Chicken Soup for The Soul Entertainment Inc (CSSE) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Chicken Soup for the Soul Entertainment Second Quarter 2020 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Jeff Majtyka. Thank you, and please go ahead, sir.

Thank you, and welcome. With me on the call today are William J. Rouhana, Chairman and Chief Executive Officer; and Chris Mitchell, Chief Financial Officer, to review the results of the 2020 second quarter as well as provide a business update. Following this discussion, there will be a moderated Q&A session open to the participants on the call.

During this call, management will make forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, intentions and strategies regarding the future. Included in these risks are forward-looking statements based on management's current expectations and assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from projected results. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call.

Please refer to the cautionary text regarding forward-looking statements contained in the earnings release, which also applies to the content of this call. Additional risk disclosures can be found in the company's filings with the Securities and Exchange Commission.

As a reminder, on May 14, 2019, Chicken Soup for the Soul Entertainment created a subsidiary with Sony Pictures Television, launching Crackle Plus. On today's call, management will make comments on certain GAAP-based and non-GAAP pro forma financial information of the combined company that includes Crackle's financial results for the relevant periods prior to the closing date as if the acquisition occurred on January 1, 2018. The non-GAAP financial measure the company uses is adjusted EBITDA. Management believes that adjusted EBITDA provides useful information and that it excludes amounts that are not indicative of the company's core operating results and ongoing operations and provides a more consistent basis for comparison between periods. The earnings release contains a reconciliation of adjusted EBITDA to net income or loss, which is the most directly comparable GAAP measure.

For further information regarding the company's historical financial performance, we refer you to our filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended June 30, 2020, which was filed today.

I would now like to turn the call over to William Rouhana, Chairman and CEO. Bill, please go ahead.

Thanks, Jeff. Hello, everybody, and thank you for joining us. Despite the very difficult times we're all living in, we actually had a very good quarter and we are seeing growing momentum as we move into the second half of the year. Our results met or exceeded expectations, with net revenue of $13.5 million and adjusted EBITDA of $2.7 million. In fact, for the 6 months ended June 30, our adjusted EBITDA is up over 10x compared to last year.

I'll dive deeper into the drivers of our performance in a minute, but I would like to start with a high-level perspective. Q2 marked the 1-year anniversary of the Crackle Plus joint venture. While no ambitious endeavor ever goes exactly according to plan, our experience with Crackle Plus has been pretty close to that.

Over the past 12 months, we've been executing on a deliberate strategy to position the company as a differentiated leader in the AVOD network space with a competitively advantaged business model. The first 2 pieces of that strategy underpin the results we're reporting today, and the next 3 pieces are just getting underway.

Our first step after forming the JV with Sony was to consolidate a large and highly unprofitable expense structure. Once we had the operations under control, our second step was to establish a low-risk cost -- low-cost programming strategy focused on high-margin originals and exclusives that we produce through partnerships or acquire through Screen Media.

Today's results reflect the success of the actions we've executed over the past year. In Q2, we generated an average of more than 38 million video streams per month on Crackle and Popcornflix, and behind that stat is an important trend, Original & Exclusive content comprised over 17.5% of the total streaming hours during the quarter, up once again and this time, from last quarter, up from 15% and up from 0 a year ago.

Performance was driven by continuing demand for hits, including Going From Broke, which was released last fall and was recently greenlit for season 2, and On Point, a series released earlier this year.

We've rapidly established Crackle Plus as the leading AVOD platform when it comes to original and exclusive programming. And we have grown our audience approximately 40% since we introduced such programming in October of 2019. All of this translated into $6.6 million of gross revenue for online networks in Q2 or $5.4 million net of the elimination of $1.2 million of intercompany revenue that we pay to our Distribution & Production business.

To provide you with a bit more color, online networks revenue reflected the weaker advertising environment in April and May, which began to strengthen towards the end of the quarter. As weather improved and less people were streaming, viewership trends fluctuated in Q2, but recent trends indicate that they are returning to above pre-pandemic levels.

I'll also remind you, if you're comparing online network revenues to prior periods, they're impacted not only by the recent ad environment, but also by the fact that Crackle received approximately $6 million of very low-margin PlayStation Vue revenue every quarter until PlayStation Vue was shut down in January of this year.

