In the late 1920s, sound replaced silent film. In 1949, the consent decree broke up studio ownership of theaters. In 1975, “Jaws” established the template of wide same-day national releases. And now, Universal and theater chain AMC Entertainment have made a historic agreement: It takes just 17 days before a major theatrical release is available online.
By comparison, it once took years for movies to show up on TV. With the advent of the VCR, the lag time went from a year to six months. DVDs, and until recently VODs, decreased that to the 90-day window.
Going forward, AMC Theaters will play Universal and Focus Features films and the studio has the right to provide the titles on Premium VOD as early as after three weekends of theatrical play. (Per the agreement, the 90-day window for basic VOD, streaming, and DVD/Blu-Ray release remains intact.)
Moving from 90 days to 17 may sound like switching out a picture window for a porthole, but the majority of a film’s gross usually comes in the first three weekends, and the PVOD alternative isn’t DVD rentals or streaming or standard VOD; it’s a purchase equal to two tickets at a theater, and with a delay. The question now is if that’s enough for theaters to survive.
In their statement, the companies proclaimed this deal as standing up for theaters. That remains to be seen, but at least it’s not day-and-date; 17 days is a small win for theatrical primacy.
Studios and exhibitors expected radical changes given the enormous damage of the pandemic. But few expected AMC and Universal to upset the paradigm on this scale, particularly after the heated public exchanges between NBC Universal CEO Jeff Shell and AMC Entertainment chairman Adam Aron. (Shell told investors Universal would elevate PVOD as an option for first run films. Aron responded by saying AMC wouldn’t play Universal titles).
That impasse, to put it mildly, has been overcome. And with it, we have a a new world that likely will change the way the film business operates.
Universal is counting on other theaters to bend
By making this agreement with the biggest exhibitor, other top chains — Regal and Cinemark — will be under pressure to and make similar deals. At a minimum, even if Regal and Cinemark declined to agree to the 17-day rule, many exhibition chains and independents would jump in to take their place. (Despite some confusion in the initial release, AMC does not get an exclusive on Universal titles).
No other studio or exhibitor has responded to the AMC-Universal announcement, which was a tightly held secret among the key parties (and timed for release after market closings). NATO, the exhibitor trade association and up to now a foe of smaller windows, said it doesn’t comment on individual member’s business dealings.
We know there’s a 17-day window, and Universal has total control of the titles and dates in their agreement. What we don’t know are the revenue details. In the statement, Aron said “(AMC is) participating in the entirety of the economics of the new structure.” That suggests AMC has a piece of the PVOD revenue, but we don’t know if that’s through its VOD platform, or a share of the broader revenues, a reduction on film rental, or some combination of these. Also unknown: Can other exhibitors make similar deals? AMC has a VOD platform, but most exhibitors don’t.
In business, it’s usually best to be first. As the biggest exhibitor, AMC could also make the best deal.
Universal cares more about PVOD
Streaming is all the rage as the theatrical alternative. But among the top three studios, Universal is by far the most likely to boost PVOD: They are owned by Comcast, America’s largest cable provider. If a Universal PVOD is rented by a cable consumer, they capture 100 percent of that revenue.
Exhibitors could have made a potentially better deal, months ago
Theatrical-window negotiations have been ongoing for years, with little progress. These include disruptor Netflix, which reportedly offered a 45-day window for some VOD. (In that discussion, AMC was the most active participant.)
At four weeks earlier than the Netflix plan, this deal is far more radical. It also includes a rev share, the value of which is TBD. At this point, AMC wanted to get ahead of the game and come to terms before theaters open to uncertain prospects. Even before the closings, AMC was involved in particularly difficult debt negotiations and faced financial vulnerability.
What this hasn’t done is elevate AMC’s stock price. Immediately after the announcement, the price spiked (to $4.77) but quickly stabilized to previous levels around $4.12. At market open, however, AMC stock headed south. At 10:10am ET, 40 minutes after opening bell, it was at $3.96.
Universal has the right product for this deal
The studio has seen a smart combination of releases, with a range of franchise titles (“Fast & Furious”), strong animation entries (“Despicable Me”), Oscar winners (“The Green Book”), Blumhouse Productions (low-budget films as well as Jordan Peele) among them. Disney is almost entirely devoted to top-dollar franchises, while Warners may be more likely to shift their low-grossing dramas to HBO Max. Universal is a higher-volume studio with an eclectic slate. It needs the flexibility of alternative platforms.
Focus Features is a wildcard
Seventeen days is a minimum time in theaters, not a standard. Consumers might get confused and believe they can wait for all films. (It would be less likely for a massive film like “Fast and Furious 9.”) The deal terms include Focus as a participant, but it may be less likely to embrace the early PVOD route.
AMC is a valued player for its films like “Emma” and “The Darkest Hour,” but the theatrical footprint belongs to a much wider range of exhibitors including Landmark and Arclight, other major chains, and many smaller ones as they expand. Going PVOD three weeks in would potentially undercut many of its partners.
It will be months before we can have a sense of the deal’s impact (Universal’s next release is “Candyman” on October 16), but it’s impossible to imagine that other studios are not working furiously to follow suit. Although exhibitors as retail operators are conservative and cautious, they also don’t want to be left behind.
AMC must have believed that the status quo of studios racing to a variety of platforms was too big a threat not to act, and now. As to whether this help theaters survive — well, that is the unanswered question.