Disney went global with Black Widow - and the consequences could be felt by the entire streaming world. Five9 won't sell Zoom, because china.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
Cinema is not for everyone
Disney (NYSE: DIS) and actress Scarlett Johansson reach a settlement over Disney's violation of the terms of the contract with the actress. Movie Black Widow released in theaters and on the Disney+ streaming service at the same time, which greatly reduced the film's box office in theaters, — a Johansson, according to the terms of the contract, in addition to her fee of $ 20 million, she received a percentage of fees in cinemas. Respectively, the fewer tickets were sold, the less money the performer of the role of Natasha Romanova received. Johansson demanded from the studio 80 million dollars, but will receive, according to some information, around 40 million. This story is very revealing..
A significant – if not a large – part of the money filmmakers and leading stars receive from the box office in theaters. The pandemic broke this scheme, because schedule release of films has shifted so often, and the box office dropped so much, among other things, due to social distancing measures in cinemas, that it was not possible to raise sufficient funds. Therefore, films began to be released in streaming at the same time as the release in the cinema - the so-called hybrid release.. By the way,, this practice has failed: it is very difficult to recapture the cost of a major blockbuster on a streaming service. After all, renting a movie for 30 $ for home viewing, you can gather in front of the screen a crowd of 10 person - and a ticket per person to the cinema costs 10-15 $.
Johansson and her lawyers, like Disney management, counted on it, that "Widow", which was completely ready for release even before the start of the whole coronavirus story and was supposed to be released in the spring 2020, grossing $1.2 billion worldwide. Based on these calculations, Johansson should have received the same 80 million. The movie ended up being released in the summer. 2021 and collected approximately 378 million - including "thanks" to the release of the film on the streaming service at the same time as cinemas. And since, to paraphrase the famous businessman Leo Galante, streaming was not included in the deal and the studio receives all the income from streaming, Johansson was extremely unhappy.
The story with Johansson is important for investors: the income of media conglomerates traded on the stock exchange depends on it. For example, AT&T (NYSE: T) in 2020, more than $ 200 million had to be paid in compensation to the authors and blockbuster stars of the then still owned Warner Media for, that the films were released in a hybrid format.
Disney management was brave at first and refused to give in to Johansson, but now it suddenly backed down and paid her half of the required amount - although the lawsuit has not even gained momentum and, in theory, could have dragged on for years. So such conflicts may flare up and affect the reporting of companies in the future.. Although it’s impossible to say for sure here and it all depends on the terms of the legal agreements in the case of each particular film.. As they say, someone else's contract - darkness.
In the long run, this could also negatively affect the profitability of streaming services.: probably, studios will pay stars and authors generous royalties with the condition, that they will not then claim anything, including revenue from content licensing. The latter is a very important source of income for creators and movie stars..
For example, TV series "Friends". Few will argue, that for most of the cast, the series was the peak of their careers, and the series ended a long, long time ago. But all the actors remain very rich people.: in total, they receive about $ 20 million for all six a year just from the reruns of the series.
Typically, studios paid about 60-70% of the cost of making a series or movie., and the rest came from a partner company, who came up with the content and then created it. That's why, for example, in the credits of many films other than the name of a studio like 20th Century Fox, Columbia Pictures you can always find the names of other companies, for example Scott Free in Ridley Scott films. These companies, in fact, and make movies, and bear financial risks in the process - usually directors and actors. In exchange for sharing financial risks with a large studio, the creators get licensing rights.
Netflix (NASDAQ: NFLX), one of the key pillars of streaming and a model for all of its competitors, did differently. The company generously pays the work of creators and actors, but in return takes away their rights to the content. Team, content creator, receives, in addition to paying all the costs of the creation with fees, approximately 30% from the cost of creating content as payment for the rights to it - this can be considered "compensation". And after that, the team no longer receives anything from the content in the future, all rights reserved by Netflix.
This is a problem for many content creators., because if the content becomes very successful, then the lost profits in the future will be huge. Whether to expect, that Disney and other "new" streaming businesses will be able to embrace the Netflix model, - there is no clear answer, since there are several complications here.