Distribution & Production revenue was $8.5 million, reflecting that business' growing rev share from content airing on Crackle as well as strong demand for TVOD content in a current television environment largely devoid of fresh entertainment. Distribution & Production revenue was up over 65% compared to our first quarter and up nearly 4x the same period a year ago. Popular originals during the quarter included Robert the Bruce and Blood and Money.

Looking ahead, we believe we will continue benefiting from the strong TVOD environment. Just after the quarter's end, on July 3, we released The Outpost, a new exclusive movie distributed by us on TVOD and another media through our deal with Millennium Media. I'm excited to note that The Outpost was the #1 movie in America for much of the month of July. It will be a big contributor to Q3 results, is not reflected in today's report, and the long tail effect of this release will surely benefit our online networks business as the movie makes its way to Crackle, where we will see higher margin flow through.

Given the current strength in TVOD, we may decide to move up the release of certain other titles, such as our Willy's Wonderland title, an action-horror film starring Nicolas Cage.

And the momentum is set to continue for our Distribution & Production business. Earlier this month, our other production company, Landmark Studio Group, announced it would be partnering with District 33 to develop and produce a new drama series, Shadows in the Vineyard, with award-winning actors, Noah Wyle and Judith Light.

Our new -- other new Landmark programming in the pipeline includes Flagrant, created by and starring Michael Rapaport; The Operative, starring Craig T. Nelson; Safehaven, executive produced by James Seale and by Brad -- and directed by Brad Turner; and Trigger Point, the first of a series of new action films we plan to release.

Although all studios brought production to a complete standstill earlier this year, we are beginning to see activity again as some U.S. productions are beginning to open up in a bubble environment and some are being moved to places such as Canada, New Zealand and Australia. With production activities beginning to restart across the industry, Landmark now expects to begin production on up to 5 movies and television series in the third and fourth quarters, including Safehaven and Trigger Point, and plans to deliver 2 of those 5 titles this year.

Additionally, our Chicken Soup for the Soul unscripted business has 3 new series set to begin production by year-end. Unlike a number of networks in the current environment, Crackle Plus is fully programmed with Original & Exclusive content through early 2021, including titles such as Portals, Grand Isle and more. In fact, at the recent NewFronts presentations to the advertising community, we announced up to 200 hours of new and original and exclusive programming for Crackle Plus. This programming includes shows starring Nicolas Cage, Demi Moore, Tom Berenger, Angus Macfadyen and more.

In addition, our originals and exclusives deliver higher margin, both when first aired and over their lifetime, due to our ownership of all or a portion of the content, and advertisers are asking to be associated with Original & Exclusive content on Crackle due to the attractive demos and unique programming. And because of that, we've seen success monetizing some of this programming at higher rates.

Our ad booking trends in the early part of the second half are improving, and we're seeing -- and we're also starting to see political dollars coming in. At the NewFronts, we also announced 2 new advertising offerings, including FreeView, which allows the customer to engage with an interactive campaign in exchange for no ads for the rest of an episode, and we're seeing good early interest and demand for this offering.

So with our business model gaining steam, this brings me back to the deliberate strategy for Crackle Plus and our next areas of focus. With the cost structure aligned and the programming strategy in place, the next step is to further invest in our technology platform to enable us to offer audiences and advertisers an even better experience. In fact, a key piece of groundwork was laid in Q2 when we purchased from Sony the near-complete next-generation tech platform they had been developing for streaming content. Under our ownership, we'll be accelerating completion of this iteration of our combined platform, with plans to deploy it in 2021. The new platform will provide increased delivery speeds, increased business intelligence, significantly lower operating costs, and it will allow us to fully control our technology.

Over the coming quarters, you will also see us focus on expanding distribution and marketing of our Original & Exclusive content in our networks to further grow our audience.

On the former, last month, we announced a major distribution expansion for Crackle Plus, adding Fubo, Plex and Xfinity to our roster of distribution partners. Last night, we announced Philo as an additional distribution partner, and we certainly expect to add others in the near future. These deals will increase accessibility of our AVOD networks from the 25 services and devices we are on today and set us up to launch the first Crackle and Popcornflix linear channels.

Finally, on the marketing front, we will be increasing our efforts to drive more viewers to our Original & Exclusive content through a 4-pronged campaign. The first prong is the distribution expansion, which I just discussed. In addition to Fubo, Plex, Xfinity and now Philo, we expect to add at least a half a dozen more of these relationships by the end of the year.

