During a decade of devastation for the home-entertainment industry, Shout! Factory has not only survived by selling DVDs and Blu-rays, it has thrived.
The 60-person Los Angeles-based company has increased its annual revenue and profits by trading on pop culture nostalgia for everything from “Leave it to Beaver” to the “My Little Pony” cartoon series.
Instead of the latest releases, it mines the deepest recesses of television and film history to unearth largely forgotten treasures that retain a cult mystique. Now in its 10th year, Shout! Factory is projected to make $50 million in revenue in 2013 and puts out an average of between 15 to 20 new projects a month
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“We’re fans first,” Richard Foos, Shout! Factory founder and CEO, told TheWrap. “We’re deeply embedded in great and cool pop culture, and we try to present it in a curated way that we’d like to see as fans.”
Shout! Factory’s hottest acts are entertainers like Mel Brooks and Ernie Kovacs, performers of great talent who are nonetheless a few generations removed from getting a guaranteed greenlight from major studios or who have passed on to their extra-earthly rewards. Likewise, its big sellers include episodes of “Mystery Science Theater 3000” not “The Hunger Games.”
Instead of hurting Shout! Factory, this retro-focus has allowed the company to take on and make money from projects that fly under the radar of major studios. For the last five years, its profits have jumped 25 to 30 percent each year on average, while revenue has grown between 5 to 10 percent annually, Shout! Factory executives say.
The executive team has enjoyed such robust growth in part by drawing on its experience in the music business. Shout! Factory emerged after Foos sold his stake in Rhino Records to Time Warner in 2001. Like Shout, Rhino spruced up and repackaged the works of older acts, although it was primarily in the music game.
When the new company formed, Shout’s management intended to evenly divide its time between music and DVDs, but the precipitous fall in record sales necessitated a change of plans.
Today, more than 85 percent of Shout’s business comes from television, animated content and movies, but those music relationships came in handy. Take “Freaks & Geeks,” which Shout released in 2004 and which remains its biggest seller. The Judd Apatow-produced series set in the Reagan-era featured an array of songs from the 1980s. That presented a licensing nightmare.
“Our expertise in our previous life at Rhino, our relationships with music publishers, have given us a huge advantage over other independents,” Bob Emmer, Shout! Factory founder and COO, said. “From the studios standpoint, they say, ‘the show was good, but it only lasted one season, so why put up six figures to license music for something that didn’t have another season?’”
But Shout! Factory executives were able to tap into their personal contacts to clear the rights to some 100 songs in 19 episodes, which allowed the show to get a home-entertainment release.
