How ‘Trolls World Tour’ Could Transform How We Watch Films Forever

Due to the coronavirus crisis, movie theater chains may be on the brink of catastrophic failure, and with it, major studios will suffer a corresponding decline as needed box office receipts disappear. I recently posted an article that called for studios to form a consortium to buy suffering theater chains. This will serve as both a defensive strategy to safeguard their cut of the box office as well as an offensive strategy that allows studios to launch films in theaters and online simultaneously, providing consumers with ultimate choice.

But even if theaters miraculously survive on their own accord, their influence and size may appreciably diminish because the crisis has forced studios to bypass theaters in a grand video on demand (VOD) experiment. In so doing, they are enticing millions more consumers to appreciate this platform as an alternative to theaters.

The benefits from both a business and consumer perspective came from an unlikely source: a troll. By now you have read articles that Universal Pictures had intended to launch Trolls World Tour in theaters, but instead converted to VOD due to theater closures. This scenario perfectly simulates what it would look like for a studio to launch a movie for the streaming platform while using sizable marketing dollars often reserved for a theatrical launch. This will provide insight as to whether a digital launch can net as much money as a theatrical launch.

First, from a business perspective: Before theaters shut down, long range projections estimated that the Trolls World Tour would have a rather weak opening weekend of roughly $23.5 million domestically. This is about 50% of the opening weekend for the original 2016 Trolls film. If we apply the 50% to the original film’s final worldwide box office of $347 million, we arrive at a potential box office for Trolls World Tour $173.5 million worldwide had it gone to theaters. The studio’s worldwide take of about 50% from theaters would have left it with nearly $87 million in revenue. With production and marketing costs totaling a reported $120 million or so, the film would have resulted in an initial loss for its theatrical run (not counting subsequent downstream revenues).

In comparison, by launching on VOD for a $20 rental, Universal needs to attain 7.5 million downloads worldwide to achieve total sales of $150 million, of which the studio’s higher VOD take of about 80% (on the high side) will result in revenue of $120 million to cover the studio’s initial investment. If it does so in the first 90 days, to replicate a typical theatrical window, it will be comparable to a theater run.

It is off to a good start. Trolls World Tour popped to the top of various VOD lists, including Amazon Prime and FandangoNow, breaking records. Early reports are that it has already passed $50 million domestic rentals in its first six days. Since the United States alone has about 25 million households with the target audience of children ages 3 to 11, the needed 7.5 million downloads on a worldwide basis seems doable. This suggests that Universal’s flight to a VOD launch might have made sense even in the absence of the virus.  

This analysis is guesswork, of course, because I am not privy to Universal’s data, but it is probably close enough for jazz.

There are other business-related benefits to a streaming premiere. Movies sent directly to VOD save expenses often incurred when studios have to market a film across separate theatrical and home windows. Going direct to streaming also prevents a lot of the rabid digital piracy that occurs when imposing a 90-day window between theatrical release and in-home availability, costing U.S. film and television studios roughly $29 billion a year. 

From the consumer standpoint, this may be a watershed moment in which millions of people become exposed to—and importantly accustomed with—event films with a premium VOD rental fee of $20. The Invisible Man and Sonic the Hedgehog, both of which had theatrical launches, eventually converted to VOD at this same price point. Consumers are being subtly trained. They will also come to appreciate that a $20 price tag is far cheaper for a family than attending a theater with its pricey food and beverage.

By year’s end, highly anticipated blockbuster films including Mulan, now scheduled for July 24, and Black Widow, now scheduled for November 6, may need to rethink their theatrical dates if major cities are still battling the coronavirus. Rather than pushing them into 2021, which is already crowded with delayed films, they may need to shift to a streaming launch or a mix of theatrical and streaming city by city. If they move to a VOD plan, Disney might use the films to entice households to sign up for a monthly subscription to Disney Plus, or they can make the films available on VOD for $19.99 for the first 90 days, then offer as part of the subscription afterwards.

We are in chaotic new era that is ripe for bold new studio experiments. Businesses and consumers are apt to change their behaviors in unison. How odd it will be if this new era was ushered in with the help of a small, unassuming troll.