything positive at times. People are hurting financially, medically and emotionally. Stores are reporting a run on the sales of staple-goods (and toilet paper!), and gun shops have record crowds, as if it's time to prepare for a zombie apocalypse.
But hidden within the onslaught of serious and impactful news have been some entertainment industry developments that have a real-world impact onto Hannover House.
For the first time EVER, two major studios (DISNEY and UNIVERSAL) have "broken the NATO rule" that prohibits home video release or digital streaming of films until at least 89-days after their initial USA theatrical release. Part of the motivation for these two studios was a result of the voluntary limitation of seating at AMC Theatres nationwide, and the more severe "temporary closure" of all Regal, United Artists and Edwards Cinema locations. It's hard for the theatres to be angry at the studios for breaking the NATO rule, if the theatres are closed or limited in sales. By the way, NATO stands for "National Association of Theatre Owners" and should not be confused with the North American Treaty Organization.
The next piece of impactful news for HHSE is the prediction now being reported within the financial trades that Cineworld (owner of Regal Entertainment Group and Cineplex Canada) will be forced into bankruptcy as a result of their theatres being closed during the COVID-19 outbreak. The most likely outcome of a Cineworld bankruptcy would be the dividing of their 7,000+ screens in North America to a series of regional players.
If the movie theatre chains no longer wield the power to control the digital streaming windows, and the behemoth status is returned to a series of regional theatre chains - companies like Hannover House can flourish with "day-and-date" releases of movies to theatres AND onto direct digital streaming at premium rates (e.g.., $9.95 to $19.95 to stream a film that's currently in the theatres...as opposed to the $1.99 to $3.99 that HHSE titles otherwise command for streaming rentals months after theatrical release). Theatrical releasing is super-expensive... often at a cost of $4,000 to $6,000 PER LOCATION once the costs of the "Virtual Print Fee," master delivery, display support materials, local market PR outreach and targeted social media are added into the mix. With theatres keeping 60% of the box office gross (and sometimes even more), a film has to gross almost $10,000 per location JUST TO BREAK EVEN under the current model. Over 90% of films do NOT recoup their theatrical releasing costs from box office settlements. So why do it? Because the theatrical exposure almost always drives enhanced revenues for home video and streaming three or four months later.
When you look at the MATH, making a film available onto premium digital streaming at the same time as it's in theatres, is over 8-times MORE PROFITABLE for a company like HHSE than waiting four-months and getting the much lower transaction fee. Also, from a cash-flow basis, revenues from digital streaming can be collected in 30 to 45 days... whereas theatrical revenues can be on a 75-to-90-day basis.
SO - if as a result of the COVID-19 shut-down - the industry windows for digital streaming continue to collapse, this is a VERY GOOD outcome for Hannover House and for the digital streaming industry in general (including MyFlix). More-and-more, people are skipping theatres and consuming their entertainment at home, on high-definition large format televisions, and choosing to watch what they want and when they want it. Paying $19.95 for the whole family to stream a first-run movie is way cheaper than buying five full-price theatre admission tickets, paying for parking, paying ridiculous concession prices, and sometimes paying for a babysitter. It's basic family economics... and this development is VERY GOOD for HHSE. So, fingers crossed that this change in distribution windows survives.
In the meantime, please hunker-down, be safe, practice social distancing and GO LONG on HHSE!
