New York  (BBN) — Since the writer’s strike and a generation of social capital wiped out by the 2008 financial crisis, the movie business hasn’t been the same.

We’re witnessing the rise of home entertainment and digital media distribution disrupting the production and distribution process of original content as it steadily overtakes the integrity of Hollywood. While streaming services are here to stay and original content budgets for Netflix [NASDAQ: NFLX], Disney+ [NYSE:ABC],  Apple [NASDAQ:APPL] and Amazon [NASDAQ:AMZN] have reached billions, there is now a looming question mark over the entertainment industry—what’s the new business model for content distribution and monetization, and where is the value in the “film studio” and the “theatrical release”?

[Amazon CEO Jeff Bezos filmed by Capitol Intelligence/BBN using CI Glass ahead of US CEO Summit with Indian PM Narendra Modi ahead of Oval Office meeting President Donald Trump. The Willard Hotel in Washington DC. June 24, 2017]

With regards to the value of the theatrical release, Beijing-based Wanda Group owned AMC Theatres [NYSE:AMC] made a quick announcement that they currently have less than a $1 billion dollars in cash to support themselves amidst COVID causing a shutdown of major theatres across America. Meanwhile, Netflix has taken a stab at acquiring indie-theaters and Amazon has garnered interest in a purchase of AMC theaters to likely expand their Prime Service and Wanda Group becoming a target of sanction by the Trump administration.

The narrow view point of film and television cultivated by Wall Street analysts shouldn’t bother anyone. We’re living in a global economy which means more people, and more entertainment. However, it’s time for the major studios to take the aberrant steps to adapt to modern technology in order to garner ticket sales (cash) rather than active users, streams and subscribers (ultimately debt).

The growth subscriber model is almost counterproductive leaving digital media distribution companies like Netflix specifically borrowing money to produce lackluster original movie content.

Most media analysts are failing to comprehend that the reign for Netflix may have reached its’ peak this year, with mass media corporations now stepping in owning their home entertainment and digital media supply chain creating brands such as Comcast unit Peacock [NYSE:CMCSA] and AT&T unit HBO Max  [NYSE:T]. Most of all, none of these media company’s prosperity is predictable—like Sumner Redstone says, “Content is King” and while I’ll add that “…content is king, distribution is just a mechanism”.

[AT&T Randall Stephenson and National Association for the Advancement of Colored People (NAACP) CEO Derrick Johnson speaks to Capitol Intelligence/BBN using CI Glass on the Black American economic renaissance following an interview of AT&T Stephenson by Carlyle co-Founder David Rubenstein at the Economic Club of Washington, DC on March 20, 2019 in Washington, DC.]

Movie-goers nowadays are reluctant to attend theatres again causing a decline in movie theatre attendance. Comic book franchise fatigue, a COVID-19 vaccine that’s not available to the public, too much curated content on the internet and the archaic setting of the movie theatre in general are all factors that attribute to the lack of interest to sit down at a movie theatre. However, history has shown us time and time again, even before the internet, that the distribution of media changes relatively every decade.

And despite what analysts and the general public says or thinks, we may actually be entering the golden era for the theatrical movie business because IoT applications have not taken over the brick and mortar business just yet. Once IoT technology does a better job streamlining the brick and mortar business, we may see an increase in theatrical attendance. The movie industry has failed to innovate “the studio” and the “movie theatre” and properly value these assets that can reshape the industry. And because they’re hasn’t been a change in the technology of filmmaking, the value of the film business has slowly declined over the past couple of years. The movie industry continues to undervalue companies like GoPro, Kodak, Snapchat, IMAX and Dolby—all serving as pieces that can reshape the film industry.

Overall, Hollywood has failed to grasp that the standard of filmmaking has not changed since the late 60s.

They also haven’t recognized African Americans contribution of over a trillion dollars to consumer spending, cultural biases in films that no longer go unnoticed creating stronger narratives and authenticity in Cinema, and blockbuster movie budgets that have grown exponentially since the early 2000s.

 

In light of any major acquisitions and rumors circulating the media and entertainment industry before and during this COVID pandemic, we may see some media companies’ assets get chewed out relatively quickly. Even with the possibility of film and tv being disintermediated, there is simply too much money in these independent co-financing partnerships with the major studios such as Black Label Media with Lionsgate [NYSE: LGFA] and Skydance Media with Paramount Pictures/Netflix.

