Entertainment

AMC strikes historic deal with Universal, shortening number of days films need to run in theaters before going digital

Key Points
  • AMC Theaters agreed to show Universal Pictures films on the big screen once more and grant Universal a smaller theatrical window so it could make its titles available on-demand sooner.
  • As part of the deal, Universal and Focus Features must play movies in cinemas for at least three weekends, or 17 days, before releasing those films on premium video on-demand platforms.
  • Previously, theaters would have the exclusive rights to films for 90 days.
  • AMC will also share in these new revenue streams from premium video on demand.
VIDEO2:0302:03
Universal and AMC will shorten the exclusive theatrical window to 17 days

The feud between AMC Theaters and Universal Pictures, which started over the video on-demand release of "Trolls: World Tour" in March, is over.

On Tuesday, the two companies announced an agreement that would see AMC show Universal films on the big screen once more and grant Universal a smaller theatrical window so it could make its titles available on-demand sooner.

As part of the deal, Universal and Focus Features must play movies in cinemas for at least three weekends, or 17 days, before releasing those films on premium video on-demand platforms. Previously, theaters would have the exclusive rights to films for 90 days.

"AMC will also share in these new revenue streams that will come to the movie ecosystem from premium video on demand," Adam Aron, CEO of AMC, said in a statement.

Neither company disclosed the full terms of the deal, stating that it was confidential. 

"The theatrical experience continues to be the cornerstone of our business," Donna Langley, chairman of Universal Filmed Entertainment Group, in a statement Tuesday. "The partnership we've forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality."

Historic deal

The agreement between AMC and Universal is truly historic. For decades movie theaters have held tightly to the 90-day theatrical window, not even budging it for Netflix when it first sought Oscar contention.

The exclusivity of having films go to theaters for a prolonged period of time builds demand and excitement, which translates to ticket sales. There is huge value in being the only place where moviegoers can catch the latest titles and it's something that up until now has been carefully guarded.

It is unclear if other theaters will follow suit and offer these kinds of deals to studios or if studios will seek out a similar deal with AMC. The National Association of Theatre Owners declined to comment, but in the past, it has been protective of the status quo.

"This presents a significant evolution of the exhibitor-studio relationship, but one that seems to acknowledge compromises on both sides in an effort to keep things harmonious," Shawn Robbins, chief analyst at Boxoffice.com, said. "The ability for a major theater chain to reap some benefits from PVOD releases could offset some of the loss of a long theatrical window, but the expectation here is that Universal still recognizes the importance of those longer runs for films doing well at the box office."

However, Robbins said, if a film underperforms theatrically, has more leeway to push the film to other platforms. Often a film that is poorly received by the public will be dropped from theaters, or given less prominent showtimes, and would wait around to be released on home video.

"If managed smartly, this could be a win-win type of precedent for many players, but it's something we'll have to see unfold in the coming years and reassess at a later point in time," Robbins said.

World War Trolls

The quarrel between AMC and Universal started in March. Due to growing concerns over the coronavirus pandemic, Universal released "Trolls: World Tour" in theaters and on-demand on the same day.

On April 10, the "Trolls" sequel became available as a digital rental for $19.99. With the majority of theaters closed, save for some drive-in locations, the film was primarily watched on-demand by an audience that found itself hunkered down at home during the early days of the U.S. coronavirus lockdown. 

Three weeks later, NBCUniversal's CEO Jeff Shell touted the digital success of the film, which had racked up nearly $100 million in rentals, and suggested the company would do more simultaneous releases in the future.

While this figure was smaller than the $153.7 million that the first "Trolls" film collected at the domestic box office, the revenue that Universal has secured was about the same for the two films because digital sales take less of a percentage from studios' earnings.

Theater owners will typically take about half of a film's gross, while 80% of the digital rental fee goes directly to the studio. 

Exhibitors were already feeling antagonized by the initial simultaneous "Trolls" release, leading AMC to announce it would no longer showcase Universal's film slate at its more than 1,000 locations.

After prolonged theater closures in the U.S., the result of rising coronavirus cases, and the constant push of Hollywood blockbusters from the release calendar, AMC's stance has softened and it was able to strike a deal with Universal.

"AMC enthusiastically embraces this new industry model both because we are participating in the entirety of the economics of the new structure, and because premium video on demand creates the added potential for increased movie studio profitability, which should in turn lead to the green-lighting of more theatrical movies," Aron said.

Earlier this year, Universal pushed the majority of its remaining 2020 film calendar to 2021. However, it still has a handful of films that are due in theaters before the end of the year.

"Candyman," a horror film co-produced with Metro-Goldwyn-Mayer Pictures and Monkeypaw Productions, is due out on Oct. 16; the James Bond film "No Time to Die," co-produced with Metro-Goldwyn-Mayer and Eon Productions, is slated for Nov. 20 and "The Croods 2," a Dreamworks Animation film, is aiming for Dec. 23.

The deal with Universal could help AMC recover lost revenue. The movie chain has been shuttered for months and it's likely future revenue will be limited as attendance will be capped to prevent the spread of coronavirus at theaters when they reopen.

The company's stock was recently down 3% in extended trading. Shares of the company have fallen nearly 43% since January as AMC has battled to stave off bankruptcy. The company most recently was able to close a debt deal to make itself solvent through 2021.

Comcast shares were up less than 1% after the market's close. Its stock is down nearly 4% since January, and has a market value of $197 billion. 

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

VIDEO0:2900:29
AMC delays opening of 450 U.S. theaters until July 30th