• Universal Pictures announced Tuesday that it would pursue dual theatrical and on-demand releases for new films even after movie theaters reopen. 
• Shortly after that, AMC Theaters condemned Universal’s plan and immediately blacklisted all of the studio’s future films from its screens.
• AMC CEO Adam Aron also accused Universal of having “zero concern” for how such a move would affect the theater chain’s revenue and viability.
• Wednesday morning, Regal Entertainment said it would also blacklist Universal movies.
• The moves by all three companies could result in a massive shift in the way Americans view movies and could be financially dangerous for all entities involved.

Universal Says It Will Continue On-Demand Releases

At the start of the year, many people probably wouldn’t have imagined that an animated film about troll dolls could ignite a war between a major movie studio and the world’s largest theater chain, but 2020 has proven itself unpredictable.

When movie theaters shut their doors in response to the coronavirus outbreaks in the United States, Universal Pictures decided to test on-demand releases for several of its new films, including Trolls World Tour. After seeing massive success with that film, Universal is now saying it will continue the practice once theaters reopen.

In turn, Adam Aron, CEO of AMC movie theaters, called the move “unacceptable” and said the chain has now blacklisted all Universal movies from airing on its screens. Wednesday morning, Regal Entertainment responded with a similar ban.

Universal, AMC, and Regal’s moves represent what could be massive shifts for the movie industry. Such moves also signal how the coronavirus pandemic might fundamentally change the way Americans consume entertainment.

Unlike movies such as F9, Black Widow, and Wonder Woman 1984, which were all postponed until either later this year or next year, Universal released the Trolls sequel through digital rental for $19.99.

While $20 is a steep price to pay for a rental, Universal argued the price was meant to compensate for the fact that the film didn’t see widespread release in theaters. Such a defense didn’t stop many on social media sites from criticizing the film’s price, but three weeks after its release, the film has proved to be an unprecedented success for Universal. It raked in nearly $100 million through on-demand 48-hour rentals. 

So far, that is still less than the nearly $154 million the first Trolls film made in the U.S. over five months in 2016; however, because movie theaters generally take about 50% of the box office revenue, Universal only took home around $77 million from the first Trolls film domestically.

By contrast, Universal has kept about 80% of what it made through renting Trolls World Tour. Notably, that means the sequel is already more profitable than the original film. 

“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of [premium video on demand],” Jeff Shell, head of the film studio’s parent division, NBCUniversal, told The Wall Street Journal. “As soon as theaters reopen, we expect to release movies on both formats.”

Universal has also reported a level of success by implementing the same on-demand strategy with movies like The Invisible Man, The Hunt, Emma, and Never Rarely Sometimes Always. Reportedly, they have generated around $60 million from rental fees, meaning $48 million of that has gone directly back to Universal. 

Before theaters shut down, The Invisible Man had brought in about $64 million in the U.S. and Canada. The other three had generated about $16 million, collectively. 

AMC and Regal Won’t Play ANY Universal Movies

Following Shell’s comments, Aron retaliated by saying that AMC, the largest movie theater chain in the world, would pull the plug on all movies from Universal.

“AMC believes that with this proposed action to go to the home and theatres simultaneously, Universal is breaking the business model and dealings between our two companies,” Aron wrote in a statement on Tuesday.

“It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us. It also presumes that Universal, in fact, can have its cake and eat it too, that Universal film product can be released to the home and theatres at the same time, without modification to the current economic arrangements between us.”

“It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice,” Aron added. “Therefore, effectively immediately, AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East.”

Wednesday, Regal Entertainment, the second largest theater chain in the world, called Universal’s decision “completely inappropriate” and said, “We make it clear again that we will not be showing movies that fail to respect the windows.”

Notably, that would mean AMC and Regal would not screen a host of films that are expected to be major box office hits, including F9, the James Bond film No Time to Die, and Jurassic World: Dominion. F9 alone is expected to bring in close to $1 billion worldwide, if not more, and crippling its theatrical release could prove to be a major blow for Universal. 

Still, these moves represent a precarious balance for both companies. Universal likely wants to continue its success from Trolls World Tour and adapt to what it believes is a more profitable model. Meanwhile, AMC and Regal want to retain their customer bases and are likely concerned that dual theatrical and on-demand film releases could hurt them. Despite that, not showing a major studio’s films could be a huge blow to the chains.

Still, Aron has double-downed on his statement and said it 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, Aron said. “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.”

Universal’s announcement has also received the condemnation of the National Association of Theatre Owners (NATO), which has argued that the success of Trolls World Tour is an outlier and not a new normal. 

“Universal does not have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases,” NATO president and CEO John Fithian said in a statement Tuesday. “Theaters provide a beloved immersive, shared experience that cannot be replicated—an experience that many of the viewers of this film would have participated in had the world not been sequestered at home, desperate for something new to watch with their families.”

Part of NATO’s argument is that Trolls World Tour was released at a time when parents were desperate to provide entertainment for their children. That was likely aided by the fact that Trolls World Tour experienced very little competition, as many other studios chose to postpone new releases. 

Universal has since responded to the criticism lodged at it by AMC and NATO while reiterating its plan to implement dual theatrical and on-demand releases. 

“Our goal in releasing ‘Trolls World Tour’ on PVOD was to deliver entertainment to people who are sheltering at home, while movie theatres and other forms of outside entertainment are unavailable,” the company said in a statement. “Based on the enthusiastic response to the film, we believe we made the right move. In fact, given the choice of not releasing Trolls: World Tour, which would not only have prevented consumers from experiencing the movie but also negatively impacted our partners and employees, the decision was clear.”

“Our desire has always been to efficiently deliver entertainment to as wide an audience as possible,” the statement continued. “We absolutely believe in the theatrical experience and have made no statement to the contrary. As we stated earlier, going forward, we expect to release future films directly to theatres, as well as on PVOD when that distribution outlet makes sense.”

Universal also added that it looks forward to having “additional private conversations with our exhibition partners but are disappointed by this seemingly coordinated attempt from AMC and NATO to confuse our position and our actions.”

Other Film Studios Choose On-Demand or Streamable Releases

Universal is not the only studio choosing to go the on-demand route. Warner Bros. is planning to release Scoob! on May 15 with a $19.99 rental fee. Notably, it will also be available to buy right away for $24.99.

Other companies, such as Disney, have now shifted some of their movies to Disney+ instead of waiting for theaters to reopen. Artemis Fowl was originally scheduled for an Aug. 9 theatrical release, but the company will now release the film on its streaming service on June 12. Likewise, Disney also released Onward on Disney+ after its theatrical release was cut short. While those movies won’t be able to generate any direct revenue, Disney is hoping they drive the company’s $6.99 subscriptions.

Still, Disney seems to be saving its major releases like Mulan and Black Widow for theatrical releases.

In fact, even Universal has been wary to test its blockbusters through rental services. For films like F9, a theatrical release may simply be too profitable to pass up. 

With such massive moves by Universal, AMC, and Regal, however, the question remains: Will the coronavirus pandemic change how Americans view movies, and if so, how?

See what others are saying: (CNBC) (The Wall Street Journal) (The Hollywood Reporter)