Studio Profit Report: Disney Dives as Sony Soars, Paramount Rises
Cinemas returned to business and studios pushed their production work into a higher gear in 2021 after the pandemic had shut down screens and crews around the globe for extended periods in 2020. Late in the year, though, the omicron variant threw a wrench into planning.
With Hollywood also spending more on productions and film marketing, profitability gains at entertainment conglomerates’ studio arms generally weren’t as pronounced as revenue growth; in two cases, the bottom line even dropped, as The Hollywood Reporter‘s annual analysis shows.
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“2020 was a wipeout, and really the first half of 2021 was not too dissimilar,” John Harrison, Americas media & entertainment leader at accounting and consulting firm EY says about box-office trends, adding: “I think the best signal about the enduring consumer appetite to go back to the theater was really Spider-Man: No Way Home, which came out in December, square in the face of the omicron variant hitting the U.S. And that film turned into one of the biggest blockbusters of all time.”
It also propelled Sony’s film unit to a huge year. With a 90 percent profit improvement (or 94 percent when figures are not rounded), it led the way in terms of bottom-line growth, followed by Paramount, while Netflix once again posted the highest annual profit of the pack.
For the third year in a row, THR’s studio profit report includes an educative look at the streaming giant, which competes for content, streaming subscribers and talent with major conglomerates, even though its financials are not directly comparable to Hollywood studio units. After all, it is a whole company rather than a unit or segment inside a bigger conglomerate, and it is all about subscription revenue, which entertainment giants typically record outside their film divisions.
What also remains is the fact that financial disclosures for Hollywood studios are limited and not always easily comparable. For example, Sony includes TV networks, Disney includes live events and so on. With companies like Disney and NBCUniversal having reorganized their business and reporting segments, the latest data also looks quite different for them compared with the past.
THR crunched figures for the calendar years 2021 and 2020 to enable a comparison, even though Disney and Sony have fiscal years that don’t align with the calendar year, and their executive teams focus on managing their businesses with an eye on the fiscal year. Nonetheless, the studio profit report gives a snapshot of a business at a time of fast-paced change, driven by streaming.
Source: Earnings reports and SEC filings.
Netflix
Revenue: $29.7B ↑19%
Profit: $6.2B ↑35%
The streamer ended 2021 with 221.8 million global subscribers but added only 18 million for the year, fewer than half the nearly 37 million recorded in 2020 amid COVID-19 stay-at-home orders worldwide. Revenue in 2021 rose only slightly less in percentage terms than the year before, while operating profit growth slowed after a 77 percent spike in 2020. Netflix boosted its spending on content to $17 billion, up from $11.8 billion in 2020, which had seen COVID production delays, and touted such series as Squid Game, The Witcher, Emily in Paris and Money Heist and films including Don’t Look Up and Red Notice as viewership drivers. Up next? More tentpoles. Co-CEO Ted Sarandos said Jan. 20: “The idea [of] big-ticket movies that people really care about premiering and being part of your Netflix subscription is actually taking the value proposition to a new level.”
WarnerMedia
Revenue: $15B ↑23%
Profit: $4.3B ↑10%
WarnerMedia’s theatrical, TV content and game licensing business rebounded in what it termed a “partial” pandemic recovery, but some of the company’s disclosures aren’t directly comparable to peers’ disclosures. Revenue for the segment grew 23 percent, led by a 30 percent “TV product” gain to $8.03 billion, helped by ramped-up productions for The CW and HBO Max (Gossip Girl, The Sex Lives of College Girls). Theatrical revenue rose 19 percent to $5.24 billion behind hits like Godzilla vs. Kong (global box office of $468 million) and Dune ($400 million) as the number of releases jumped from five to 17. Parent AT&T doesn’t report profits for the segment, but deducting disclosed direct costs ($10.7 billion, up 30 percent) from revenue, the resulting figure, akin to gross profit, advanced 10 percent to $4.3 billion. Commensurate with the bigger release slate and broader COVID recovery, marketing expenses soared 66 percent to $1.47 billion, and film and TV production costs climbed 30 percent to $8.42 billion.