For context on how this impacts viewership, with each new distribution platform addition, we typically see between 200,000 and 500,000 new monthly active visitors. Second, we have a broad-based impact from our recently launched promotional PR campaign, which is strengthening our visibility in weekly what-to-watch features and better highlighting our steady drumbeat of ad-supported new and original content. We also just began a meaningfully targeted marketing campaign that pays for itself by utilizing our growing user base to take on larger ad deals.

Lastly, we've had great success in the past driving viewership to original content, like Going From Broke, through our social media presence, and we are now doubling down on that strategy with social being a key part of promotion for every Original & Exclusive title. These marketing efforts are consistent with our low-cost business model, and we believe they will help energize and drive viewership as we continue to grow.

One last item before wrapping up and turning the mic over to Chris. During the last quarter, you saw us take steps to further improve our balance sheet and financial flexibility to move on the opportunities ahead. Our recent bond sale enabled us to replace our bank debt, improves our ability and flexibility to move quickly in the fast-moving marketplace. We've also recently sold 5 million of unregistered common stock in a private placement at a price slightly above the market to our financial partner in Landmark, further increasing our cash resources and strengthening our relationship with this very important partner.

Wrapping up, we're entering the second half of 2020 with a bright outlook for both Crackle Plus and our Distribution & Production business. Assuming there are no significant disruptions to the ad spending recovery and to the resumption of production activity, we believe we are poised to deliver a significantly better second half of 2020 compared to the first half, with strength continuing into 2021.

Growth will be driven by our strong programming lineup, rapid growth in Distribution & Production and the anticipated benefits of our marketing program for Crackle Plus.

We have a clear execution path in building our AVOD networks and are embarking on the final steps in that path, accelerating development of our next-gen technology and aggressively growing our audience through new distribution relationships and expanded marketing. Overall, we see increasing opportunities to build our business, both domestically and internationally, and we look forward to keeping you posted on our progress.

Over to Chris.

Thank you, Bill. On today's call, I will focus on a review of our financial results and balance sheet and then turn to some recent financial developments and updates.

We reported gross revenue of $13.9 million in the second quarter compared to $12.2 million in the year ago period, an increase of 12%. Results reflected stellar performance across our 2 segments, highlighted by strong growth in Distribution & Production. Online networks, or Crackle Plus, generated $6.6 million in gross revenue in Q2 2020 compared to $10 million in the year ago period.

The Q2 year-over-year comparison reflects a couple of factors. First, you may recall that Crackle received approximately $6 million in gross quarterly revenue from Sony's PlayStation Vue service, which was shut down in January of this year. For comparison purposes, with our 2020 second quarter, approximately half of that total, or $3 million, was received -- are with a portion of the 2019 second quarter in which we consolidated Crackle Plus results.

Second, as Bill noted, 2020 gross revenue for online networks included $1.2 million in intercompany rev share payments to our Distribution & Production business, which are eliminated in our consolidated net revenue. Finally, the current 2020 period included the impact of the significant downturn in advertising industry spending due to COVID-19, particularly in April and May.

Distribution & Production generated gross revenue of $8.5 million in Q2 compared to $2.2 million in the year ago period, an increase of nearly 4x. Growth reflects the benefits of the revenue share payments relating to Original & Exclusive content provided to Crackle Plus and a strong TVOD environment.

Gross profit for the quarter ended June 30, 2020 was $0.6 million or 4% of net revenue compared to $3.6 million or 30% of net revenue for the year ago period. The key factor in the decline is the COVID-19-related impact on ad revenue at Crackle Plus, which eliminated -- sorry, which limited our ability to cover our technology costs, which are fixed, and as of Q2 2020, also includes certain depreciation expenses in cost of revenue related to the Sony tech platform acquisition that Bill described.

Notably, if you add back the noncash film library amortization expense, gross profit would have been $7.0 million or 51% of total net revenue as compared to $5.0 million or 44% of total net revenue in the year ago period. We also anticipate a recovery in gross margin in the second half of the year based on the improving business trends Bill outlined.

Operating loss for the quarter ended June 30, 2020 was $13 million compared to an operating loss of $3 million for the year ago period. Without the film library amortization expense included in cost of revenue and noncash amortization and depreciation expense, the operating loss for the quarter ended June 30, 2020 would have been $1.5 million compared to $0.9 million for the year ago period. Note that there was roughly a $5 million difference in amortization of intangibles between the quarter ended June 30, 2020 and the prior year period.

