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Behind the Universal/AMC Battle, Where VOD Is Only One Problem

Millions in merchandising deals, ancillary revenue streams, dodging bankruptcy: This brouhaha transcends the theatrical experience.


The NBC Universal logo hangs on a building in Los Angeles.

Jae C Hong/AP/Shutterstock

After the vocal volley between Universal (we can go VOD!) and AMC Entertainment (then we won’t play your movies!) extended to Regal Theater’s parent Cineworld (and neither will we!), it seemed like a little context might be in order.

As NBCUniversal CEO Jeff Shell reminded investors on a first-quarter earnings call this morning: Although most movies are currently being watched at home, no one’s suggesting that VOD could, should, or would replace theaters. However, he does expect it to be a “complementary element” going forward — and that’s the part that has AMC chairman-CEO Adam Aron apoplectic.

All of this could be the start of an irreconcilable rift, or it could be standard-issue posturing. Technically, it’s academic until theaters reopen — but it also points to some serious core issues that need resolution.

These include:

• Both studios and theaters are in bad shape at the moment thanks to the pandemic (NBCU parent Comcast’s profit dropped 40% against Q1 2019; AMC delayed its Q1 2020 earnings call to June), but studios have the upper hand. They have other revenue streams (including VOD), while exhibitors’ financials were already ragged and they have nothing to mitigate the loss.

• Shell continues to push the envelope. AT&T Chairman John Stankey made similar comments about reworking the theatrical model; these were quickly modified by subsidiary Warner Bros. executives, but it put theaters on edge. Exhibitors presume Shell parsed his words carefully, seeking a reaction. He got one.

• AMC is the most vulnerable of the circuits. It denies investigating Chapter 11 bankruptcy options, but the other options depend on its projected earnings. Learning that Universal could choose to move some first-run titles to VOD — and the attendant possibility that other studios could follow suit — whacks those plans with a two-by-four.

• It’s worth noting that when Universal announced it would move “Trolls: World Tour” to VOD, theater circuits reacted with mild annoyance, not anger and alarm (though not getting a heads-up rankled). The tone was: We get it, you have a movie, we don’t have theaters, wish it weren’t so but let’s move on. However, they also believed the experiment would be a short-lived bust, and doubted that Universal would release figures. Three weeks in, the film has $100 million in rentals and exhibitors have heart attacks.




• Like “Trolls,” the upcoming Warner Bros. VOD release “Scoob!” is a family film that has expensive and time-sensitive merchandising deals with Walmart, among others. Sources suggest that theaters fear “Mulan” might follow suit, and Aron’s hellfire Universal letter might have been a warning shot to deter those notions. (Of course, Disney also has Disney+ and could offer “Mulan” in May to entice new subscribers with, say, a three-month commitment. That could mean 10 million new subscribers and $200 million.) With “Tenet” from Warner Bros. as the sole other July release, the psychological and financial blow of such a move would be huge.

• Meanwhile, studios are sitting on billions in unreleased films and investments in stalled productions. They also are subject to a structure in which theatrical performance triggers ancillary deals. A film that grosses $100 million rather than $50 million gets much more at every stop on the food chain — cable, streaming, VOD, airlines, TV. If they can’t hit those numbers in the reopened theaters with their 50-percent capacities and an anxious public, that model falls apart. That leads to aggressive exploration of alternatives and letting Wall Street know they’re on top of it.

• On Wednesday, AMC got some good news: Its long-battered stock rallied by 25 percent, way ahead of Cinemark and other media stocks. However, all of this also plays out in the court of public opinion, where social-media sentiment for AMC ranges somewhere between nonplussed and unkind. The moviegoing public cares about theaters, but isn’t vested in the status quo; they prefer options, safety, and the ability to make their own choices.


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