Sony
Revenue: $10.2B ↑24%
Profit: $1.8B ↑90%
There was a lot to cheer for at Sony and its Pictures division. Theatrical revenue ballooned 120 percent to $1.1 billion thanks to such hits as Spider-Man: No Way Home and Venom: Let There Be Carnage, which drove the unit to its first-ever quarterly profit of more than $1 billion in the wrap-up to 2021. Film-related streaming revenue crossed the $1.2 billion mark, and TV revenue rose 27 percent to $3.7 billion, helped by increased deliveries of programs and Netflix’s licensing deal for Seinfeld, which kicked in at the end of 2021. The segment’s TV channels grew revenue 29 percent to $2.6 billion as advertising rebounded from the pandemic hit in 2020 and Sony acquired anime streamer Crunchyroll. All that outweighed a 38 percent home entertainment revenue drop because of a COVID-driven lack of product and higher film marketing costs.
NBCUniversal
Revenue: $9.4B ↑16%
Profit: $884M ↓12%
NBCUniversal reorganized its reporting units, with its new studios segment including not only film but also TV production and distribution operations. Revenue rose 16 percent, driven by a 15 percent content licensing gain of $7.6 billion and a 65 percent theatrical jump to $691 million after the 2020 pandemic hit, helped by the likes of F9: The Fast Saga (which exceeded $725 million at the global box office) and Sing 2 (its $333 million worldwide made it the highest-grossing animated film released last year). Home entertainment and other revenue climbed 3 percent to $1.2 billion. But the unit’s profitability dropped as operating expenses rose 21 percent to $8.6 billion, driven by a 26 percent increase in programming and production expenses to $6.8 billion after COVID interruptions in 2020 and a 24 percent increase in marketing expenses to $1.08 billion “due to a higher number of theatrical releases.”
Disney
Revenue: $8.1B ↓8%
Profit: $281M | ↓50%
After a reorganization for the streaming age, analysts see the “content sales/licensing and other” business for the Disney Media and Entertainment Distribution division as the closest equivalent to its former studio unit. It includes “the sale of film and episodic television content in the TV/SVOD and home entertainment markets, distribution of films in the theatrical market,” licensing of music rights and the stage business. (Disney+ subscriptions are not part of this.) Calendar year 2021 operating profit here, as calculated by THR, fell to $281 million on lower revenue and higher expenses, such as for theatrical marketing, which tends to rise with a higher number of theatrical releases. Revenue dropped 8 percent, even though theatrical rebounded 87.3 percent despite key titles, such as Black Widow, being released day-and-date on Disney+. The company’s top theatrical performer was Shang-Chi and the Legend of the Ten Rings ($432 million globally). But “fewer theatrical releases and production delays have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release,” Disney noted in a regulatory filing. In line with that, home entertainment revenue fell 33.1 percent in 2021, and TV/SVOD distribution revenue fell 6.2 percent.
Paramount
Revenue: $3.1B ↑19%
Profit: $368M ↑71%
In 2020, the first year after the Viacom-CBS merger, the conglomerate’s studio unit more than doubled its profit. Last year, it stayed on its growth path, driven by revenue jumping 20 percent and expenses dropping 15 percent to $2.7 billion. Theatrical revenue hit only $241 million, but that was up 34 percent thanks to the pandemic recovery. A Quiet Place Part II was its biggest performer ($297 million so far), followed by PAW Patrol: The Movie ($144 million). Licensing and other revenue rose 19 percent to $2.83 billion thanks to deals with its own streamer, Paramount+, and third parties, plus the licensing of titles from Miramax, in which it acquired a controlling stake in 2020. On Feb. 15, the firm unveiled a rebrand that took the name of its historic studio. “We are pioneers of an exciting new future, focused on streaming,” said CEO Bob Bakish.
Source: Earnings reports and SEC filings. Most companies report operating profit, but Paramount reports adjusted operating income before depreciation and amortization, and NBCUniversal reports adjusted earnings before interest, taxes, depreciation and amortization. WarnerMedia doesn’t break out earnings for its relevant segment, so THR deducted disclosed direct costs from reported revenue. Profit and revenue figures in the billions are rounded and focus on the calendar year 2021 compared with 2020, even though Disney and Sony use different fiscal years.
A version of this story appeared in the Feb. 23 issue of The Hollywood Reporter magazine. Click here to subscribe.
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