Our operating cash flow significantly improved year-over-year and approached breakeven, coming in at approximately negative $800,000 in the 2020 second quarter compared to approximately negative $6 million in the same period last year.

Adjusted EBITDA for the second quarter was $2.7 million compared to an adjusted EBITDA of $1.3 million in the same period last year.

I would like to briefly address the $4.3 million of other income recorded in the quarter. This reflects a true-up agreement with Sony regarding certain remaining transitional expenses tied to the 1-year anniversary of the Crackle transaction, which also included a 1-year content agreement extension.

Looking at our balance sheet and liquidity position, the company had cash and cash equivalents of $4.7 million as of June 30, 2020 compared to $6.4 million at June 30, 2019. Our total commercial loan principal outstanding was $13.6 million as of June 30, 2020. In addition, the company had an outstanding revolving credit facility in the amount of $5 million as of June 30, 2020. We had outstanding debt of $18.6 million, with no significant maturities for several years as of June 30, 2020.

We recently completed a public bond offering, rated BBB by Egan-Jones, which resulted in net proceeds of approximately $22 million. The company used approximately $13.3 million of the net proceeds to repay the entirety of the outstanding principal and unpaid accrued interest under our loan agreement with Patriot Bank. We have broad discretion with respect to use of the remaining proceeds of the offering.

Additionally, more recently, we entered into a subscription agreement with co-investments, our financial partner in the Landmark Studio Group venture, where we agreed to issue and sell 625,000 unregistered shares of common stock in a private placement at a price of $8 per share, which represented the modest premium to the 30-day trailing average price of our common stock. The transaction generated gross proceeds to the company of $5 million. As a result of these capital initiatives, our current cash balance is over $8 million as at the close of business yesterday.

Looking ahead, as Bill alluded to, we are increasingly confident in our ability to deliver strong performance in the second half of the year relative to the first half. While we are well aware that we continue to operate in the midst of a global pandemic, our confidence is supported by the strong TVOD performance of The Outpost and the benefits of an improving ad spending environment, including a record high week of ad sales for Crackle Plus in the first week of July.

Thanks for joining. I'll now turn it back over to Bill.

Thanks, Chris. So we had a strong quarter, and I've never been more excited about where we are and what our opportunity is. I want to thank our Chicken Soup for the Soul team as they have really remained steadfast through this difficult period. And just so you all know, they will be working from home for a while longer as many companies are.

So we'll take some questions.

(Operator Instructions) And our first question comes from the line of Dan Kurnos with The Benchmark Company.

Bill, I guess I'm just trying to sort of understand the strategy, if there's a shift, if there's a way to shift between the buckets. Obviously, we've been through this, I think, before, to a degree, even adding back the intercompany to online networks, maybe a little light, but TV and film distribution more than offset that. And granted, there's a very strong demand for TVOD in the market right now. So I guess I'm trying to understand what you think kind of the -- with the improvements that you're seeing in the marketplace, let's take it in 2 parts, what you think the kind of the underlying growth or trajectory is for the online networks business.

And then secondarily, within kind of TV, film -- TV and distribution, are there -- you mentioned pulling forward some titles, but just talking about kind of the opportunity to push deeper into that channel, given that it is very high-margin and given that a lot of major studios are doing things like putting digital films on TVOD, now it feels like there's a pretty good opportunity for you guys to increase partnerships there.

Okay. That was a lot of stuff, Dan. Let me try and take it a piece at a time. The online networks piece was absolutely impacted by the disastrous April that everybody had in the business, when advertising pretty much dried up. It got much better in May, and it got much, much better in June. As Chris said, in the last -- almost the last line of his speech, we had the single best week of signing up new orders for Crackle Plus in the first week of July we've ever had. So as far as we could tell, things are coming back pretty strongly, at least for us, in the online networks piece. And as we look out over the rest of the year, we're looking at meaningful growth, we think, in Q3 and then more in Q4 in that segment even after we deduct the payments we make to ourselves, for the content provided by the Distribution & Production side of the house.

