This week has seen some very bad blood between AMC Entertainment and Universal Pictures. The two companies have beef with each other over Trolls World Tour. The film was originally scheduled for a theatrical release on April 10th, but due to the Coronavirus pandemic shutting down practically all theaters, Universal Pictures decided to release it on VOD. At first glance, this makes sense. After all, with cinemas closed, why not target the huge audience of bored children stuck at home?
But major studios choosing to release their movies simultaneously in cinemas and on VOD is the theater industry’s worst nightmare come true. They argue that it diminishes the product that they offer, that they’re already running very thin margins and that Universal Pictures are breaking the long-standing rules about a film’s “theatrical window.” Things hit boiling point when Universal CEO Jeff Shell made a statement to the Wall Street Journal crowing about the VOD success of Trolls World Tour.
AMC boss Adam Aron released an incendiary letter claiming that as a result of this, they would no longer be showing any movies by Universal Pictures. Now, Regal Cinemas owner Cineworld has followed suit, releasing a lengthy statement that says the following:
“Cineworld’s policy with respect to the window is clear, well known in the industry and is part of our commercial deal with our movie suppliers. We invest heavily in our cinemas across the globe and this allows the movie studios to provide customers all around the world to watch the movies in the best experience. There is no argument that the big screen is the best way to watch a movie.
Universal unilaterally chose to break our understanding and did so at the height of the Covid-19 crisis when our business is closed, more than 35,000 employees are at home and when we do not yet have a clear date for the reopening of our cinemas.
Universal’s move is completely inappropriate and certainly has nothing to do with good faith business practice, partnership and transparency.
Mooky Greidinger, Cineworld’s CEO approached Brian Roberts, the Chairman of Comcast, back in 19th of March (after Universal announced that Trolls 2 would be released in breach of the window) and told him among other things that:
“Nice words from your team are worthless if we cannot trust you as a partner. The message that the media has portrayed is: “Hollywood breaks the window” – well, this is not true! All our partners called us in timely manner and told us that in the current situation they want to shorten window for movies that were already released as cinemas are closing, most importantly, they all reassured us that there will be no change to their window policy once the cinema business returned. Unfortunately I missed similar message in Universal’s announcement… not only did Universal provide no commitment for the future window – but Universal was the only studio that tried to take advantage of the current crisis and provide a ‘day-and-date’ release of a movie that was not yet released”.
Cineworld’s roots go back 90 years in the industry and it was always open to showing any movie as long as the rules were kept and not changed by one sided moves. Today 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.
We have full confidence in the industry’s current business model. No one should forget that the theatrical side of this industry generated an all-time record income of $42 billion last year and the movie distributors’ share of this was about $20 billion.”
The theater chains coming together on this makes sense. After all, if AMC was the only chain not showing upcoming Universal heavy-hitters like F9 and Jurassic World: Dominion they’d be left out in the cold. It looks like the stage is set for a corporate tug-of-war then between studios and theaters.
Theoretically, though, the studios have the upper hand, as most major theatre chains are running on a financial knife-edge and simply cannot boycott major studios for too long (and that’s leaving aside the massive impact of Coronavirus on their business). But you shouldn’t discount the cultural cachet that theaters provide, which means movies still occupy a higher rung of the entertainment ladder than TV and video games.
In any case, with the entertainment landscape undergoing unpredictable shifts in the wake of Coronavirus disruption, I suspect this drama is far from over.