Why the Universal-AMC Deal Is a Big Deal
Ken Jones, Chief Film Critic
Last week, Universal Studios and AMC Theatres reached an agreement on having the option of shortening the exclusivity window of their new releases from 90 days to 17 days. This is a potentially seismic shift in the life cycle of films that could have far-reaching implications in the way they are released in the future. Also, it is a very practical deal.
Traditionally, the way the movie business works is that when a new movie is released, studios give the movie theaters an exclusive window (typically 75-90 days) where they are the only ones showing the movie. After that window, the studios makes it available for home distribution on streaming VOD platforms or disc. It’s been a lucrative arrangement for a very long time for both sides. Studios reap most of the box office rewards, movie theaters have a built-in draw to bring people to their business because they’re the only place around you can see the latest and greatest (ideally). But times are changing, viewing habits are changing, and there has been talk for a long time about how the industry is going to need to be shaken up because the current model might not be sustainable in the long run.
Some studios have toyed with same day releases in the past, but those are usually smaller, independent movies, and are usually limited releases because the theaters don’t like to share or have anyone challenge their corner. Since Netflix has gotten into the original content business in the last few years, even they have run into difficulties in getting some theaters to show their movies, even Oscar-nominated films like Scorsese’s The Irishman were only briefly in theaters in order to qualify for awards season.
Back in the spring, at the beginning of the Covid-19 pandemic, Universal made the decision to release Trolls: World Tour as a same day release on streaming and in theaters, at least whatever theaters were still open at the time in early April. They said that this may be their release plan going forward even. In response, AMC Theatres went full Lebowski, declaring that this aggression will not stand, man, and they said that they would cease showing Universal releases at their theaters altogether. Given that AMC is the largest theater chain in the US with over 8,000 screens, this was a big deal.
Now, the two sides have simmered down and come to an arrangement that seemed utterly unthinkable just a few months ago. The deal, as I understand it, mean that after 17 days, Universal has the option to pull a movie from the theater and make it available via VOD (think the $19.99 rental figure that we’ve seen with VOD released during the pandemic that eschewed a theatrical release) or keep it in theaters and continue with the exclusivity window of 90 days before it is available for the more traditional VOD rental price.
On its face, this seems like a complete and total capitulation by AMC Theatres, buckling under pressure and with little-to-no negotiating power, especially because they could be in dire financial straits if the pandemic continues. However, the reports are that they will receive a portion of the VOD revenue if they decide to go the VOD route after 17 days, so they do stand to profit from this.
It also matters how long the terms of this agreement are. Is it a two-year arrangement or is it more long-term? If it is more long-term, say five years or beyond, it may be more of a capitulation by AMC and it may pressure other movie theater chains to follow suit and that would be a massive change in the landscape of how movies are released. Either way, there is no united from amongst the movie theaters. AMC has broken ranks.
Even if it is a shorter deal, there is a practicality to all of this. With much of the 2020 movie schedule being wiped out because of a global pandemic, a ton of movies have been pushed back into 2021. Movie studios plan their release schedules well in advance, and build their schedules around certain tentpoles and they’re constantly jockeying for position at certain times of the year with other studios.
Covid has caused a continual cascading effect of movies being pushed back and rescheduled (just look at how many times Tenet has been pushed). Even if some 2020 delays have pushed some 2021 movies to 2022 and beyond, there is still going to be a tsunami of movie releases in 2021. I’m eyeballing this a bit, but it feels like we’re going to get about a year and half’s worth of movies condensed into the 2021 release schedule. I’m expecting 2021 to be a year’s worth of summer movie season, with a big movie basically being released every weekend. No relegating bad movies to January/February/August/September when moviegoing is slow anyway. Each weekend is going to be a banger.
Most movies make the majority of their money in the first three weekends of release, which just happens to be… 17 days! If a movie is profitable, both Universal and AMC are going to want it to keep going at the box office and keep rolling in the dough. Most of the studio tent poles and blockbusters should be unaffected by this deal. Neither side is going to a rush to pull Fast & Furious 9 or Jurassic World: Dominion. But, movies in the horror, comedy, and drama categories with modest budgets might be more lucrative if they can cash in on VOD fresh off the heels of a shortened theatrical run. Who knows, maybe we even see a greater diversity of films getting made instead of the increasing trend to franchise movies and superhero movies. There are a lot of ways this deal could change the business.
Also, if a movie is not performing as well as expected or is just an outright bomb, then kicking it out to VOD also benefits both sides. It allows Universal to repurpose and repackage it for a VOD audience and try to recoup some of their investment by getting the ball rolling on VOD early. It also allows AMC to push it out to make room for more profitable movies and playing to packed house (or as packed as social distancing may allow at that point) rather than a movie that isn’t drawing audiences. With that tsunami of releases, those screens are potentially prime real estate for AMC Theatres, especially if Covid-19 is in the rearview mirror. And it’s likely that 2022 will also be pretty packed as well. Because of this, it behooves a movie studio like Universal and a movie theater like AMC to make an agreement that allows for some flexibility.
The impact of Covid-19 on Hollywood and movie theaters is going to be felt for years. Universal and AMC Theatres have given themselves options to potentially be flexible and profitable in the short-term if Covid-19 is properly dealt with in the next 1-2 years. It’s a practical solution to a stacked release schedule that is looming for the next few years. Other theater chains have balked at the idea, but they would be smart to stop and think for a moment about how making a similar deal with Universal and other studios could be to their benefit. And other studios should stop and consider the same thing. In fact, it’s hard to imagine that they won’t. It’s easy to see this catching on and becoming a game changer; it’s also easy to see certain interests being resistant to all of this. But the fact is the bubble has been breached. Change is here. The future is now. Adapt or die.