On the Distribution & Production side, we're bullish for 2 reasons. One, we're seeing TVOD revenues really explode. The Outpost was the #1 movie on TVOD for most of July. In fact, it still hits #1 every once in a while on iTunes and a couple of the others. It's performing extremely well. And none of that is in these numbers, 0. It's not in anything you see today. But that's not the only move we have that has that kind of potential. We have 5 or 6 others coming between now and the end of the year. The one we highlighted was Willy's. That one, we think, has the potential to be very, very big, and so we're trying to pull it forward for that reason because there is a dearth of content in that space right now. Even with the studios beginning to let 1 or 2 of their bigger shows in, they're doing it in a way that isn't entirely -- it really isn't competitive with what we're doing. When you put Mulan on Disney Plus and then say I'm going to charge $29 for it, there's a couple of hurdles there that you don't have to go to, to buy The Outpost for $9.99. So we're really seeing great traction there, and we expect that to continue.

But as importantly, we have a plan that's also driven by production, and that production has partnerships and you know how we do it. We either sell 100% of the cost off to sponsors or we use tax credits or we have partnerships, and we use a combination of those things to reduce risk. We have 8 productions now ready to go in the second half of the year. A few of them would have gone in this quarter if we hadn't had COVID. That is a very meaningful number. Quite a few of them will get done between now and the end of the year. And so that's going to help drive that side of the business as well. And ultimately, all that stuff will end up as exclusives and originals on Crackle.

So we've got actual wind in our sails in all of those places, looking at the second half of the year. That's why we were so optimistic in what we said today. It's -- we're seeing it all around us, Dan.

I think that was the first half of your question. If you don't mind giving me the second half again, I would appreciate it.

No. I think that's probably most of it. I'll just -- I was curious since you did bring up Mulan on Disney Plus and kind of the studios being at maybe a different price point. I do wonder, though, as a distributor of content, if there's a way for you guys to get more involved with some of those partnerships as guys look to cash in on the current TVOD trend.

Yes, I think that's a good question, and you actually raised 2 different things with that question. One is pricing. We've been charging $9.99 in our -- for our TVOD stuff, but we're going to see -- we're going to follow the market and raise those prices a little bit. And the other thing about pricing is the premium pricing is lasting longer now as the TVOD window gets extended. So TVOD is better than ever, and it's better for a bunch of reasons, not the least of which is the fact that there's little competition in there right now.

Other partnerships, that's a really good question. And we announced a couple of relationships last night, one of which I want to highlight, with Millennium, which is a phenomenal production company. You know many of the things they've created over the years, and they were the creators of The Outpost. And we have another movie coming from them called Blackbird coming up very soon. And these are high-profile movies that are particularly good in this environment for the TVOD releases. And so we are working hard to build that relationship, in particular, and others coming. So yes, I agree with you.

Just a housekeeping, on the comment on online networks growth, you're talking sequentially, not year-over-year, probably for Q3, right?

Well, the year-over-year thing, you'll have to subtract out the PlayStation Vue in order to come to that number. But we're going to approach where we were, I think. It -- based on where we are today, we're looking like Q3 is going to be a very good quarter in online networks and Q4 even better.

Now there is one other thing I didn't talk about, which is really a critical factor. We are getting political advertising now. We've started writing quite a few political ad campaigns now, in fact, 2 today as we were preparing for this meeting. And they're both -- it's not just national. There's quite a bit of it that's local. I think that's going to have a big impact. Last quarter, I said I thought it might, I predicted it would, but now I can tell you, it already is having an impact. And I think the combination of the rebound we're seeing in general and the political advertising is going to serve us well even in Q3, Dan.

So Q2 was clearly an aberration, I mean, at least for the moment. If the world comes to an end again, I guess it could repeat itself. But right now, it's aberrational as far as we can see.

Yes. Political was going to be my final question, Bill, but since you've already taken the floor on that one, I will get back in queue.

And our next question comes from the line of Thomas Forte with D.A. Davidson.

So Bill and Chris, hope you're doing well. A statement and a question and then a follow-up question. So Bill, for personal reasons that I think you can understand, I greatly look forward to you updating your ad tech. The first question then is I wanted to ask you -- I'm glad you're laughing. I wanted to ask you the most common investor question I'm getting following just the blowout success of The Outpost. So how does the TVOD revenue flow through your P&L? And then what are the different ways you monetize such popular content?