In these times, acquiring a major studio takes a lot of work and some encouragement from the executive level to get strong financial and creative direction to boost the studios’ user engagement and profitability.

[George Clooney speaks Capitol Intelligence/CI Africa using CI Glass on China National Petroleum Corporation role in the South Sudan conflict following news conference at National Press Club in Washington, DC]
Clooney video

Since the dawn of streaming, content has now become the asset and the studio lot and movie theatre poses itself as a liability.

Here are the following “mind-twirling” potential acquisitions that could either attribute to more greed and lackluster box office performance or give Hollywood the adrenaline shot it’s been begging for–

Lionsgate… despite a 17,000 film and television library, one couldn’t ask a studio to put out lackluster franchises. Does anybody remember their theatrical hit Cabin Fever? Does anyone know how long John Wick and Hunger Games can survive as franchises? Let’s also not forget Lionsgate genius idea to put a theme park in China without a strong merchandising sales history to support it? With so many other iconic studios like Kaufman Studios in Astoria, Queens built by the founder of Paramount Pictures, Adolph Zukor, or Silvercup Studios would’ve taken the industry by storm, instead Lionsgate decide to invest in a mediocre in Yonkers, NY.

Lionsgate doesn’t seem to have an initiative to hire any creative direction to create a strong company vision either. If Lionsgate gets acquired, I’d encourage the new studio leaders to take notes from Disney’s leadership under Bob Iger or Universal’s strong B-Movie push under Donna Langley. Overall, it remains unclear the fate of Lionsgate. Maybe acquiring a New York distributor similar to a Bleecker Street Media wouldn’t be a bad choice to at least provide some creative direction for Lionsgate.

MGM… With Apple TV+ now co-financing films and television shows as they plan to pay the bill for Martin Scorsese’s Killers of The Flower Moon, a lucrative licensing deal for Apple TV+ could work with MGM. The question then remains, what happens to Epix?

EuropaCorp… Luc Besson and his Vile Alternative Investment partners for his motion picture and television production/distribution company from Paris, France are known for its Taken and Transporter series. The company as of recent, is on the verge of Bankruptcy.

ULTRAVHOLDINGS… Ryan Kavanaugh is the founder of UltraVHoldings and a current executive at Warner Bros. The likelihood of UltraVHoldings library eventually being acquired by AT&T unit WarnerMedia is very high, but with their intentions to create a lucrative licensing deal with Netflix remaining unfulfilled, the studio could be up for grabs.

SONY PICTURES [NYSE:SNR]… Sony has a fighting chance to maintain their stance as a film studio. It is hard to understand how Sony didn’t dive deeply into developing their media and entertainment supply chain. They had it right with the PlayStation. A strong 360-degree entertainment streaming service would’ve been a perfect fit to match with the PlayStation network. The last conversation was held by Amazon and Apple TV+ with regards to an acquisition. While Apple can buy all 6 major studios currently, it depends with this new trade war with China in place, will have Apple take their dry feet out of the content business and go back into redeveloping and branding their consumer electronics.

Aviron Pictures

This studio really never had a chance to begin with. The vanity distribution company, Aviron Pictures is now on the brink of Bankruptcy as well. The movie business is a journey, no matter how big you are financially, you cannot start from the top. This isn’t Wall Street. This is Hollywood. With William Sadlier (BlackRock Investor) and David Dinerstein’s experience from Paramount Classics, the Aviron Pictures seven picture library and distribution experience could be resurrected despite a tainted image. However, it’s too small to get back into the theatrical distribution system.

[Black Entertainment Television co-founder and Salamander Resorts & SpA owner Sheila C. Johnson speaks with Capitol Intelligence/BBN using CI Glass on Lee Daniels’ The Butler and Len Blavatnik at Middleburg Film Festival in Middleburg, Virginia. Octover 24, 2015]

Overall, it will be interesting to see how the landscape of content, distribution and disintermediation of media and entertainment plays out within the next decade. There will always be room for independent players but as media corporation continue to scale, the content companies that have the potential to shift culture and change the way we consume entertainment may go unrecognized if the industry isn’t careful.

By Nigel Wright in New York, edited by PK Semler in Washington DC.

For more information please call +1-202-549-3399 or email pks@capitolintelgroup.com

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