In three weeks of digital release, the ‘Trolls’ sequel made more money for Universal Pictures than the original did during five months in theaters.
Photo: Photo Credit: DreamWorks Animati/Associated PressA historic distribution agreement between AMC Entertainment Holdings Inc. AMC -0.96% and Hollywood studio Universal Pictures is sowing discord and confusion in an industry already reeling from the coronavirus pandemic.
AMC, the world’s largest theater chain, and Universal agreed to shrink the time between a movie’s opening in theaters and when customers can rent it to watch at home—to just 17 days, from 75. The two companies had been at public loggerheads over the issue of when to release movies for home viewing just a few months ago. Now, in addition to changing the way fans watch many movies, the shift has the potential to change the types of movies that are made and the way they are marketed, say many in Hollywood, as it changes the way money flows over the movie’s life cycle.
With movie theaters closed and production paused for the foreseeable future, some people in the movie industry are asking why AMC and Universal decided this was the moment to make such a dramatic change.
Executives at rival studios said it was too early to know for sure if the deal would end up setting a new industry standard, while others said it was unlikely the deal would make sense for other major studios.
AMC and Universal declined to comment.
Tim Richards, a former Hollywood studio executive who now runs the world’s sixth-largest exhibitor, Vue International, questioned the need for such a drastic step, pointing out that before the pandemic, global box office receipts had performed well for years.
“This is an industry that’s not broken,” said Mr. Richards. “This is an industry that is thriving and growing, and that’s why most studios right now aren’t trying to tinker with it.”
Reopening dates for theaters have been a moving target—pushed back several times as guidelines from state and local health authorities have shifted and studios have delayed releases of the handful of titles they have continued to consider releasing this summer or fall, instead of later in the year or even in 2021.
Whether major theaters reopen in mid- to late August, as currently planned, or later, they are unlikely to attract big audiences—not only because of potential restrictions on crowd sizes and other public-health measures, but because they are likely to have few mass-appeal titles to show.
Comcast Corp.’s Universal, for instance, doesn’t have a high-profile movie on the books for at least three months. With limited exceptions, such as Warner Bros.’ “Tenet,” most other studios are in a similar boat.
The second-largest theater chain in the U.S., Regal Entertainment Group, expressed frustration about the AMC-Universal deal and vowed to avoid playing movies headed for home-video earlier than usual.
“We think this is the wrong move at the wrong time,” said a spokesperson for Regal’s U.K.-based parent, Cineworld Group PLC. “We intend to maintain our position of not showing any releases that do not respect the established theatrical window.”
A spokesman for the National Association of Theatre Owners, the owners’ leading national advocate, said the trade organization doesn’t “comment on individual member company decisions.”
NBCUniversal President Jeff Shell on Thursday signaled his desire to pursue similar deals with other exhibitors.
“Hopefully other exhibitors will be sharing in the new revenue stream,” Mr. Shell said during a conference call discussing Comcast earnings with Wall Street analysts.
The deal, which applies only to the U.S. market, will last for at least three years, according to a person familiar with the matter. Following the newly shortened theatrical window, AMC is to receive a sliver of premium-priced rental income from other platforms like those owned by Apple Inc. and Amazon.com Inc. The share of rental revenue is to be based on AMC’s U.S. market share for each individual title, the person also said. The theater chain operates nearly 20% of the movie screens in the U.S. AMC will also be able to rent Universal titles on an online service of its own.
AMC could use some positive news. Although the company recently secured fresh capital to help it stay afloat until theaters can reopen, its shares have taken a beating while it struggles with a massive debt load.
Many in Hollywood are wondering why AMC and Universal cut the theatrical window so drastically.
“Windows were going to shorten after the pandemic in some way on their own,” said a rival exhibition executive. “[But] nobody thought they were going to 17 days.”
Seventeen days represents a film’s first three weekends at the box office—when, according to research firm MoffettNathanson, most films make 70% to 80% of their ticket sales.
People involved in digital home entertainment were enthusiastic about the AMC-Universal deal. Tedd Cittadine, vice president of content distribution at Roku Inc., which makes plug-in streaming devices for televisions, said the move would be “a tremendous benefit for consumers.”
Write to RT Watson at rt.watson@wsj.com
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