THE HOLLYWOOD REPORTER 10 FEBRUA RY 26, 2020
Behind the HeadlinesThe Report
AVENGERS: COURTESY OF MARVEL STUDIOS.RIVERDALE: DEAN BUSCHER/THE CW.HOBBS: DANIEL SMITH/UNIVERSAL STUDIOS.HOLLYWOOD:ANDREW COOPER/SONY PICTURES ENTERTAINMENT.RYAN: KURT ISWARIENKO/AMAZON STUDIOS.WITCHER: KATALIN VERMES/NETFLIX.Source: Earnings reports and SEC filings. Most companies report operating profit, but Viacom reports adjusted operating income before depreciation and amortization, and NBCUniversal reports adjusted earnings before interest, taxes, depreciation and amortization. All figures are for the calendar year 2019 compared with 2018, even if companies use different fiscal years.Hollywood majors all made money in 2019, but with streaming the pricey priority, THR’s annual analysis
of studio divisions shows that these investments have already impacted revenue trends BY GEORG SZALAIStudio Profit: Disney Reigns, Netflix Gains
Revenue Profit$5B
$10B
$15B
$20B
Disney’s studio results
for 2019 include Fox from
the close of the merger
on March 20, making it a
tale of two companies. Led
by Avengers: Endgame,
Disney reached an
unprecedented $11.1 bil-
lion at the global box
office before including
Fox. The plan for 2020?
Getting 20th Century
Studios on track and mak-
ing sure such tentpoles
as Mulan, Jungle Cruise
and Marvel’s Black Widow
and The Eternals, plus
Onward and Soul from
Pixar, perform. “2020 is
not going to be the same
as 2019 for the studio,”
Disney CEO Bob Iger told
analysts Feb. 4. But given
that Disney+ is a focus
and that the company’s
direct-to-consumer and
international unit, which
includes the streamer and
Hulu, saw its operating
final-quarter loss rise to
$693 million due in part to
the costs associated with
launching the streaming
service, analysts will keep
an eye on disclosures
regarding its impact on
the studio unit.Some big hits, includ-
ing Once Upon a Time
in Hollywood ($374 mil-
lion globally), and lower
expenses helped Sony
grow its profit despite
flat revenue in the
calendar year 2019.
Sony reached domestic
revenue of $1.35 billion,
its best showing since
2012, even though its
global haul fell below that
of 2018. The conglomer-
ate signaled that its TV
studio arm was a mixed
bag last year, though it
didn’t break out financial
details. It benefited from
Netflix hit The Crown,
whose season three
the studio said boosted
financials in the final
quarter of 2019. Plus, in
some quarters of 2019
the studio cited “higher
development expenses”
for TV productions.
Sony also boosted
profitability by trimming
the portfolio of interna-
tional TV channels in its
media networks seg-
ment. It went from
100 channels at the
end of 2017 to 76 at
year-end 2019.In 2019, Paramount
before the CBS-Viacom
merger swung to adjusted
earnings of $80 million
after a $33 million loss
in 2018. That was driven
by a 14 percent improve-
ment in licensing revenue
and a 3 percent dip in
expenses. Licensing rev-
enue came from titles
in its film library as well
as from new series from
Paramount TV Studios,
with the company high-
lighting that the year saw
“increases in licensing
of film catalog titles to
SVOD providers and
recent releases to pay
television services.” As
in 2018, licensing was the
largest revenue genera-
tor for Paramount, with
$1.7 billion, or 57 percent
of the total, in 2019.
That was ahead of home
entertainment with
$623 million, which was
up 1 percent. Paramount
TV Studios, whose shows
include Amazon’s Jack
Ryan and Netflix’s 13
Reasons Why, expanded
to end 2019 with 27 shows
ordered, but financials
were not disclosed.Warner Bros. exceeded its
annual operating income
record set in 2018. One
key benefit for the bottom
line was the fact that
Warners cut operating
expenses by 5.6 per-
cent to $11.9 billion from
$12.6 billion, with the com-
pany in several quarters
citing a mix of lower film
and television production
costs and decreased mar-
keting expenses. Warners’
revenue took a hit last
year, though, as it became
the first studio to detail
the financial impact from
the upcoming launch of its
streaming service, HBO
Max. With WarnerMedia
holding back content from
third parties for May’s
HBO Max, the company
in the fourth quarter
recorded $1.2 billion
in foregone licensing
revenue. The studio’s TV
production arm benefited
from such hits as The Big
Bang Theory, which ended
its run in May, and The
CW’s Riverdale. The stu-
dio’s TV product revenue
was $6.4 billion for the
year, exceeding its $6 bil-
lion theatrical haul.Led by Fast & Furious
spinoff Hobbs & Shaw,
profit at the studio run
by Comcast entertain-
ment unit NBCUniversal
recovered in 2019 after
a 2018 drop, with the
studio proving that it’s
not all about box office.
In fact, 2019 saw a nearly
29 percent fall in theatrical
revenue to $1.5 billion after
2018 blockbuster Jurassic
World: Fallen Kingdom
alone had brought in more
than $1.3 billion. Home
entertainment revenue was
also down, from more than
$1 billion to $957 million.
However, content licensing
climbed 3.4 percent from
$2.9 billion to $3 billion,
and lower operating
expenses also boosted
the bottom line amid
reduced film production
costs throughout the year
because of the makeup
of the slate. The content
licensing revenue line in
2020 will see some impact
from the April launch of
streamer Peacock, which
led Universal to end its
movie output deal with
FX Networks starting with
2020 titles.$14.4B | ↓2%$6.5B | ↓9.7%$833M |↑13.5% $665M | ↑22% $80M | NAProfit rose despite a 29 percent theatrical
revenue fall to $1.5 billion as content licensing
climbed 3.4 percent to $3 billion.Avengers: Endgame Riverdale Hobbs & Shaw Once Upon a Time in Hollywood Jack RyanDisney WarnerMedia NBCUniversal Sony ViacomCBS$13.0B | ↑38%$3.4B | ↑36%
$2.4B | ↑14.3%$9.0B | FLAT$3.0B | FLATThe streaming giant
gained 27.8 million
subscribers in 2019,
down from its peak addi-
tion of 28.6 million in
2018, amid new competi-
tion. Netflix ended the
year with 167 million
global members, includ-
ing 61 million in the U.S.,
and has predicted it
will tally 7 million more
in the first quarter of- Original series
The Witcher was its
biggest show launch,
with 76 million mem-
ber households having
watched (for at least
two minutes). Netflix
revenue grew briskly
in 2019, and its operat-
ing profit trailed only
Disney’s. Management
promised that last year
marked the peak in its
free cash flow losses with
$3.1 billion, projecting an
improvement to a $2.5 bil-
lion deficit in 2020. The
company spent $15.3 bil-
lion on programming in
2019, with CFO Spencer
Neumann saying that
“well over 50 percent
of our cash spend is
on originals.”
The WitcherNetflixParamount’s 2019 home entertainment
revenue was $623 million, but
theatrical proved to be the big area of
weakness with a 26 percent revenue
drop year-over-year to $547 million.$20.2B | ↑28%$2.6B | ↑63%