The ongoing drama between movie theaters and Universal Pictures just escalated.
The drama between theaters and Universal Pictures began when Universal decided to release Trolls World Tour through digital platforms like Amazon and Apple TV.
National Association of Theatre Owners Declares Theaters Won’t Forget
Following Universal’s decision to release the film through digital platforms without consulting theater owners and exhibitors, John Fithian, the chief of the National Association of Theatre Owners told The Hollywood Reporter in March, “Trolls World Tour is a very different story. For all the movies that had been scheduled for release during April and May, every other distributor announced delays to later times. But they still intend to release those delayed movies theatrically.”
He added, “Some of those delays have specific new dates. And some have been postponed for unspecified dates. But all of the movies with originally planned release dates in April and May, with the one exception of Trolls, will be released later theatrically, with full theatrical windows.”
Fithian continued, “All those other studios demonstrated their belief that the theatrical model is still essential to their business, they just had to delay release dates because of the virus.”
Fithian then notes that theater owners will not forget Universal going straight to VOD and skipping a theatrical release, “Only Universal, and only on Trolls, did one studio skip the theatrical model and go straight to the home. Universal continues to advertise to consumers that Trolls will be released simultaneously to theaters and the home on April 10. And they are lying to consumers.”
He added, ” Universal knows that theaters will still be closed on April 10, so unlike every other distributor who must simply delay their releases in that time period, but still understand that theatrical release is essential to their business model, Universal on Trolls didn’t make that decision.”
He concluded, “Exhibitors will not forget this.”
Universal Pictures Touts Success of Trolls World Tour
The beef between Universal and the National Association of Theatre Owners ramped up following the release of Trolls: World Tour, which reportedly earned around $100 million and was rented over 5 million times in the three weeks its been available on VOD.
Speaking with The Wall Street Journal, NBCUniversal’s Jeff Shell touted the success of Trolls: World Tour.
Shell concluded that Universal’s decision to forego the theatrical release of Trolls: World Tour was the right one. And that this, along with the theatrical release, was something their company would pursue going forward.
“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD. As soon as theaters reopen, we expect to release movies on both formats.”
In fact, Universal plans to release The King of Staten Island on June 19 to premium video on demand platforms similarly to how they released Trolls: World Tour.
AMC Theatres Declares They Will Boycott Universal Movies
Following these comments Adam Aron, the CEO of the Chinese-owned AMC Entertainment Holdings Inc. penned an open letter (which you can see in full below) to Universal Chairman Donna Langley. In the letter Aron wrote, “Going forward, AMC will not license any Universal movies in any of our 1,000 theaters globally on these terms.”
Aron would also write, “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.”
“This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat,” Aron writes.
He adds, “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.”
Aron then states, “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.”
Aron concludes by noting they are willing to sit down and negotiate with Universal, “AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours.”
But he concludes writing, “However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.”
The primary issue here is theaters generally are granted at the minimum 75 days of exclusivity to screen the film before they are released digitally. Shell’s statements indicate they will attempt to ignore that exclusivity and release to theaters and digital on the same day.
National Association of Theater Owners Responds
In a press release, the National Association of Theatre Owners (NATO) would respond to Universal’s statement declaring that Trolls World Tour’s reported $95 million domestic gross is not indicative of a “shift in consumer movie viewing preferences.”
Rather they explain it is due to “hundreds of millions of people isolated in their homes seeking entertainment.”
The press release also notes that Universal’s being pleased with the PVOD results “should not be interpreted as a sign of a ‘new normal’ for Hollywood.”
President and CEO of NATO John Fithian stated, ““Universal does not have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical
He added, “Theaters provide a beloved immersive, shared experience that cannot be replicated – an experience that many of the VOD 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. We are confident that when theaters reopen, studios will continue to benefit from the global theatrical box office, followed by traditional home release.”
Following AMC Theaters announcement they would be ending their business relationship with Universal and NATO’s press release, a Universal spokesperson issued a statement to Fox News.
