Sony Pictures Entertainment intends to play the film and TV industry’s new era as an independent studio, committed to theatrical releasing, and with an expanded slate that gives it more options in streaming, says its chairman and CEO, Tony Vinciquerra.
Speaking Thursday at parent company Sony Group’s investor relations day, Vinciquerra said that as parts of the world emerge from the COVID-19 pandemic “SPE has many reasons to feel optimistic about the way things are now going.”
“On the film side, the traditional windows model has been upended. Several studios are experimenting with shorter theatrical windows before offering [films] on their streaming service, or even offering day-and-date releases. Ultimately, this will raise the bar for theatricality of film,” he said.
“We remain committed to theatrical exhibition and look forward to being back in theaters in a big way…Films following a traditional theatrical release will continue to be important to talent. We’ve seen an upturn in talent wanting to work with us,” said Vinciquerra.
SPE is now targeting the same volume of theatrical releases as pre-pandemic, he said. This comprises 12-15 titles that it produces, along with a volume of acquired titles and art-house films, such as Oscar-winning “The Father,” released through Sony Pictures Classics.
“We will now also be producing for streaming. The slate will be a combination of larger-budget event films that meet the high bar for theatrical entertainment, while also producing more moderately priced films with flexible distribution options. This streaming component to our slate strategy is additive, not in place of our theatrical output,” Vinciquerra said.
As a result of secular shifts in the TV sector, “there is far lower demand for broadcast and cable series, especially drama, and reduced episode and series count. There is less long-term value for third-party television producers,” Vinciquerra said.
SPE’s U.S. and international businesses are “squarely focused” on adjusting to realign with these new realities. He explained that “demand for content continues to rise and [SPE’s] TV production teams are really busy franchise building, mining Sony’s library of game shows, and meeting demand for lower-cost unscripted content.” The clients, however, are different now.
“A few weeks ago, we signed an exciting deal with Netflix that includes a first look at any films we intend to make directly for streaming or decide later to license for streaming.
“That was part of a larger, multi-year, two-part output deal with Netflix and Disney that replaced our Starz deal which expires next year. Netflix will have exclusive first pay 1 window rights in the U.S. to SPE’s feature films, following their theatrical and home entertainment windows, beginning with our 2022 film slate. Disney will then follow that with the U.S. rights to distribute Sony content across its portfolio of linear entertainment networks and streaming platforms.
“Both were great deals for SPE. They reflect our content and our advantages as an independent studio. Our ability to work with any and all partners and platforms is what makes these deals possible, and continues to be a key strategic advantage of ours.”
Vinciquerra added: “While we have made the decision not to have a general entertainment streaming service, our two niche streaming services [animation-driven] Funimation and [faith and family-focused] Pureflix are profitable and growing.”
While drawing comfort from the global success of “Demon Slayer The Movie: Mugen Train,” Vinciquerra offered little insight into anime strategy, explaining only that the planned acquisition of another niche streamer, Crunchyroll, is” making its way through the regulatory approval process” and that he hopes it is soon completed.
Vinciquerra explained that SPE had cut its channels portfolio in many parts of the world as cable and satellite revenues decline, leaving Sony’s channels business now largely focused on India and Latin America. He said: “[India] has been a terrific market” but aligned his India commentary not on the remaining linear channels, but on the group’s newer streaming business, SonyLIV. He said that SonyLIV has grown its subscription count from 800,000 to 5.6 million, and that SPE will respond by increasing its production budget.
Answering questions on costs and profit margins Vinciquerra and SPE’s senior executive VP and CFO Phil Rowley explained that the near to medium term will see both gains and weaknesses.
Rowley explained that SPE’s margins will “undoubtedly” suffer this year as theatrical releasing restarts and greater marketing costs are incurred. Film and TV production costs may, however, reduce.
Vinciquerra said: “Our production budgets will go down in the coming year, because we are assuming the COVID expenses will come out of those budgets.”
Both men argued that shorter theatrical windows will bring financial benefits.
“Instead of 90 days of exclusivity to theatrical it will shorten to 45 to 60 days. This will allow us to market the film once. If it is 45 days, you can spend that enormous amount of money and then give a little booster short. We believe we will be spending less on marketing, in a more effective way, and bring more revenue into the year in which we release the film theatrically,” Vinciquerra said. “With the deals we’ve just done with Netflix and with Disney, those revenues will also come in more quickly. This is a positive, not a negative.”