Okay. So I'll take you through the life cycle of The Outpost. Well, first of all, The Outpost is available on, I would say, upwards of 30 different platforms that you can either rent it or download it or -- and watch it so long as you pay, stream it. And we're seeing kind of the normal distribution of viewership across places like Amazon and iTunes and cable VOD, which tend to be the dominant places that people consume on-demand paid-for video. We will see that come through in the month of July and then August and even, I think, probably into September, at which point, we will be selling DVDs. There were huge -- there are very big DVD orders on The Outpost as well. And that will probably run a month or 2 before you will be able to see The Outpost on Netflix, who paid a substantial amount for that privilege. And then when that's over, it will come to Crackle, Popcornflix and be exclusively available only on our networks.

As a result of that progression, we will make a very large amount of money on that movie over the course of the next several quarters, many, many multiples of what we paid for it. And the producer will make more money too because they -- the way that The Outpost deals are structured, they have a share of the back end than we do.

So it will be a highly profitable exercise in all of those various channels of distribution. And most movies go through at least 3 of the 4, Tom. So TVOD, DVD and quite a few go right to AVOD without an SVOD deal because SVOD these days is way more discriminating in what they're willing to take that they don't make, with -- that is not their own stuff, which, by the way, is what I hope we will be someday, where we have less LIBOR and more and more of our own content. But that's quite a way into the future.

So it goes through that life cycle, and that is what pretty much every acquired program goes through. And even the produced programs tend to go through the same life cycle depending on who the partners are. The first few productions that we have lined up now are mostly divided between us and a foreign partner, us being the sole U.S. holder, foreign partner controlling all foreign rights, and a very significant amount of the budgets of each of our upcoming shows are covered by tax credits in places like Louisiana, Georgia, Canada and others. And so those -- in those cases, we will control the domestic rights completely free and clear. And those will probably go onto our online networks very rapidly, more quickly than they will go through the other -- through the process that we take most movies through. Does that help you?

It does. So now for my follow-up and then I'll get back in the queue. So I wanted to frame it this way, though, because you've talked about this, but I want to frame it this way. So on its earnings call, Roku suggested TV advertising spending may not recover until 2021. So can you provide your thoughts on TV advertising spending market over that time frame? And what are the implications for Chicken Soup for the Soul?

Well, based on what we're seeing, the TV advertising market, at least that we have, has rebounded. So I can't say from our own personal experience that we're seeing what they just said. We are a -- I mean you all may remember that we came out of Q1 virtually sold out. And the way it's looking right now, I mean, Q3 looks like it could have -- could be similarly positioned to Q1 and Q4 would be. We're just -- we will just be raising prices. We've taken the highest CPM deals in our history in the last month. And we are starting to spend money aggressively on growing viewership because we know that we have the advertising demand for the viewers when we deliver them. So I don't know what -- I'm not sure of the context in which Roku said that about the television advertising market, Tom. And I don't really know that I'm smart enough to tell you what will happen to TV in general. But I can tell you, our business has bounced back.

And our next question comes from the line of Lisa Thompson with Zacks Investment Research.

So I managed to watch The Outpost last night. So I'm all ready for all this. So I wanted to understand a little bit about the economics, though, of what happens when you don't have a theatrical distribution. Do you -- how much do you make like putting it in the theaters versus how you're doing with this VOD methodology?

So for us, Lisa, the absence of a theatrical option is actually a big advantage because, by and large, we are happy, when in a theatrical release, we break even based on the costs and take advantage of the promotion and publicity to drive sales in the ancillary markets. In this situation that we're in now, where the TVOD providers can't really expect that because there are no theaters or very few, we have the ability to go straight to TVOD without that expense. And to market more effectively in a more targeted way, the TVOD availability is just less expensive. So the returns are much higher, skipping the theatrical window. And at least for now, it's a big advantage.

In the normal course of running the business, we do limited theatrical releases in order to have -- to generate awareness and then follow with a TVOD release and a DVD release and sometimes an SVOD release and sometime -- and always an AVOD release. And by the way, that's one of the reasons producers come to us today, just so you all understand that. We can guarantee them a prominent release of their programming on a major AVOD network, ours. And so when we compete with other people to obtain programming today in the Screen Media side of our business, we've got something that very few of our competitors have, a way to guarantee that they will -- that producers will see meaningful revenue from this window, which, increasingly, we are the only ones you can go through to get to it because of the purchase of Pluto and Tubi and Vudu and Xumo, the "u people," as we might call them. Those purchases have pretty much locked out independent producers from real access to meaningful AVOD revenue. So we're sitting in a very good position in terms of acquiring new programming.

