Movie Theaters Rally Against Universal

This year is not a very good one for, pretty much any industry that involves groups of more than 3 people spending time nearby. Bars, restaurants, and pubs are closed, events of all kinds are postponed and canceled, and entertainment venues were forced to suspend their activity due to the social distancing mandates in force all over the world.

The gadgets presented at CES 2020 were the last ones this year the press could see hands-on at a major trade show – the next one (MWC) was canceled because of the pandemic. And the last major movie to see a theatrical release was Vin Diesel’s “Bloodshot” that hit the screens on February 20. Movie theaters were pretty much deserted since then.

That until April 10, when Universal bypassed movie theaters and released its “Trolls World Tour” animated feature on VOD.

A gamble that paid off

Originally, the sequel to the 2016 animated feature “Trolls” was scheduled to hit the screens on March 10 but it was delayed due to the ongoing pandemic. Universal, in turn, decided to play a dangerous game: it skipped the movie’s theatrical release altogether and decided to push it out on VOD instead. The movie was released on Fandango Now and Amazon Prime Video for $19.99. The gamble seems to have paid off: with more than 5 million rentals, the movie generated over $100 million in digital rental fees.

Unlike theatrical releases, where about half of the gross revenue is pocketed by the theaters, Universal was reportedly left with about 80% of the total gross generated by the film. A win for Universal, a win for the fans… and a major loss for the theaters.

The experiment paid off, so Universal decided to consider adopting a similar strategy for the future (when the theaters open): instead of sticking with the traditional “theaters-first” approach, it plans to release at least some of its movies in parallel both in theaters and through streaming services.

Theaters ticked off

AMC Theaters, the world’s biggest movie theater chain, was quick to condemn this new business model. In a letter sent to Universal Chairwoman Donna Langley cited by The New York Times, AMC CEO Adam Aron accused Universal of “breaking the business model and dealings” between the studio and the theaters. “With this proposed action to go to the home and theaters simultaneously, Universal is breaking the business model and dealings between our two companies,” he wrote, pointing out that if it’s not reversed, AMC may boycott releasing any Universal films in the future.

AMC is not the only one that threatens to cut ties with the studio: Regal Cinemas, the second-largest movie theater chain in the US, is planning to do the same.

The feud between Universal and the theaters may seem pointless in the current situation – the movie theaters are closed anyway – but it may heat up as soon as the social distancing measures are eased, and the ban on gatherings is lifted across the US.