In a massive reversal of its previous policy, theater giant AMC Entertainment Holdings has reached agreement with Universal Studios to allow the studio to release films to premium video-streaming services after just 17 days of play in cinemas. The deal signals a massive sea change to a longstanding policy that had required studios to play films on the big screen for at least three months before making titles available to home viewers.
Theater operators had long highly guarded this so-called “theatrical-release window” to avoid having to compete with consumers’ living-room couches for eyeballs. But COVID-19 has changed the game by shutting down cinemas worldwide.
That prompted Universal to release “Trolls World Tour” directly to streaming on April 10 for $19.99, which pulled in roughly $100 million in rentals in the film’s first three weeks. That’s admittedly less than the $153.7 million that the first “Trolls” film collected at the domestic box office, but it ended being up more lucrative for Universal on the whole. That’s because the studio pockets roughly 80 percent of revenues for video on demand (VOD) movie vs. a 50-50 split with theater operators when films hit the big screen.
Unsurprisingly, Universal was pleased with its “Trolls World Tour” outcome — so much so that NBCUniversal CEO Jeff Shell noted in an interview with The Wall Street Journal that “as soon as theaters reopen, we expect to release movies on both formats.”
But equally unsurprisingly, AMC was largely displeased by that announcement and initially struck back aggressively. “It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice. Therefore, effectively immediately, AMC will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East,” CEO Adam Aron wrote in an April letter to Universal.
At the time, the threat seemed quite frightening given the size and scale of AMC, the world’s largest cinema chain. Losing AMC screens could have been a crippling blow for Universal’s upcoming releases — and Aron underlined that AMC was firm on its policy, noting that the move to ban Universal films was not “not some hollow or ill-considered threat.”
Hollow? No, AMC was clearly perfectly serious at the time.
Ill-considered? Well it’s hard to credibly threaten a massive movie studio with not playing its films on your screens when AMC wasn’t able to play anyone else’s films on its screens, either. And although theaters are slowly attempting to reopen nationwide, they’re hampered by a relative dearth of big-name new releases this summer, as well as the reality that consumers are genuinely hesitant to get back into cinemas.
PYMNTS has surveyed U.S. consumers throughout the pandemic and found that Americans aren’t quite ready to resume normal activities like going to the movies. It’s not that the interest isn’t there; 54. 2 percent of those we spoke to said they missed going to leisure events like movies. That trailed only wanting to see friends and family and eating out in restaurants as the top activities that Americans missed.
But the data also demonstrated that consumers remain nervous about the health consequences of getting back to the physical world. A notable share of those we surveyed are uninterested in giving up their digitized lifestyles in favor of getting back to their physical ones. That’s a long way of saying that even when theaters reopen and studios resume releasing films, a large share of consumers simply aren’t going to be willing to sit in theaters. Instead, they’ll wait for movies to stream online.
And now, it seems like those customers won’t have to wait longer than the 17 days in the Universal/AMC deal (which includes three weekends). With the dam of theater-owner resistance broken, we can expect other studios to negotiate similar arrangements with AMC and other cinema chains.
However, AMC didn’t walk away from the deal with nothing. Sources told some media that the chain negotiated about a 10 percent cut of on-demand revenues, apparently having accepted the idea that collecting something from digital-only consumers is better than nothing.
AMC CEO Aron said his company “enthusiastically embraces this new industry model both because we are participating in the entirety of the economics of the new structure and because premium video on demand creates the added potential for increased movie studio profitability, which should in turn lead to the green-lighting of more theatrical movies. This multi-year agreement preserves exclusivity for theatrical viewing for at least the first three weekends of a film’s release, during which time a considerable majority of a movie’s theatrical box office revenue typically is generated.”