And we're -- and right now, we have the advantage of not having to do the theatrical releases. When the theatrical release business comes back, we'll go back to releasing limited theatrical releases, using that primarily to promote awareness of our movies, and business will go back to the way it was. It was a good business before. It will be a good business. Then right now, it just happens to be a great business.

So has this all changed your, like, algorithm? Because I knew that, in the past, when you went and spent $2 million on a horror movie or something, you knew exactly how many people to expect that were going to watch it because you had all this data on it all. Has this all changed now with the way things are functioning? Can you pay more for certain movies because you're making more of them?

Well, we could. I would rather pay less and make more if that's okay with all of you.

Okay. So that's the plan.

I'll take advantage of the fact that you can't -- if you go to another distributor, you can't count on as broad an access to the marketplace as we can give you. At the least, I want to only pay the same amount as the other guys and have the advantage of being able to put things on our own network ultimately and generate meaningful revenue. So no, we're not upping the amount we're paying because we think the marketplace is giving us a greater return. We're sharing that return with our producers. We're all going to make more money. And I think we're all better off for it.

Okay. Great. Well, obviously, you're not going to tell us how much The Outpost has made so far, so be looking forward to seeing that.

I hope it's really a lot.

It's a lot. Good.

It's good. I like it.

Okay. We'll look forward to next quarter then.

And our next question comes from the line of Joseph Besecker with Emerald.

And I think Tom Forte from Davidson is really getting back in the queue. Maybe I'll steal a question from him. So their firm did a call several weeks ago on the state of AVOD, and they did this detailed analysis of the growth of advertisers across all AVODs and particularly mentioning about Amazon, and it looked like they were taking that part, the AVOD business, a lot more seriously than they were prior. And he could probably talk about it, really gave a lot of examples in there. Have you seen a meaningful change in the type of advertisers? And does that halo effect from some of the other AVODs help you? And then the last time, I did ask you about political. I'm going to have a follow-up to that when you're done here.

I don't know, Joe. We are getting the biggest campaigns we've ever gotten right now.

Okay. Well, you're doing the campaign second, I'm looking at...

I don't mean -- I'm sorry, I wasn't talking about political campaigns. By that -- that time, I meant advertising campaign from advertisers. We are getting the biggest ones we've ever gotten. And they are at pretty -- they're at good CPMs, higher than we've seen before. I don't know if that's a halo effect of other guys coming into the space. I mean we did have a really good NewFronts presentation. We worked very hard on it. We were presented the same day as Roku and Hulu and Samsung and Tubi. So we were in good company that day. And we announced over 200 hours of Original & Exclusive content, and we announced the 2 new ad unit approaches that we are pushing hard on, one being the FreeView unit, where you watch one interactive ad and you don't have to watch anymore for the rest of the show, which we consider to be really great for consumers and for advertisers, higher engagement, completely provable engagement, and the consumer gets to watch less ads and we make more money. I mean that's like the holy trinity of sorts.

Right. On the political...

I would just say one thing about Amazon, Joe, because if you don't mind, I would like to...

No. No. Sure.

I want to filibuster for a minute. Amazon is a great partner to us in many ways. It's really interesting because their attitude about, at least this business, is that they can exist as IMDb, a network, and also as a platform, the Amazon Fire platform. And they very much support our Original & Exclusive content strategy, so much so that they give us marketing and promotion if we give them early access to our content. This contrasts with Roku, who does none of that, and it's one of the reasons we are so careful to make sure that Roku stays a smaller percentage of our overall business than it would otherwise be without management. They are 2 very different types of companies that have those platforms. And both of them are under attack from the smart TV guys, who are, frankly, the easiest way for consumers to get to OTT and who are taking increasing market share. So we see this market spreading out in terms of distribution and having many, many more ways to get to the customer.

And that question about Amazon is really an interesting one because it opens up so many different things to be -- for people to be aware of. Sorry, I took a slide...

No. No. That helped. And then on the political, which is the question I asked on the last call, and now you said you're definitely seeing it, does it matter to you? Or can you give me some kind of split as to the breakdown of what you have and what you expect to have on national versus regional? And does that matter to you that if some of it's regional? And are there different -- is there different margins in that type of thing?

