Universal, AMC Theatres Forge Historic Deal Allowing Theatrical Releases to Debut on Premium VOD Early

Universal Pictures and AMC Theatres have put aside a bitter feud and signed a multi-year agreement that will allow the studio’s films to premiere on premium video on-demand within three weeks of their theatrical debuts.

The pact, sure to send shockwaves throughout the exhibition industry, has the potential to reshape the ways that movies are marketed and distributed. Rival studios are likely to begin pushing for exhibitors to grant them more flexibility when it comes to determining when and how their theatrical releases can make their way onto home entertainment platforms.

Financial terms of the agreement were not disclosed. However, in a statement, AMC’s CEO Adam Aron said the company will “share in these new revenue streams,” which means that it will get a cut of any money made on these digital rentals. Universal only has the ability to put its movies on premium on-demand, meaning the rentals that go for roughly $20 a pop. It cannot sell films or rent them for lower on-demand fees, in the $3 to $6 range, until three months after they debut in cinemas.

Even though Universal, under this new agreement, could theoretically debut the next “Jurassic World” or “Fast & Furious” installments on premium on-demand with 17 days of their debut, they will likely have longer exclusive runs in cinemas. Instead, the studio has the option to capitalize on its new freedom with mid-budget fare, comedies, and horror movies that might not have as robust runs in cinemas. But if smaller movies perform better than expected on the big screen, Universal can wait to put it digital rental services. On its upcoming slate, Universal also has “Minions: The Rise of Gru,” “Halloween Kills” with Jamie Lee Curtis and spy thriller “355” with Jessica Chastain, Penélope Cruz and Lupita Nyong’o,

The deal culminates a period of hostilities between the studio and the world’s largest theater chain, a chill in relations that began after AMC vowed to stop showing Universal’s movies after the studio decided last spring to unveil “Trolls World Tour” simultaneously on digital platforms and in the few theaters still open during the coronavirus pandemic.

On Tuesday, both sides made nice, with Universal praising the viability of the big screen and AMC hailing the decision as a sign of its willingness to innovate.

“The theatrical experience continues to be the cornerstone of our business,” said Donna Langley, chairman of Universal Filmed Entertainment Group. “The partnership we’ve forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality.”

For his part, Aron said, “Focusing on the long-term health of our industry, we would note that just as restaurants have thrived even though every home has a kitchen, AMC is highly confident that moviegoers will come to our theatres in huge numbers in a post-pandemic world. As people enjoy getting out of their homes, we believe the mystical escape and magical communal experience offered at our theatres will always be a compelling draw, including as it does our big screens, big sound and big seats not to mention the alluring aroma of our perfectly prepared popcorn.”

For years, Universal and other studios have pushed to shrink the “window,” industry parlance for the period of time between a film’s theatrical release and its debut on home entertainment. Traditionally, that frame of exclusivity has last for 90 days, which theater owners have maintained is critical to prevent customers from opting to skip cinemas and wait until a film is available in their homes. However, studios have griped that those terms are onerous. They maintain that movies make most of their box office revenues in the first few weeks of release and waiting three months to debut films on-demand and across other platforms requires them to spend more money to advertise them and re-familiarize the public.

However, COVID-19 has altered the power dynamics in the relationship between studios and theaters. The bulk of cinemas in the United States remain closed due to the virus, and plans for a large-scale national reopening have been delayed again and again as cases surge in the South and West Coast. Theaters don’t have the leverage they once did and are looking for ways to make money at a time when its not clear if customers feel safe going to cinemas.

At the same time, Universal has found continued financial success with its strategy to bypass theaters at a time when most of the country is still staying home. On-demand platforms have been booming during the pandemic, and Universal estimated that five million people rented “Trolls World Tour” in its first few weeks, generating roughly $100 million in sales. Empowered by those figures, it also debuted the Judd Apatow comedy “King of Staten Island” on premium on-demand this summer and has put movies such as “Emma,” a Jane Austen adaptation from its indie label Focus, on-demand after their releases were truncated by coronavirus closures.

In the past, Universal has perhaps been the most aggressive in pushing the limits of the theatrical release window and has tried to find ways to offer its movies to home entertainment consumers earlier, running afoul of the exhibition community with its aborted plans to offer the Ben Stiller and Eddie Murphy comedy “Tower Heist” on-demand within weeks of its 2011 debut. In that case, Universal backed down after theaters threatened to stop showing its films.

In the coming weeks, the two companies will begin discussions surrounding international distribution agreements in the countries in Europe and the Middle East served by AMC.

As AMC has struggled to reopen cinemas, its been saddled with concerns of its liquidity. Even before the pandemic caused its locations to close for four months, the company was heavily indebted due to expensive refurbishments of its venues and deals to acquire rivals like Odeon and Carmike Cinemas. At one point, AMC looked on the verge of filing for bankruptcy, but it recently renegotiated terms of its debt, which it said cleaned up its balance sheet.