SUNDAY 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 - new production titles than the Company has ever previously released... and several are "event-level" releases with the potential impact to elevate the Company 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 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... which is NOT counting revenues from theatricals, VODwiz, publishing, international and production income from the other titles (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.
Now that the title is in active pre-order solicitation, the case for exclusivity in the industry has been clearly made for Hannover House. Inconsistent pricing, dates, packaging and terms are confusing at the very least, and damaging at worst. The idea of HHSE paying $250,000 for the non-exclusive right to sell a documentary - at the risk that orders could be filled through other distributors or at other prices - is not attractive to the Company. Especially with so much other product in the pipeline that does NOT require a big advance payment burden, (or the risk of non-exclusive revenue assurance).
To be fair, from the start, Redbull made their desires for how they needed th home video rights to be divided-up quite clearly. While this plan never made complete sense to HHSE, with the theatrical rights licensed separately from home video and the film enjoying a national release through HHSE, there seemed to be limited risk in preserving the opportunity to handle some of the home video later.
At this point in time, the Company no longer sees a financial upside to acquiring a small piece of this title's home video potential. HHSE is not in a position to take on any projects that are structurally assured of losing money. In this respect, we agree with the early "critics" who said that the home video on this title would have an inconsequential impact to HHSE's revenues. We agree. With 52-titles in current solicitation - five more on deck for theatrical - and thirty more on deck for video in Q3 / Q4 - the Company is not in need of distributing titles that will not generate a net profit for the effort. 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!
Onward and Upward in 2015!