The spokesperson began, “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.”
They continued, “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. We absolutely believe in the theatrical experience and have made no statement to the contrary,” the statement reads.
It concludes, “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. We look 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.”
NATO Responds to Accusations of Coordination
Following Universal’s statement, NATO would respond with their own statement via Deadline.
“Earlier today NATO issued a statement regarding Universal Studios’ public comments in the Wall Street Journal regarding that studios’ evaluation of the results of releasing the movie Trolls World Tour directly to the home without a theatrical release, and specifically that Universal would release future movies both theatrically and to the home.”
Also today, according to various public press reports, AMC released a letter that company sent to Universal stating AMC’s individual company reaction to Universal’s public statement earlier in the day in the Wall Street Journal. NATO and AMC did not coordinate those statements in any way. Indeed, AMC had no comment on NATO’s draft statement when sent to NATO’s Board of Directors, nor did AMC participate in the Board deliberations regarding that statement. Regarding AMC’s reported letter to Universal, NATO had no involvement with nor knowledge of that letter before reading about it in the press.”
Without any knowledge of the facts, or the common courtesy to inquire about those facts, Universal nonetheless made the reckless charge this evening that the company is ‘disappointed by this seemingly coordinated attempt from AMC and NATO to confuse our position and our actions.’ Unfortunately, Universal has a destructive tendency to both announce decisions affecting their exhibitor partners without actually consulting with those partners, and now of making unfounded accusations without consulting with their partners.”
Regal Cinemas Declares They Will Not Show Universal Movies
Regal Entertainment owner Cineworld would get in on the action releasing a statement via Deadline.
Their statement begins, “Cineworld’s policy with respect to the window is clear, well known in the industry and is part of our commercial deal with our movie suppliers.”
It adds, “We invest heavily in our cinemas across the globe and this allows the movie studios to provide customers all around the world to watch the movies in the best experience. There is no argument that the big screen is the best way to watch a movie.”
The statement then condemns Universal for breaking the understanding about the release window.
“Universal unilaterally chose to break our understanding and did so at the height of the Covid-19 crisis when our business is closed, more than 35,000 employees are at home and when we do not yet have a clear date for the reopening of our cinemas,” it reads.
The statement adds, “Universal’s move is completely inappropriate and certainly has nothing to do with good faith business practice, partnership and transparency.”
The statement also includes quotes from an alleged discussion between Cineworld’s CEO Mooky Greidinger and Brian Roberts the Chairman of Comcast.
Greidinger allegedly told Roberts, “Nice words from your team are worthless if we cannot trust you as a partner. The message that the media has portrayed is: “Hollywood breaks the window” – well, this is not true! All our partners called us in timely manner and told us that in the current situation they want to shorten window for movies that were already released as cinemas are closing, most importantly, they all reassured us that there will be no change to their window policy once the cinema business returned. Unfortunately I missed similar message in Universal’s announcement… not only did Universal provide no commitment for the future window – but Universal was the only studio that tried to take advantage of the current crisis and provide a ‘day-and-date’ release of a movie that was not yet released.”
The statement then details they will not show movies in their theaters that break the exclusive window, “Cineworld’s roots go back 90 years in the industry and it was always open to showing any movie as long as the rules were kept and not changed by one sided moves. Today we make it clear again that we will not be showing movies that fail to respect the windows as it does not make any economic sense for us.”
It concludes, “We have full confidence in the industry’s current business model. No one should forget that the theatrical side of this industry generated an all-time record income of $42 billion last year and the movie distributors’ share of this was about $20 billion.”
Regal would add on Twitter that they were not boycotting Universal.
Regal is not boycotting Universal nor any other studio. We will continue our normal policy and play movies that respect the theatrical window, allowing movies to be released first in theatres prior to streaming or VOD platforms. pic.twitter.com/xQBX4uUHfG
— Regal (@RegalMovies) April 30, 2020
AMC Theaters Financial Woes
What might be the most interesting part of all of this is AMC Theaters’ own financial woes. The company saw its credit rating downgraded by S&P Global in early April from B to CCC-.