Looking closely at Netflix content, then you can see, that for the most part, stars and creators there are often figures of the second order, Netflix does not have such an abundance of giants, like at Disney and Warner. How the same Disney will negotiate and pay-overpay a clip of rich and famous actors and creators, we have already approximately seen in the example of Johansson. Shareholders of streaming services may already begin to be afraid of reflecting the growth of expenses in the reporting. Big deals of this kind look extremely ruinous: the same Netflix bought the rights to two sequels to Knives Out for $465 million - and we are just talking about exclusive rights to films, and their creation has yet to be paid. I do not think, What is the case with Disney movies, traditionally relying on big stars, the company will be able to save a lot.
You can expect, that streaming companies will be able to cut costs to a large extent by working with actors and directors from the Old World. So, the third part of "Bad Boys" instead of the expensive Michael Bay was filmed by little-known directors from Belgium. And English actors are a good example of saving money without sacrificing quality.: with a high level of acting, the British, by American standards, actually work for food. So, Englishmen Tom Hardy and Benedict Cumberbatch received for playing the roles of Venom and Doctor Strange 7 and 2 million - and there they had quite a lot of screen time and the resulting load. At the same time, American Jeremy Renner is in favor of 16 minutes in the second "Avengers" received more than 6 million. So there is a possibility of a "British invasion" on the screens - European actors are like Russian IT people: by American standards they get a penny, and they work just as well, like in the USA.
However, also possible, that streams and creators will be fighting a war of attrition - and streaming can simply force creators to accept their terms, when content creators run out of money: no excess work, but you need to live on something. On the other hand, history with johansson shows, that streamers and studios don't see their negotiating position as particularly strong and therefore tend to give in.
Expected rise in streaming spending casts doubt on many new streaming services breaking even within their time frame. This is very bad, because the unreasonable and inflated expectations of investors regarding streaming are what push the quotes of these companies up - and sometimes contribute to their fall in case of disappointment. And this we do not even take into account the growth in costs of film production in the context of a pandemic.: the corresponding expenses add 10-20% to the cost of making a film or series.
So all of the above should be considered by everyone, who "invests in streaming, because it is promising ".
I am a simple American investor, I don't want money, respect strong senile leader Biden
Zoom Video Conferencing Service (NASDAQ: ZM) was going to buy cloud provider Five9 (NASDAQ: FIVN) for 15 billion dollars. Now he is his, seem to be, won't buy: Five9 shareholders suddenly voted against the sale. The explanation for this sounds unconvincing enough to, so that any self-respecting investor refuses to believe in him: Say, Zoom's growth will slow down, because people will meet more live.
Let's not argue with this thesis, but still worth noting, that the reason for refusal is absolutely unconvincing from the point of view of the shareholder: Five9 is a losing company, and ahead of higher rates and more expensive loans, its shareholders should be praying on Zoom that, that she even buys this company. Well, the claim would be the cheapness of Zoom's offer.: Five9 bought with a premium 13%. But no., of all the reasons we chose the strangest and most stupid.
I believe, that it is related to the investigation of Chinese ties Zoom: a large part of the company's team works in China. And the founder of the company is from China, although he received an American passport. At the same time, both companies will continue to cooperate., as before. Basically, the news about the failure of the Five9 deal is very sad.
It's bad here then, that the non-public circuit of American society is now reflected in commercial transactions. With the sale of Zoom, Five9 investors would get some premium and the opportunity to profit from the business., which may well go bankrupt.
I refuse to believe, that investors voluntarily voted against the sale of the company on such grounds: probably, this was preceded by negotiations between Five9 shareholders and “respectable people”, who explained to them, that the business should not be sold. Otherwise, another would have been put forward for refusal., more good reason. US national security considerations are not very relevant here.: Five9 specializes in calls, chats and mailings. I highly doubt it, that the information extracted from Five9 would help Chinese hackers more codes from the entrances of Russian houses. However, The attitude of the American power circles to "keep out" the Chinese in high-tech industries is quite obvious. At the same time, the selectivity of Americans seems very interesting.. For example, in the case of the American film industry, investors react to the penetration of Chinese capital and political influence in almost no way.
In general, the cancellation of the deal with Five9, probably, will be part of a campaign to drive Chinese investors out of the US, which can negatively affect the prospects for buying other unprofitable startups - which will be bad for the shareholders of the latter. However, there is a bright spot in this situation: the falling cost of unprofitable startups will be a benefit for tech companies, who will inevitably buy them. As they say, failure of one is an opportunity for another.
