BLOG: Marketplace Paradigm Shift Impacts Critical Timing for HHSE & Major Studios
HHSE Investor Relations
Welcome to the Hannover House Investor Relations Blog
Monday, February 22, 2021
Marketplace Paradigm Shift Impacts Critical Timing for HHSE & Major Studios
Greetings HHSE Friends & Followers - the broadcast of the Superbowl earlier this month resulted in a surprise to many in the entertainment industry, with the MARCH 2021 announcement of a "Paramount" branded streaming service. Most insiders knew that this move was previously not expected for several more years, due to the limited library of Paramount titles not already under license to existing services, or to affiliate Viacom entity CBS (via CBS All Access).
But we are not living in last year's marketplace... and the ongoing impact of COVID functionally shutting down movie theatres as a revenue stream has forced a quick rethinking of strategies for all of the major studios. DISNEY, WARNER and UNIVERSAL have already blazed a path towards improved profitability by restructuring the theatrical release windows previously held for the exhibition industry... instead now launching "day-and-date" (or very shortened theatrical first-look windows), before digital streaming onto their own, proprietary studio labels.
As mentioned in prior blogs here, DISNEY stepped up first with the live action MULAN skipping theatres and ultimately generating over $300-million in direct-to-consumer digital revenues (while incurring NO theatrical P&A expenses and not having to endure "splitting of the box office revenues" with the theatres).
More recently, Universal partnered with Netflix (International) to squeeze the Christmas theatrical release date for the Tom Hank's "NEWS OF THE WORLD" into a 3-week race to digital streaming... again to realize far greater bottom line results than sums projected if the film had been handled through traditional release windows in a non-Covid marketplace. The third paradigm Earthquake was triggered with the Warner Brothers announcement of simultaneous theatrical release openings with premieres on their HBO Max streaming division. SO - in today's marketplace (with functionally no theatrical revenues as the locomotive for a film's income stream), it's not a surprise that Paramount would be inclined to accelerate its launch of a studio-branded streaming service.
All of these factors - and the shifting paradigm of how consumers are viewing entertainment - are driving the industry and market enthusiasm for the upcoming MyFlix service and launch. The right place and right time are now, here, and with MyFlix. So, this is further validation of our current HHSE path.
Hold tight... and chill the champagne (metaphorically).
OTHER ITEMS OF INTEREST:
Over the past two weeks, shareholder emails have posed additional questions and items of interest, which we will attempt to address below.
1). NEW RELEASE ITEMS (PHYSICAL HOME VIDEO) - yes, despite the primary focus for the company moving to MYFLIX, the slate of BluRay and other home video releases mentioned last Fall will still be proceeding. The delay has been market-driven, as the key retailers that are still successful with physical BluRay and DVD sales (e.g., Best Buy and Target as the primary retailers) are still in slow-mode for adding secondary titles. We have been told that shelf-space and new release receptivity will being to open up this summer... and the slate of seven HHSE titles that have functionally been on hold (for about 18-months thus far), will begin to see retail light at that time. Again, this is all part of the COVID driven retail issues. Industry statistics are showing a rebound for some aspects of the physical home video market (especially BluRay), as pride-of-ownership and the quality-of-experience available on a BluRay (vs most streaming options) is beginning to make a come-back.
2). FRED SHEFTE - Stock Shares - late last year, HHSE President D. Frederick Shefte completed his divorce proceedings with Diana Shefte, including the communal division of his restricted officer / affiliate stock shares in HHSE. Earlier this month (Feb. , Shefte filed for personal bankruptcy, and listed as an asset his remaining HHSE Stock Shares, with the caveat that Rule 144 sale restrictions - and the inability to place physical (printed) share certificates of officer-affiliate stock with known USA brokerages - renders these affiliate shares functionally worthless to the estate. Shefte's attorney (Stanley Bond) has informed HHSE that the Trustee has expressed an unwillingness to challenge the S.E.C. laws in an attempt to violate Rule 144 sale prohibitions, especially in light of the barriers governing both physical share certificates and officer-affiliate sale restrictions. Accordingly, it is HHSE's strong belief that Shefte's personal bankruptcy filing will have no negative impact on the company or the disposition of his shares. With Shefte's health status and home situation remaining tentative, he made the decision to reduce his personal stress by discharging himself from legal disputes - and in the process, improving HHSE's defenses in some disputed, foreign matters impacted under the "one-judgment" rules.
3). IMPROVING HHSE PPS IMPACTS S-1 OFFERING - The recent improvement in both volume and pricing of HHSE common stock shares in the public market has generated concerns among some HHSE shareholders about our S-1 share offerings. The intent of the S-1 is to raise funds for the expansion and marketing of MyFlix (along with a provision for 30% of proceeds to be utilized for existing payables and debt management). As currently drafted, the three S-1 stock sale tranche's are each at 50-million shares, with the first at $.03 (e.g., $1.5-mm), the second at $.05 (e.g., $2-mm) and the final at $.08 (e.g., $4-mm) - as these share prices were structured to be a "premium to current market prices." With the recent improvement in HHSE pricing, $.03 is no longer likely to be a premium price - and may, in fact (in days), be a discounted price to the trajectory of HHSE share prices at this time. Accordingly, a revision is anticipated in the pricing levels for the S-1 and this would result in a reduction of total S-1 shares being offered being reduced from 150-mm total to a more likely level of 100-mm or slightly less. A revision of the S-1 offering will be posted in the next few days to the S.E.C. via a Form 8 statement, as prior formal notification to the market is recommended by counsel.
4). HHSE YEAR END - AND F10 - The HHSE annual filings for the OTC markets will be released this week, as they have already been incorporated within the F10 Registration. This will be the last OTC markets disclosure filing as all future financial disclosures will be posted first to S.E.C. Edgar. HHSE has been advised to continue making required OTC filings during the 60-day S.E.C. review period; however, this advice renders this week's 12-31-2020 OTC filing as the last. Revenue results were negligible for 12-31-2020 - due to the various factors of COVID-related retail shut-downs, ongoing theatre closures, post-production status for "WILDFIRE" and the imminent launch of the MyFlix site... all of which items now show significant activities for Q1 (and Q2, with respect to the physical home videos and theatre openings).
5). PRAYERS & BEST WISHES FOR SEN. ROBERT DOLE - HHSE C.E.O. Eric Parkinson asks that we keep Sen. Robert Dole in our thoughts and prayers as he commences chemotherapy today for Stage IV lung cancer. Senator Dole has lived an admirable and productive life of 97-years, and is a long-time and family friend for the Parkinson's (clear back to his first political race in Kansas). Eric Parkinson was also a co-Chair of the west coast fund-raising team for Senator Dole's 1996 Presidential race, including a record-breaking fund-raising event for the movie industry held at the Century Plaza Hotel in Los Angeles. Godspeed for a recovery and more years earned for this great man...