AMC vs. Universal

As if things weren’t bad enough for the theater industry, the American Multi Cinemas chain – the largest in the United States – announced that when theaters reopened, they would no longer be showing any films made by Universal or their associated labels (including DreamWorks, Focus and Illumination). Considering that Universal has in its upcoming slate two of the biggest franchises in Hollywood – Jurassic World and F9 (The Fast and the Furious) this seemed like AMC was shooting itself in the foot.

The controversy erupted over an interview that NBCUniversal CEO Jeff Shell gave to the Wall Street Journal, in which he lauded the $95 million that Trolls World Tour made on Premium Video on Demand (PVOD) and how Universal would be looking into doing day and date PVOD in the future alongside their regular theatrical releases.

This raised red flags in the theatrical exhibitor firmament. For decades now, there has been an understanding that there would be a window between theatrical releases and home video/streaming releasing which would give theaters a chance to make as much revenue as they possibly could. Considering that theaters only get a portion of admission fees (they do get 100% of concessions which is why it costs so much for popcorn and a soft drink),that get larger the longer a movie is in theaters, it is in the best interest of theaters to keep movies in the multiplex for as long as they can.

So AMC head honcho Adam Aron took the drastic step of banning Universal product in his theatersWith. He was joined the next cay by Cineworld, owners of Regal – the second largest chain of theaters in the country. It’s possible other chains will join the ban.

This feels like a lose-lose situation for those that are caught in the middle – the moviegoing public. Both sides have pros and cons to their positions. For Universal, the pros are that the trend for movie viewing has been changing as audiences are increasingly watching films at home. As home theater set-ups get more sophisticated, it is not impossible to if not replicate at least approximate the theater experience in your own living room. It is also demonstrably less expensive, particularly for families; an evening at the movie theater including concessions, tickets and parking can often run right around $100 for a family of four or more. Although services like AMC A-List are making it more affordable for families to go out to the theater together, it still can be a hassle. Studios are well-aware of these changing trends and would be foolish not to be preparing for it. With a profusion of streaming services appearing, the demand for product is only growing and especially for product that is exclusive to those services. While Disney Plus and the upcoming HBO Max (debuting in May) have a built-in studio supply chain (Disney and Warners, respectively) Universal which at present doesn’t have a streaming platform of their own will likely end up supplying product to established outlets like Amazon Prime, Netflix and Hulu.

The con for Universal is that movies going directly to PVOD rob theaters of a potential revenue stream. The situation with Trolls World Tour was unique; scheduled to hit theaters in March, the coronavirus pandemic closed the movie theaters  up and with nowhere to show the film, and most of their slate postpones or canceled, Universal felt that the lesser of two evils was sending Trolls World Tour direct to home video, allowing families with antsy children to see it at home while quarantined. However, the nearly hundred million dollar take went to the streaming services and Univeral; the theaters made nothing on the film and while art houses and independent distributors are partnering up for virtual cinema experiences that partially benefit independent theaters that show indie films, nothing like that exists for big chains and the studios aren’t about to take something like Top Gun: Maverick and put it on a video streaming service benefiting AMC or Regal since theaters won’t due a lot to promote the films. The loss of potential profits to the theatrical film exhibition industry, which is already suffering and operating on a thin margin, is devastating and might be the straw that breaks the back of chains like AMC which is already in some financial difficulty.

For AMC, the pro is preserving a business model that works; they can if they play their cards right possibly negotiate a more favorable rental fee system that allows them more of a buffer. It also might make other studios think twice before considering taking a similar stance as Universal, in which case the chains will be at the mercy of the studios who could leverage big blockbusters with smaller films, forcing theaters to carry less profitable product in order to get their hands on the big blockbusters that are their bread and butter.

The negative is that they are being seen as petulant and tone-deaf by the moviegoing public, who are already complaining loudly about the cost of going to the movies. Some fans are already saying they will take their business to smaller chains like Alamo Drafthouse and see the big blockbusters there. Even having the industry standard A-List promotion, it has to be said that the A-List really only benefits regular moviegoers; casual moviegoers will find less value in it and consequently will feel less brand loyalty. If people start seeing AMC as the Avaricious Mean Chain, it could spell trouble for their bottom line which is already, reportedly, in trouble.

For those fretting that they won’t be able to see Minions: The Rise of Gru in their favorite theater, I wouldn’t worry too much about it. This is likely to be resolved before the theaters open up again. However it shakes out, the likely loser in all of these machinations will be the public, which is pretty much par for the course these days.

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