S&B Global explained the downgrade, “The rating agency expects AMC Theatres to remain closed beyond June due to the impact of the coronavirus and does not believe the company has sufficient sources of liquidity to cover its expected negative cash flows.”
They added, “The outlook on the company is negative, reflecting the rating agency’s expectation that there could be a liquidity shortfall within the next six months, absent some form of incremental financing. The outlook also reflects the potential for a distressed debt exchange over the next six months.”
However, according to The Motley Fool the Chinese-owned company announced it has plans to raise $500 million in a debt offering in order to survive into the fall when theaters will hopefully be reopened.
AMC isn’t the only theater company raising debt, Cinemark is also reportedly seeking to raise $250 million in a debt offering to survive the Chinese Virus.
We also wrote about AMC’s financial woes, in that their employees were furloughed and a number of corporate employees were let go. There were also talks of filing for bankruptcy. Last month, Standard and Poor’s downgraded AMC’s credit rating. They also issued a statement regarding the negative cash flow for the theater chain and that they might not recover.
However, recent reports state that Dalian Wanda Group, a majority shareholder for AMC Entertainment, had secured $500 million in a debt offering that would allow them to keep their properties well into the fall, and get them to the expected July date when the economy is expected to reopen.
But what do you think about this squabble between the studios and the theaters? Do you think Universal will stick to their plan and lose their exhibitors? Do you think some theaters will allow Universal to have simultaneous day-and-date releases?
John Aron’s Letter to Donna Langley
At this time of national emergency and the coronavirus wreaking havoc on the entire world, I hope that you and your loved ones are healthy and safe. I worry – and I wish the best for – the health of all of our industry colleagues. Never in our lifetimes has there been a more challenging time.
Amidst a global pandemic as a backdrop, I wish we were spared from also having to address a different issue that arises from Universal actions currently underway.
For 100 years, AMC Theatres has served as a strategically critical and highly profitable distribution platform for movie makers, and for all that time the exclusivity of the theatrical release has been fundamental. When a movie is “Only in Theaters,” consumers perceive it to be higher quality entertainment. Countless filmmakers and moviegoers believe that their creative works are best enjoyed by consumers on the big screen. And we all know that those theatrical releases indeed boost publicity, positive word-of-mouth, critical acclaim and downstream revenues.
For much of the past four and a half years, I have been in direct dialogue with Jeff Shell and Peter Levinsohn of Universal about the importance of a robust theatrical window to the viability of the motion picture exhibition industry. Throughout that time, AMC has expressed a willingness to consider alternatives to the current windowing strategy common in our industry, where the aim of such alternatives is to improve both studio profitability and theater operator profitability.
Universal stated it only pursued a direct-to-home entertainment release for “Trolls World Tour” because theaters were closed and Universal was committed to a lucrative toy licensing deal. We had our doubts that this was wholly Universal’s motivations, as it has been a longstanding desire by Universal to go to the home day and date. Nonetheless, we accepted this action as an exception to our longstanding business practices in these unprecedented times.
In today’s Wall Street Journal, Jeff Shell is quoted as saying that:
“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Mr. Shell said. “As soon as theaters reopen, we expect to release movies on both formats.”
This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable to AMC Entertainment, the worlds largest collection of movie theatres.
Going forward, AMC will not license any Universal movies in any of our 1,000 theatres globally on these terms.
Accordingly, we want to be absolutely clear, so that there is no ambiguity of any kind. 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. 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. 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. This policy affects any and all Universal movies per se, goes into effect today and as our theatres 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.
AMC has invested significant time and energy with Universal executives over the past few years trying to figure out a new windows model that would be beneficial both for your studio and for our theatre operations. While Universal’s unilateral pronouncements on this issue are unpalatable to us, as has always been the case, AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours. However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.
CEO and President