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Warner’s Tsujihara: Home Entertainment Returning to Growth

15 Oct, 2014 By: Erik Gruenwedel

Kevin Tsujihara

Warner Bros. boss reveals entire ‘Friends’ library has been licensed to Netflix, beginning Jan. 1

With Warner Home Video the top packaged-media studio over the past 17 years, coupled with growing digital sales of movies and ongoing licensing of TV shows to subscription streaming services such as Netflix, the studio’s retail entertainment business is returning to growth, Warner Bros. Studios CEO Kevin Tsujihara told an investor group.

Speaking Oct. 15 at Time Warner’s Investor Day in New York, Tsujihara said year-to-date sales of new-release digital movies have increased more than 150% compared with the prior-year period. The executive said Warner (and the industry) has bounced back from a disappointing summer box office with September theatrical revenue back up.

“We don’t feel [the summer] is a long-term trend. Already, the fall has been a different story. The industry has had a very strong month and our movies have been extremely successful,” Tsujihara said.

He said he expects consumer spending in home entertainment to remain stable with digital ownership leading to a steady shift toward higher-margin products. Indeed, Tsujihara said the variable contribution margin on digital sales is a whopping 85% to 95% compared with 55% to 65% for packaged media.

“As the market changes, we are diligently managing our costs. As a result, we expect our home entertainment profits to grow in the coming years,” he said.

Indeed, the executive said he is looking for the studio to cut about $200 million in marketing costs this year.

“That goes straight to the bottom line,” said Tsujihara, who until being named CEO of Warner Bros. in 2013 headed Warner Bros Home Entertainment Group.

The executive said Warner is working on a trilogy of new Harry Potter-based movies written by “Potter” author J.K. Rowling, with the first film to be released in 2016. In addition, Warner has several Lego-themed movies in the pipeline, including a sequel to this year’s box office hit The Lego Movie slated for release in 2018.

“By 2020, Lego Emmet will be giving this presentation,” Tsujihara joked.

Warner also licensed all 10 seasons of TV series “Friends” to Netflix, beginning Jan. 1, 2015. Warner Bros. Television has syndicated the show since 2004. Other TV shows going to Netflix include the first season of original series “Gotham,” which debuted Sept. 22 on Fox, and “Person of Interest.”

“The domestic home video market in on the cusp of a return to growth,” Time Warner CEO Jeff Bewkes told attendees.

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