Universal's animated sequel Trolls World Tour did pretty well for itself on direct-to-VOD -- which might be a good thing, since cinema chain AMC Theatres says they plan to retaliate against the studio for the way they handled the film's release by refusing to screen Universal films when they reopen their doors later this year. The film has so far earned somewhere in the neighborhood of $100 million by utilizing premium VOD rentals ($20 for 2 days, about the cost of buying a new movie digitally). That's not much less than the $115 or so the first Trolls movie made in its first three weeks in North America.
Essentially, the conflcit boils down to this: NBCUniversal exec Jeff Shell told investors (and The Wall Street Journal) that the movie had proven there was a market for movies that release for premium rental on the same day the theatrical release happens. That sounds pretty great to a lot of consumers, but exhibitors bristle at the idea that they would lose their exclusivity.
"The results for Trolls World Tour have exceeded our expectations and demonstrated the viability of PVOD," Shell told the Journal. "As soon as theaters reopen, we expect to release movies on both formats."
AMC Theatres CEO shot back in a letter to Universal that their blackout 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."
After years of being somewhat gunshy about losing theatrical revenues -- especially as piracy became easier and the DVD market crumbled -- movie studios have recently been interested in testing the waters of streaming. The success of big-budget blockbusters on Netflix and the rise of other ambitious streaming platforms and projects have given most studios the idea that streaming isn't going anywhere and is a potentially big revenue driver in itself. Hesitation to move on that instinct has come largely because studios don't want to alienate exhibitors, creating exactly this sort of potential conflict. It will be interesting to see whether other studios will side with Universal against AMC, and whether other exhibitors join the boycott or decide to just collect any revenue AMC is leaving on the table.
The novel coronavirus pandemic has hit AMC hard: the chain has been sued by landlords who say some locations have not been paying rent during the closure, and last estimates were that AMC Theatres had laid off 98.5% of its employees in a closure that may now last as long as four months (some early, optimistic projections had held the theatres might be able to open after six weeks of downtime). The company's credit rating was downgraded at the start of this month, with some analysts predicting that AMC would not reopen at all, but more recently reports came out that the chain was talking with bankruptcy lawyers and working on a path forward that would allow the company to continue operations in spite of the hit it's taking right now.
The company, which is already deep in debt, will likely face serious financial problems in the fall, unless creditors can grant AMC a waiver. AMC's creditors may be more likely than usual to grant such a waiver -- after all, the COVID-19 impact has hit virtually everyone. Still, it seems likely that AMC will face an uphill battle in recovering from the losses. Last year at this time, the domestic box office was generating more than $100 million in revenue per week. Now, it's a few thousand dollars from the handful of places where theaters (mostly drive-ins) are still open.
Even while theaters were taking in huge amounts of money in 2019 -- a record year for the box office -- AMC was running a deficit. According to earnings statements, the country's largest theater chain lost more than $100 million last year. The company reported a $5 billion-plus deficit at the end of 2019 and losses of $149 million for the year -- numbers that aren't likely to bounce back this year. In 2018, they were profitable -- but by less money (around $110 million) than last year's deficit.