Studios vs Theaters: The Knives Are Out?

studios vs theaters

The ongoing pandemic has affected a variety of businesses with a variety of products and services – the entertainment industry is not an exception. While some of its branches are thriving due to the widespread stay-at-home orders, others have seen their revenues melt away like snow.

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Among the hardest-hit businesses, we find movie theaters that were among the first venues forced to close. Vin Diesel’s Bloodshot was among the last wide theatrical movie releases this year, and it felt the effect of the virus in full: its box office revenues were way down. Then again, the virus may have been just a scapegoat – we’ll never know.

At the same time, streaming services are doing better than ever. Even without high-profile releases like Amazon’s upcoming “Lord of the Rings” series, a never-before-seen number of people are following movies and series on Netflix, Prime, Disney+, and all others that have emerged in the last couple of years.

Streaming services are doing so well right now that, apparently, movie studios that relied heavily on theatrical releases before the pandemic are now considering using them as their primary channel. In some cases, anyway, and for the time being. But this is not very well received by the companies running the movie theaters.

The case of the Trolls

“Trolls, the 33rd animated feature released by DreamWorks, was a moderate success – but big enough to warrant a sequel. Trolls World Tour, the sequel, was scheduled to be released in cinemas on March 10 but, due to unforeseen consequences, this never happened. Universal decided to delay the theatrical release to April 10 (and proceed with it in a very limited form) and to release the movie through video-on-demand services on the same day. As you might expect, the revenues generated by the theatrical showings were minuscule. Not the VOD release, though.

Released through FandangoNOW and Amazon Prime Video, the Trolls World Tour could be seen by anyone for a one-time rental fee of $19.99. The interest in the musical was huge (undoubtedly fueled by the lack of new releases): with more than five million (!) rentals, the movie made more money for Universal than the first in its five-month theatrical run.

Universal wants VOD, theaters don’t like it

When releasing a movie in a chain of theaters, the latter takes a cut of around 50% of the movie’s gross revenue. In the case of video-on-demand services, the studio’s cut is closet to 80%. This is obviously a much better deal for the studios.

This is probably why after the successful experiment with the Trolls, Universal intends to extend its practice of releasing certain movies both through cinemas and streaming services at the same time.

As you might expect, theaters didn’t like Universal’s idea. The first to react was AMC, the biggest American theater chain with more than 1,000 locations and around 11,000 screens. In a letter sent to Universal chairman Donna Langley, AMC Entertainment CEO and President Adam Aron pointed out that Universal intended to make this change without regard to the revenues of the cinemas. As such, he announced Universal that AMC cinemas will no longer play any Universal movies, not in the US, not in Europe, not anywhere – and promised to treat all other studios that “unilaterally abandons current windowing practices absent good faith negotiations”. Since then, Regal Cinemas – another American movie theater chain with more than 500 locations – also announced Universal and all other studios that it will now show its films if the studios don’t respect the “theatrical window”.

Universal, in turn, responded with disappointment when facing the “seemingly coordinated attempt” by theater chains to blackball it. But it did defend its position: “Based on the enthusiastic response to the film, we believe we made the right move”, the company said in a press release while reiterating its belief in the “theatrical experience”.

The knives are out?

Universal has quite a few big releases coming in 2021 that rely heavily on the “theatrical experience” – think Fast 9, Jurassic World: Dominion, both of them with the potential of billion-dollar box office revenues. It would – like most other studios, by the way – like to be less restrained by the tradition of the “theatrical window”.

At the same time, movie theaters – that are currently in a sensitive situation due to the pandemic – would like to stand up to the strengthening digital direct-to-consumer shift fueled by the emergence of streaming services backed by major brands (Peacock, Universal’s own digital video streaming service is already available to Comcast’s Xfinity Flex customers, and will become widely available in two months).

So, the knives are out, it seems.

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