It doesn't matter. And the reason it doesn't matter is because the CPMs are about the same. The breakdown -- so far, we're getting more local than we're getting national, actually. I think the national guys are coming later. I mean I think they have to have their conventions, and then they will really start to do this stuff. But the local guys are out there already. And we're also getting a bunch of interesting advertising on referendums, which I find so -- I didn't expect to see that. So it's coming from all different directions, and there's quite a bit of it.

Well, congratulations. I think things are starting to come together, and it's fun to watch.

Thank you, Joe. I really appreciate your support. And hope you're doing okay.

(Operator Instructions) Our last question comes from the line of Thomas Forte with a follow-up with D.A. Davidson.

Okay. Great. So Bill, Joe did take one of my questions, so I'm going to come up with another one here. All right. So I had 2 follow-ups. So follow-up number one, I wanted you to talk about the ability for AVOD to exploit the Facebook boycott and/or attract traditional social networking advertisers to AVOD. Our data suggests that advertisers that are reported to be boycotting Facebook are advertising on AVOD for the first time? And in some instances, those that were already using AVOD are putting more ad impressions on AVOD? So I have one follow-up after that one.

Tom, I don't know for sure because nobody comes and says, "Hey, I want to advertise on your network because I don't want to advertise on Facebook." It's not like they call you up to tell you that. But we do have some new advertisers. And as I said earlier, some of these campaigns have gotten bigger, and it could be and may be. And your research probably proves it that this is a positive for us for the time being.

But it's one of several positives. As we've said before, political is a positive right now. That's probably a positive. There's also the fact that sports are -- it's weird what's going on with sports programming and viewing. And most of the broadcasters are complaining about the lack of ratings. I don't know exactly what that means, but maybe it's because sports fans are not satisfied with these truncated seasons without people in the stands. Maybe it's just not sports to them anymore. But we're still seeing people come to us looking for -- for the audience they used to find at sports. So there's a variety of different things that seem to be going on that are driving the business in the advertising side.

Wonderful. All right. So final question. So I wanted to ask another question I get from investors a lot. How does the monetization, for example, from Going From Broke compare with The Outpost? And then in general, what's the significance of having a second season for Going From Broke?

Okay. That's interesting. I guess, in absolute terms, The Outpost will make us more money than Going From Broke did. There's no question about that. But in -- on relative terms, Going From Broke was the single best-performing series financially in the history of Crackle. So -- but I think that mostly has to do with the scale of the production costs and the scale of the various channels in which you can exploit a movie like The Outpost and the fact that we choose to take a series like Going From Broke and put it on our own network immediately and drive meaningful return. So that's -- there's a variety of reasons that that's the case.

Going From Broke Season 2 is a great thing for a lot of reasons. We know there's a built-in audience for it. But we also have seen that whenever a series comes back to Crackle for a second season, the first season comes right back to life and viewership jumps and you get a second chance to make a lot of money. So maybe, in the end, we'll find out that with multiple seasons, assuming maybe there's going to be more than 2, we'll see the economics of Going From Broke equal to or greater than The Outpost.

Series have always had an economic life that is measured in years when they're successful, and the cumulative effect of those years can be very meaningful. Whereas movies generate much more money immediately, and then over a period of time, they tend to tail off. So I think -- I don't think we are around long enough yet to give you a complete economic comparison between Going From Broke and The Outpost. But if Going From Broke continues to be made for season after season, it will ultimately probably do better than The Outpost did, but that would mean it was a hit for many years.

All right. Well, I think that was the last question. I want to thank you all for joining us today. We appreciate it. One of the things that we've been talking about with people, and it didn't come up on this call, is the impact of the linear expansion that we're going to see in the next little bit of time. As you all know, our linear channels are launching for the first time. And what we've seen in the linear channel business is that you get many more hours of viewing, typically from a viewer, much less engagement, but many more hours. And so we're looking for an uptick from that, from the rollout of our own linear networks. That's one other factor that's making us bullish about the next few months. And of course, our marketing is likely to grow our monthly active viewers quite considerably.

So we are really excited about where we are. I'm grateful, we think, that we made it through this period, which I really did not know what to expect in April and May. But we have bounced back, and we have been lucky enough to have a great ballast in the Distribution & Production business. So things are good here, and thanks for coming today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.