Theaters Take on Premiere Video on Demand as Universal’s Trolls World is a Hit
Things are getting testy between theaters and studios as the opening of theaters looms on the horizon and studios are rethinking releases. Due to the COVID-19 pandemic, numerous studios pulled their films choosing instead to release them video on demand or shrinking the release windows from theaters to digital.
The most high profile release so far was Universal‘s Trolls World Tour. Things escalated after a Wall Street Journal report says the film earned $95 million domestically in its first 19 days. The original film earned $153.7 million domestically for its entire run and $120.9 million after 19 days.
The National Association of Theatre Owners sent out a statement:
This performance is indicative of hundreds of millions of people isolated in their homes seeking entertainment, not a shift in consumer movie viewing preferences. It is not surprising that people under shelter-in-home ordinances for weeks on end with increasingly limited entertainment options would take advantage of the movie’s direct-to-VOD move to keep children entertained, even at a premium price.
We’ll ignore the blatant falacy of “increasingly limited entertainment options.”
They also emphasized:
Universal heavily marketed the title as a theatrical release, in theaters and elsewhere, for weeks on end. That is unlikely to recur in normal times, and those costs haven’t been disclosed. While Universal may be pleased with the PVOD results of Trolls World Tour, this outcome should not be interpreted as a sign of a ‘new normal’ for Hollywood.
We’ll also ignore the weird tangent about marketing. As marketing is marketing and there might be a stronger marketing plan to be made emphasizing its exclusiveness to video on demand.
After the success of Trolls World Tour, Universal decided to release the Judd Apatow/Pete Davidson comedy The King of Staten Island in homes June 12, skipping its original June 19 theatrical release.
Warner Bros. is skipping theaters as well with Scoob! going digital on May 15, STX is taking My Spy to Amazon, Paramount/MRC‘s The Lovebirds is going to Netflix, and Artemis Fowl is releasing on Disney+. None of these films would likely have been blockbusters and will likely play well to their niche audiences on demand.
NATO also argued that the optimum price point for movie rentals are $5-$8 with $6 being the sweet spot and transactional video has been declining since 2004 with sales and rentals of individual titles at home dropping from $24.9 billion to $9.3 billion in 2019.
What’s interesting is, that $6 rental isn’t that much different from what studios get currently. With an $10 ticket at the American box office, they’d get about 60% or $6. Overseas it can be 20% to 40% depending on the arrangement. Movies begin with fees up to 90% and the fees go down. This article from The Week has an excellent explanation. So, NATO has shown studios would potentially make the same and possibly more with video on demand.
Things have ramped up further with AMC Theatres saying they will no longer play any Universal Pictures after NBCUniversal CEO Jeff Shell promising to “open titles on premium and in theaters at the same time.”
AMC Theaters chairman-CEO Adam Aron went on the attack in a letter to Universal Filmed Entertainment Group chairman Donna Langley saying:
It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice. Therefore, effectively immediately AMC will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East.
This policy affects any and all Universal movies per se, goes into effect today and as our theaters reopen, and is not some hollow or ill-considered threat. Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes. Currently, with the press comment today, Universal is the only studio contemplating a wholesale change to the status quo. Hence, this immediate communication in response.
Universal’s unilateral pronouncements on this issue are unpalatable to us, as has always been the case, AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours. However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.
Theaters are in a tough position as they need studios more than studios need them. With months of revenue lost, they need guaranteed blockbusters like Universal’s Fast and Furious 9 which has been pushed back to April 2, 2021 and Disney’s Mulan which is currently set to open July 24, 2020. Both of which would be billion-dollar films in normal environments. With more digital services being released with “captive audiences,” studios will need theaters less and less. Disney+ has over 50 million subscribers already as an example and at $7(ish) a month, that’s over 350 million reasons a month and 4.2 billion reasons yearly.