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Fox COO: Home Entertainment ‘Complicates’ Theatrical Slate

5 Nov, 2013 By: Erik Gruenwedel

Ongoing changes in home entertainment, including declining packaged media sales and rises in lower-margin rentals, have impacted theatrical productions — notably in budgets, Chase Carey, president and COO of 21st Century Fox, told analysts.

Speaking Nov. 5 in a fiscal call, Carey said 20th Century Fox Studios would not pigeonhole itself producing certain budget movies. Instead, the studio will release a film slate with varying budgets and hope for the best — as a occurred with late summer hit The Heat, co-starring Sandra Bullock and Melissa McCarthy.

“The last three to four years, the home entertainment market shifted. You got to be realistic about how you approach and what you invest in and how you navigate a business that obviously is a complicated one to navigate,” Carey said. “But I think the minute you start believing there are formulas for sort of what types of films to make, I think you probably are putting yourself in a corner.”

Meanwhile, 20th Century Fox Studios, which includes 20th Century Fox Home Entertainment, posted a 25% drop in first-quarter (ended Sept. 30) operating income to $328 million, due primarily to unfavorable year-over-year theatrical comparisons.

Specifically, the studio attributed the decline to the difficult box office contrast of Ice Age: Continental Drift a year ago with The Wolverine and The Heat this year. Drift, which racked up $161 million in domestic ticket sales, generated $716 million in foreign box office. Wolverine, which stars Hugh Jackman, and Heat, accounted for $400 million and $230 million in global box office revenue, respectively.

Studio revenue for the period increased 9% to $2.12 billion, reflecting growth at the television production businesses (i.e. retransmission fees), led by the syndication of “Modern Family,” and higher SVOD revenue from the sale of the first two seasons of “New Girl” to Netflix.

In the call, Carey said he expects revenue from licensing content to subscription video-on-demand services such as Netflix to be flat with last year, which was about $300 to $400 million.

“SVOD revenue again for the current year will be, I think, a reasonably flat year-on-year for us, but there are a lot of discussions going on that aren't necessarily reflected in those,” Carey said. “It is an area, in general, which I guess I'd say the digital platforms delivering a richer content experience that we expect to be a real area of growth for us as we go forward in next few years.”

When asked if Fox plans to up Hulu’s profile as a TV Everywhere platform, Carey said Fox would seek in some way to enhance the service's appeal in the evolving digital landscape.

"We think there are real opportunities in the digital space to both create something that can be a real positive for us, for sort of the existing distribution ecosystem, as well as, our platform that competes with in some way with the Netflix and the likes of the world in creating an alternative in that digital space," he said.

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