AMC Theaters and Cineworld Won’t Play Universal Movies

This move by AMC and Regal may cost Universal much more money than what they are making with the release of Trolls World Tour on VOD.

 

Let’s go back to a couple of months. Back then, Universal was supposed to release the second installment in the Trolls universe, Trolls World Tour, on April 10. This meant that the studio had signed a deal with theater owners all over the country saying this: starting April 10 (maybe April 9 for Thursday previews, sure) you are able to show our movie for the following months, and in the first three months (roughly) we will not release this movie in any other platform.

 

This means that there is a pact between the studio and the theaters that is actually very fragile, and either end breaking their part could have disastrous consequences in the future. If the studio breaks their part, theaters could potentially refuse to show their future movies, and if theaters break their part of the agreement, the studio won’t send them their movies anymore. Everybody that sits at that table understands that and respects that, because it is a profitable situation for everyone. Studios make their highest profits with theatrical distribution and theaters need people attending to sell them candy and survive.

 

You might be saying, hey, back in March, several studios took their movies out of the theaters and released them on VOD or streaming (the most notorious case being Onward for Disney+, but also The Way Back, Sonic The Hedgehog, etc.) And while that is true, theater owners didn’t oppose to that because they understood that due to the current situation they were being forced to shut down and so they weren’t capable of fulfilling their part of the agreement.

 

However, the Trolls 2 situation is very different, because Universal decided to send that movie direct to VOD without giving the theaters the chance to honor their part of the agreement by delaying that release (like all the other studios did). Initially, the theater owners were furious, but this week they have put their statements into action, and both AMC Theaters and Cineworld, which owns Regal (the two biggest theater companies in the world), have announced that moving forward they will not be playing any Universal distributed film.

 

Their move did not come unprovoked. After the NATO (National Association of Theater Owners) showed their angriness at Universal for skipping the theatrical distribution for Trolls World Tour, the CEO of NBCUniversal, Jeff Shell, told the Wall Street Journal the following:

“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD. As soon as theaters reopen, we expect to release movies on both formats.”

 

He was talking about the fact that Universal has already made over $100 million in the first three weeks of release, which would mean that around 5 million families rented the movie on VOD (for the modest price of $19.99). This not only means that the studio is getting back its production budget (around $100 million, so we are not counting marketing costs), but also it is exceeding the expectations that were set on the film for its domestic run. According to an old entry of Box Office Pro, the movie was tracking to earn $60-$90 million in its total domestic run.

 

However, according to Variety, AMC did not take Shell’s statement lightly and they took action, by sending a letter to Universal Filmed Entertainment Group chairman Donna Langley, in which they said:

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.

This policy affects any and all Universal movies per se, goes into effect today and as our theaters reopen, and is not some hollow or ill-considered threat. Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes. Currently, with the press comment today, Universal is the only studio contemplating a wholesale change to the status quo. Hence, this immediate communication in response.

Universal’s unilateral pronouncements on this issue are unpalatable to us, as has always been the case, AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours. However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.

 

Universal responded:

Our goal in releasing ‘Trolls: World Tour’ on PVOD was to deliver entertainment to people who are sheltering at home, while movie theatres and other forms of outside entertainment are unavailable. Based on the enthusiastic response to the film, we believe we made the right move. In fact, given the choice of not releasing ‘Trolls: World Tour,’ which would not only have prevented consumers from experiencing the movie but also negatively impacted our partners and employees, the decision was clear.

Our desire has always been to efficiently deliver entertainment to as wide an audience as possible. We absolutely believe in the theatrical experience and have made no statement to the contrary. As we stated earlier, going forward, we expect to release future films directly to theatres, as well as on PVOD when that distribution outlet makes sense. We look forward to having additional private conversations with our exhibition partners but are disappointed by this seemingly coordinated attempt from AMC and NATO to confuse our position and our actions.

 

The day after that, on Wednesday, Cineworld stated that they won’t be playing Universal movies in their theaters either (via Deadline):

Universal’s move is completely inappropriate and certainly has nothing to do with good faith business practice, partnership and transparency.

Today we make it clear again that we will not be showing movies that fail to respect the windows as it does not make any economic sense for us.

Cineworld’s policy with respect to the window is clear, well known in the industry and is part of our commercial deal with our movie suppliers. We invest heavily in our cinemas across the globe and this allows the movie studios to provide customers all around the world to watch the movies in the best experience. There is no argument that the big screen is the best way to watch a movie. Universal unilaterally chose to break our understanding and did so at the height of the Covid-19 crisis when our business is closed, more than 35,000 employees are at home and when we do not yet have a clear date for the reopening of our cinemas.

Cineworld’s roots go back 90 years in the industry and it was always open to showing any movie as long as the rules were kept and not changed by one sided moves. Today we make it clear again that we will not be showing movies that fail to respect the windows as it does not make any economic sense for us. We have full confidence in the industry’s current business model. No one should forget that the theatrical side of this industry generated an all-time record income of $42 billion last year and the movie distributors’ share of this was about $20 billion.

 

Universal must react to this quickly because if they keep their intentions, and so do AMC and Cineworld (and potentially other distributors as well), the studio will probably lose hundreds of millions of dollars next year with the releases of Fast 9 and Jurassic World: Dominion. I can’t see a situation in which the board of the studio allows that to happen, so they will probably have to back up, and even then, theater owners could still hurt them financially, even if they agree to show their movies (by not playing them in premium formats like IMAX, Dolby Prime, 3D, etc.)

 

It will be interesting to see how things turn out in the end. One of the things I find most fascinating about this entire situation is that Universal is no longer the only studio pulling these types of tricks. Disney has already announced they will be skipping theatrical distribution for Artemis Fowl, and so did WB with Scoob. Let’s all hope for this situation to resolve itself rather quickly so that we can someday go back to the movie theater and enjoy ourselves.