NBCUniversal CEO Jeff Shell dropped some bad news on theater chains that signals a new future for how audiences consume major motion pictures after COVID-19.
In a new interview with the Wall Street Journal, Shell opened up about the success of releasing “Trolls World Tour” on video-on-demand as opposed to waiting for theaters to reopen amid COVID-19. The animated kids movie earned an estimated $100 MILLION in revenue over its first three weeks in on-demand sales in North America, a figure that promises return profits for the studio down the road. In comparison, the original “Trolls” in 2016 earned $116 MILLION at the domestic box office in the same time frame.
Shell is now saying that the successful, experimental release will affect how the studio releases movies in the future, and it isn’t looking good for the traditional theater chains:
“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Shell told WSJ. “As soon as theaters reopen, we expect to release movies on both formats.”
Looking strictly at earnings, the decision to move some content to VOD makes perfect sense as studios keep a larger share of on-demand revenue than they do with traditional theaters. WSJ estimates that Universal earned 80 percent of revenue with VOD ($80 MILLION) in the case of “Trolls World Tour.” The film is currently priced at $19.99 for a 48-hour rental.
Theater chains are understandably upset by Shell‘s comment. The National Association of Theater Owners addressed the success of “Trolls World Tour” and the future for VOD in an official statement:
“Universal does not have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases,” NATO president and CEO John Fithian said. “Theaters provide a beloved immersive, shared experience that cannot be replicated – an experience that many of the VOD viewers of this film would have participated in had the world not been sequestered at home, desperate for something new to watch with their families. We are confident that when theaters reopen, studios will continue to benefit from the global theatrical box office, followed by traditional home release.”
NATO makes a good point in questioning the profitability of VOD moving forward, as “Trolls World Tour” is just one success story under extreme circumstances. Notably, the film is a sequel to a hugely successful kids flick that didn’t have much else to compete with when it was released.
Studios will continue to release select films on VOD like “Scoob” and the Pete Davidson/Judd Apatow comedy “The King of Staten Island” among others. It’s by no means game over for theaters yet, but it’s looking certain that COVID-19 will at least shake up release strategies moving forward.
Judd Apatow’s new comedy, “The King of Staten Island,” starring Pete Davidson will now be released digitally on June 12th. pic.twitter.com/7ZXImisA9L
— Pop Crave (@PopCrave) April 28, 2020
AMC Entertainment CEO & President Adam Aron is now saying the theater chain will refuse to license any Universal movies in its theaters moving forward.
Read the official statement:
“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 movie makers, 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 worlds 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.”
Universal is standing by its original statement published by the WSJ in a new rebuttal to AMC:
“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.”
Do you think theater chains will take a major hit thanks to video-on-demand? Share your thoughts with us on Twitter at @PopCrave!