Does Anyone Win in AMC Theatres’ Fight With Universal Pictures?

Exhibitors and studios might be well served to remember a saying from Mahatma Gandhi — “An eye for an eye only ends up making the whole world blind.” Instead of heeding the words of the Indian nationalist, the two camps are locked in a deadly struggle, one fueled by ego, distrust, and recrimination, that will likely leave both sides gravely wounded unless, or until, cooler heads prevail.

Tensions between AMC Theatres and Universal Pictures reached a boiling point Tuesday night, ending in an explosive proclamation that the world’s largest theater chain would no longer play movies from one of the biggest studios in Hollywood.

The seeming declaration of war was triggered after Universal, taking a victory lap in the press to touting better-than-expected success for “Trolls World Tour.” The studio decided last month to move its animated sequel to “Trolls” directly on premium video-on-demand — and in a handful of drive-in theaters across the country — when it became clear cinemas would have to close amid the coronavirus outbreak. Exhibitors’ eyebrows were raised, particularly as Universal made its announcement before the shutdown went into effect, but they ultimately accepted it given circumstances and a general understanding that studios would otherwise wait until multiplexes reopen to showcase their most anticipated films. But the knives didn’t come out until NBCUniversal’s CEO Jeff Shell suggested on Tuesday that Universal might start to simultaneously release some movies in theaters and on-demand, even after the pandemic subsides.

“As soon as theaters reopen, we expect to release movies on both formats,” Shell told the Wall Street Journal.

Shell’s comments were interpreted as fighting words to those in the business of showing movies on the big screen. And there are other reasons relations have grown strained. Before taking a shot across exhibition’s bow, Universal reported a day earlier that Pete Davidson and Judd Apatow’s comedy “The King of Staten Island,” would also forgo a theatrical release and drop on digital rental platforms in June.

AMC’s CEO and president Adam Aron called Shell’s comments “unacceptable.”

“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,” Aron wrote in a statement Tuesday night, announcing his venues would ban Universal’s movies. “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 theaters simultaneously, Universal is breaking the business model and dealings between our two companies.”

Universal Pictures, through a spokesperson, responded at the time, defending the studio and saying Shell’s comments were misconstrued.

“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 studio said Tuesday evening.

It remains to be seen if Universal is going to continue playing around with theaters’ exclusive access to its films. But if Aron makes good on the threat, that would deprive Universal of thousands of screens to play movies — and pissing off the world’s largest exhibitor will take a big chunk out of the studio’s box office earnings. For AMC, which will be struggling to shake off months without income following the coronavirus closures, icing out Universal means the circuit won’t be able to screen the next “Fast & Furious” flick or “Jurassic World” sequel. Those are the kind of blockbusters that can be counted on not just to sell tickets, but also tons of popcorn and concession stand treats that exhibitors rely on to boost revenues.

Aron said AMC would also cut ties with any studio “contemplating a wholesale change to the status quo.” Cineworld, the owner of Regal Entertainment, took a less radical stance, barring anything that threatens to disrupt the way movies traditionally arrive in theaters, but stopping short of a total ban on Universal titles. Other exhibitors are being tight-lipped about whether they are following Aron’s lead, arguing that conversations between the two parties should remain private.

“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,” Cineworld said Wednesday in a statement.

For decades, studios and exhibitors have debated the utility and length of theatrical windows, industry speak for the amount of time a movie plays exclusively in cinemas. Films commonly run in theaters for 90 days before they are available to watch on home entertainment through video-on-demand. Studios have attempted to shorten that gap, in an effort to reduce marketing costs. They believe that they will get more bang for their buck by having movies debut on in the home shortly after they have blanketed the airwaves for theatrical releases. But theater chains have been concerned that audiences will be less inclined to buy tickets if they can see the movie on their couch just a few weeks later.

“I’ve always believed exhibitors hold the upper hand in these negotiations, even if Universal’s stance was to circumvent the theaters,” said Eric Wold, an analyst with B. Riley FBR. “If all exhibitors banded together, it would be tough for the studios to stand against them.”

Some believe it’s the studios, who are responsible for producing content, wielding the power.