Due to the unimaginable success of the VOD release of Trolls: World Tour. AMC Theaters is refusing to play Universal movies in theaters once they reopen.
Blame it on Trolls or blame it on Universal? That’s the real question. Earlier today, AMC Theaters publicly went on to make a major announcement regarding their refusal to play any of Universal’s upcoming films in their theaters after they reopen. Earlier last month, AMC Theaters, along with the rest of the world went into total shutdown due to the coronavirus pandemic.
Due to the pandemic, all gatherings of any size, no matter how big or how small were canceled and outright forbidden. Due to the lack of entertainment for many of us sheltered at home, movie studios like Universal released their scheduled theatrical released early and straight to consumers in a video-on-demand format. Consumers had a choice of either renting or buying the film outright, rather than wait for theaters to reopen later this year or next in order to watch the film.
Luckily for Universal, who rolled the dice on the infamous “high-risk, high-reward” game, emerged victoriously. In just three weeks, Trolls World Tour racked in over $100M. A huge milestone achievement when it comes to straight to consumer content. Not only that, but Trolls World Tour also earned Universal more in those first three weeks than the first Trolls film earned the studio in its five-month theatrical run. An astounding record and achievement for both the film and the studio behind it.
Unfortunately for AMC, they took a massive loss in the process. For those who are unfamiliar with splits between film studios and movie theaters. For the most part, there’s a 50/50 split between the studio and the theater once the film is released. In this very specific case, where a scheduled theatrical release is pulled and released ahead of schedule and straight to consumers. Movie theaters, in general, take a massive loss. Gaining absolutely nothing from a VOD release.
On the flip-side, Universal came out on top, keeping 80% of the total profits behind the film’s massive VOD success. Talk about a triple whammy. It’s crystal clear as to why that would leave a bad taste in AMC’s mouth.
AMC Theaters CEO and President Adam Aron released a letter stating his company’s displeasure with Universal’s success with their VOD release.
Check out the letter below:
Dear Donna,
At this time of national emergency and the coronavirus wreaking havoc on the entire world, I hope that you and your loved ones are healthy and safe. I worry – and I wish the best for – the health of all of our industry colleagues. Never in our lifetimes has there been a more challenging time.
Amidst a global pandemic as a backdrop, I wish we were spared from also having to address a different issue that arises from Universal actions currently underway.
For 100 years, AMC Theatres has served as a strategically critical and highly profitable distribution platform for moviemakers, and for all that time the exclusivity of the theatrical release has been fundamental. When a movie is “Only in Theaters,” consumers perceive it to be higher quality entertainment. Countless filmmakers and moviegoers believe that their creative works are best enjoyed by consumers on the big screen. And we all know that those theatrical releases indeed boost publicity, positive word-of-mouth, critical acclaim, and downstream revenues.
For much of the past four and a half years, I have been in direct dialogue with Jeff Shell and Peter Levinsohn of Universal about the importance of a robust theatrical window to the viability of the motion picture exhibition industry. Throughout that time, AMC has expressed a willingness to consider alternatives to the current windowing strategy common in our industry, where the aim of such alternatives is to improve both studio profitability and theater operator profitability.
Universal stated it only pursued a direct-to-home entertainment release for “Trolls World Tour” because theaters were closed and Universal was committed to a lucrative toy licensing deal. We had our doubts that this was wholly Universal’s motivations, as it has been a longstanding desire by Universal to go to the home day and date. Nonetheless, we accepted this action as an exception to our longstanding business practices in these unprecedented times.
In today’s Wall Street Journal, Jeff Shell is quoted as saying that:
“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Mr. Shell said. “As soon as theaters reopen, we expect to release movies on both formats.”
This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable to AMC Entertainment, the world’s largest collection of movie theatres.
Going forward, AMC will not license any Universal movies in any of our 1,000 theatres globally on these terms.
Accordingly, we want to be absolutely clear, so that there is no ambiguity of any kind. AMC believes that with this proposed action to go to the home and theatres simultaneously, Universal is breaking the business model and dealings between our two companies. It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us. It also presumes that Universal, in fact, can have its cake and eat it too, that Universal film product can be released to the home and theatres at the same time, without modification to the current economic arrangements between us.
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 theatres 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 theatres 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.
AMC has invested significant time and energy with Universal executives over the past few years trying to figure out a new windows model that would be beneficial both for your studio and for our theatre operations. While 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.
Adam Aron – AMC
While the letter states that AMC Theaters’ and Universal’s current business endeavors have currently come to an end, Aron and his company are still open to renegotiating new plans with Universal. A typical business move which should be expected. But it doesn’t end there, Universal fired back with their own statement.
“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.”
Universal
Once again, business is business. This is typical, screw me over and I’ll walk away scenario that’s often seen in business dealings. While AMC Theaters is taking Universal’s success a bit too personal, it is totally understood from a business standpoint. On the other hand, both parties seem interested enough in renegotiating and restarting their business workings once again. Only time will tell how long it will take.
The most interesting part about this whole ordeal is how will AMC Theaters react to Warner Bros’ upcoming VOD release, Scoob! which is scheduled to release on May 15th? I guess that will depend on the film’s success. Overall, this avenue of release will be considered by all film studios at some point in time, if they haven’t considered it already, which we are sure they have.
While there is no clear cut time as to when theaters will reopen, for the time being, its best to just enjoy these films if and when they release directly to consumers. But most importantly, it is key to support these films in theaters when they in fact, do release.
Source: IGN, Universal, AMC Theaters Press Release
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