Image via Universal Pictures
Godzilla vs. King Kong. Ali vs. Frazier. Bird vs. Magic. Belichick’s Patriots vs. everyone.
These legendary battles gained a new competitor as Universal Pictures and AMC Theaters went head-to-head over...Trolls World Tour?! Why in the world is the largest theater chain in the U.S. picking a fight with a global corporation over an animated musical film based on toys you had as a child? And what does it mean for the future of the theatrical movie-going experience? The answers to these questions are complicated, but essentially boil down to the tension around how we are used to seeing movies versus how we’ve grown accustomed to seeing them in the past decade. It’s a long-simmering cold war that finally exploded—quite publicly—this week.
The typical relationship between cinema chains and film distributors has worked as such: Film studios (like Universal) lease out a movie to a theater in exchange for a portion of its ticket sales. It’s a symbiotic relationship, as theaters need movies to show and studios need the massive distribution abilities of the screens to ensure its movies are seen by large portions of people. As part of this agreement, theater chains are typically granted an exclusive 90-day period—known as windowing—wherein they receive the exclusive rights to show a film. The two groups then split the money the movie makes during the course of its run. However, this model has been challenged in recent years by streaming services—most notably Netflix—as those platforms have proven a studio can release content to a hungry audience and have it seen by a large number of people immediately.
As the coronavirus has ravaged Hollywood, cinemas and studios alike are left in a compromising position. With theaters closed, there’s not a traditional option for studios to showcase their product. This tension is why we’ve seen a number of studios, looking to recoup however possible, embrace releasing movies on premium video-on-demand (PVOD) platforms like Apple, Amazon, and so forth. The initial wave of movies to hit PVOD—The Invisible Man, The Hunt, The Way Back, and Onward, among others — were all films already released to theaters prior to Rona shutting everything down. Crucially, these movies moving to PVOD after their release still provided an element of windowing, still adhering to the standard relationship between theaters and distributors.
The same can’t be said for Trolls World Tour. The animated sequel to the highly popular Trolls movie was originally set for an April 17 theatrical release but was moved up a week to April 10 to offer a day-and-date digital and theatrical release for the few theaters who were still open. Technically, this move violated any resemblance of windowing.
However, most chains didn’t seem to make much of a fuss—publicly at least. That changed with a report from The Wall Street Journal on Tuesday, April 28. Since its North America release on April 10, the movie has made an estimated $100-million from PVOD sales. While this amount is under the $153-million domestic gross the original Trolls movie made back in 2016, Universal gets to keep all of the $100-million because they don’t have to share those funds with a theater chain. To add further insult to injury, NBCUniversal CEO Jeff Shell then doubled down, saying “Soon as theaters reopen, we expect to release movies on both formats (theatrically and PVOD).”
After those comments, well, all hell broke loose.
AMC Theaters chair-CEO Adam Aron called Shell’s comments “unacceptable” and issued a damning statement, seemingly passing the rubicon along with it by saying “effectively (sic) immediately AMC will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East.”
Part of this statement is inherently reactionary. COVID-19 has made day-to-day industry operations far scarier than normal circumstances. Once you add in the rise and threat of streaming services, theaters like AMC are worried about the competition eating away at its margins. It’s not just AMC either, as Regal Cinemas owner Cinemark stated, “we make it clear again that we will not be showing movies that fail to respect the windows as it does not make any economic sense for us.” Regal is the second-largest chain in the US and its adherence to this policy could cause further doom for Universal if the two biggest players in the theater space refuse to play ball.
But a 1,000-foot view shows this isn’t sustainable for either side. At this point, Trolls World Tour is an outlier—not the norm. The film’s $100-million success can be rationalized in any number of ways: Parents bought it for their kids to watch while they tried to get work done; it was the first new studio release in months and didn’t have any other competition during its release; marketing of PVOD releases will get more expensive if other studios are also marketing their titles and so forth.
Meanwhile, AMC is in the middle of a crash crunch and quite literally cannot afford to not have access to movies like Fast 9, Jurassic World: Dominion, or No Time to Die as those franchises have massive global audiences and stand to gross $1 billion worldwide. Likewise, Universal needs chains like AMC to distribute those movies to hit those high grosses, as the margins on big tentpoles are too big not to release—which is why each of those previously mentioned films have already been delayed at least six months or more.
A PVOD and/or streaming-first debut doesn’t make sense for every single movie. Plus, I know that I don’t want to see Fast 9 on my couch; I want to see it on the biggest screen possible to hear the engines roar and tires squeal—preferably alongside a raucous crowd.
What might make sense for a straight to PVOD release are non-prestige (read: not A24 films and movies of their ilk) small and medium-sized movies that have been popular on Netflix—i.e., comedies, rom-coms, and cheaper action movies—could see higher profits for studios on VOD than in theaters. Take a movie like Universal and Judd Apatow’s The King of Staten Island. The Pete Davidson-led movie is the studio’s next straight-to-VOD release and seems like a flick that a certain group of people would just wait until it’s on VOD to watch anyhow. Releasing that straight to digital stands to provide a higher opportunity cost for studios because they wouldn’t have to share revenues with a theater chain. If The King of Staten Island tanks, at least Universal won’t have to split a loss with AMC.
What we’re seeing unfold is a very public insight into a symbiotic relationship that’s always been a very delicate dance. Universal has already walked back its initial comments a touch, calling the theater experience a “central element” of their business while acknowledging PVOD is “complementary.” But the damage from—and I cannot believe I’m writing this—Trolls World Tour (of all movies!) is already done. The whole issue with opening Pandora’s Box is that you can’t close it back up again. Now all that’s left is to let them fight—and see what’s left among the rubble when the dust settles.