A newly announced deal between Universal Pictures and the nation’s largest theater chain to bring movies quickly to digital platforms is sending shock waves through Hollywood, with many rival theaters criticizing it for terms on which they were not consulted and benefits on which they are not included.
On Tuesday AMC announced an agreement with Universal Pictures to dramatically shorten theatrical “windows” – the exclusive period before a movie can move to digital on-demand platforms that has been a contentious point between those that produce movies and those that retail them.
Under terms of the deal, Universal will be allowed to put movies on digital platforms after 17 days of theatrical release, or a movie’s third weekend, instead of the customary 60-75 days. In exchange, the studio will share an undisclosed portion of on-demand rental proceeds with AMC.
The principals heralded the deal as a digital-forward move that still accommodates the traditional – and, not insignificantly for studios, highly lucrative – business of theatrical moviegoing. The two companies, which had each rattled their sabers in advance of negotiations in recent months, declared a win for both sides.
But questions immediately arose about how many movies will be subject to the deal. Universal was unlikely to pull its biggest films to a low-revenue on-demand platform after three weekends, when the company could still add more than 25% to its box-office total. “Jurassic World,” the 2015 action movie that is one of Universal’s biggest modern-day hits, garnered an additional $150 million after its third weekend on top of the $500 million it had already made.
At the more modest end, “The Secret Life of Pets 2” last summer added an additional $40 million to the $118 million it had taken in.
Smaller-budget films that were not performing strongly in theaters could be moved after 17 days, but those films are less likely to make an economic or cultural impact.
If the studio were to follow through, it would face another issue: all the other theater owners.
Four independent operators interviewed by The Washington Post, all of whom spoke on the condition of anonymity so as not to appear publicly critical of colleagues and counterparts, said they were upset by the deal, particularly noting that AMC negotiated an agreement that only benefited itself but still shortened the window for everyone else.
“So now our window ends and what we do have to show for it?” one said.
Three of the four said they were unlikely to play Universal movies if the deal proceeded.
The head of the parent company of Regal, the country’s second-largest chain, went public with his unhappiness.
The company’s leaders “clearly see this as a wrong move at the wrong time,” Mooky Greidinger, chief executive of Cineworld, told the industry trade site Deadline. “Clearly, we are not changing our policy with regards to showing only movies that are respecting the theatrical window.”
Universal is unlikely to try to impose the terms without bringing other theaters into the revenue-share. AMC controls about one-quarter of the 40,000 screens in the U.S., not enough to make or break a movie.
When all those separate deals have been negotiated, with other theaters and chains gathering their own percentage, “how much money will be left over for the studio?” one theater owner said. So little, that the owner believed Universal would be uninterested in taking advantage of the deal for many movies.
Representatives of AMC and Universal did not respond to a request for comment.
Windows can be a tricky issue for theater owners. Many theaters have different sales patterns and needs, with some seeking to rotate new product in quickly and others looking to wring value from older movies.
The National Association of Theatre Owners, which as a matter of policy does not weigh in on the actions of members, did not comment on the deal.
No other studios have followed Universal, with Sony Pictures considered the next-most-aggressive in seeking to shorten windows. Other studios, such as Disney and Warner Bros., are considered theater-friendly and have not historically pushed hard for window changes.
The agreement comes as AMC and other theaters have felt the pinch of the coronavirus pandemic, as did studios – the closure of theaters this spring prompted Universal to put several planned theatrical moves on digital-rental platforms, and NBC Universal chief executive Jeff Shell said Universal would continue to turn to digital event after the pandemic ended.
AMC may have its own short-term reasons for cutting a deal. The company is facing a debt crunch due to the pandemic, and the agreement could provide revenue from digital rentals if consumers do not return to theaters.
Universal has at least three big U.S. releases scheduled for the fourth quarter, including the Jordan Peele-produced horror remake “Candyman,” the animated sequel “Croods 2,” and the Western “News of the World,” which reunites Tom Hanks with his “Captain Phillips” director Paul Greengrass. All of them could bring AMC much-needed revenue if they open in theaters to a nervous consumer base that then stays home, thus prompting Universal to enact the window clause.
Digital windows have been contentious for more than a decade. Some studio executives think theaters hold on to movies for too long; there is a point, they believe, at which a movie’s theatrical momentum has slowed but a film can still take advantage of residual marketing heat in on-demand venues, though there have been few test cases to demonstrate the point.
Consumers, habituated by Netflix’s on-demand approach, clamor to see films right away.
But anything close to release simultaneity for Hollywood’s biggest movies is, according to most experts, the stuff of economic fantasy. Studios cannot sustain franchise movies, with as much as $200 million in production costs and an equal sum in marketing expenses, with digital revenue.
For a movie that takes in $300 million at the U.S. box office, as the top nine films each did last year, a $5 rental would require more than 40 million homes to rent it, once revenues are shared with distribution partners. The highest-rated network show this season, “NCIS,” averages 15 million viewers – and it’s free.
Studios would need to build movies much differently, at far smaller budgets, to make them feasible in a primarily digital world.
“And at that point,” one theater owner said, “isn’t that Netflix?”