Apr 30, 2020

Studio vs.Theater: Who flashes first in the war caused by "Troll World Tour"-

Like so many films for younger audiences, Dreamworks Animation's Trolls World Tour preaches the value of getting along while respecting each other's differences. The film industry doesn't seem to have heeded this message: the movie's release earlier this month sparked tensions between the exhibition and distribution sectors that have escalated into a full-blown crisis.

Universal Pictures's decision to shift Trolls World Tour from a theatrical-only to a simultaneous premium video-on-demand (PVOD) and theatrical release infuriated cinemas, which saw the move as a violation of the longstanding principle of theatrical windows. But the decision seems to have worked out well for Comcast-owned Universal, which reported on Tuesday that the movie grossed $100 million in three weeks (at $19.99 per rental), surpassing expectations.

Emboldened by this result, Jeff Shell, CEO of the studio's parent company NBCUniversal, told the Wall Street Journal, “As soon as theaters reopen, we expect to release movies on both [theatrical and online].” (It's worth noting that NBCUniversal will launch the streaming service Peacock nationwide in July.)

This was one step too far for AMC Theatres, the U.S.'s (and world's) largest theater chain, which retorted that it would no longer play any Universal films on these terms, “effectively immediately.”

Cineworld, which owns Regal Cinemas, the country's second-largest theater chain, swiftly followed suit. “We will not be showing movies that fail to respect the windows,” it said in a statement.

The National Association of Theatre Owners (NATO) added its voice to the chorus of disapproval: “Universal does not have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases.”

In a response to AMC's ban on its films, Universal qualified Shell's initial statements: “We absolutely believe in the theatrical experience and have made no statement to the contrary. 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.” Today, Shell told investors that PVOD releases will be a “complementary element” to theatrical distribution for some of the studio's films (Variety has more on his latest comments).

As the coronavirus crisis continues, Universal is extending its experiment with VOD beyond Trolls World Tour. On Monday, it announced that it will release the live-action comedy The King of Staten Island straight to online in June. Other distributors are trying similar things: Warner Bros. is releasing the animated feature Scoob! on VOD in May, and Disney will put Artemis Fowl directly on its streaming service Disney+ in June.

The theatrical window - the roughly three-month period during which films tend to play exclusively in cinemas - has long been a bone of contention between exhibitors, who value it as a major selling point, and studios, who believe that they could earn more if it was shorter.

Universal's decision to bypass the window almost entirely for Trolls World Tour (with the exception of some drive-in theaters) may have angered exhibitors, but it was taken in exceptional circumstances, when cinemas were shut. Which is why Shell's vow to continue the practice even once they've reopened has rankled.

By walking away from all Universal titles, theaters would forgo some lucrative franchises, including Jurassic World, Fast & Furious, Minions, and the newly announced Lego reboot. Cineworld was more cautious in its wording, saying only that it would refuse films that ignore the theatrical window. Whether Universal - and other studios - continue this experiment in VOD, and whether the theaters make good on their threat, remains to be seen.

If the studios do continue it, they are effectively betting that online revenue can compensate for the shortfall caused by being locked out of the country's biggest theater chains. This leads to the question: is Trolls World Tour an exceptional case-

After all, it benefited from the full weight of a theatrical marketing campaign, and, as a family film, is well suited to a home-bound audience. Is its triumph a one-off, or a sign of a permanent shift in viewing habits- The answer to the question begins with the release of Scoob, The King of Staten Island, and the other straight-to-VOD releases that may well follow.

Shell believes he has an answer already: “I would expect that consumers will return to theaters [when they reopen] and we will be part of that,” he told investors today. “I also would expect PVOD [premium video on demand] is going be part of that offering in some way. It's not going to be a replacement, but it will be a complementary element and we're just going to have to see how long that takes and where it takes us.”

The statements from AMC, Universal, and Cineworld are published in full below.

On Tuesday, AMC CEO Adam Aron sent the following letter to Donna Langley, chair of Universal Pictures:

Universal issued the following statement in response:

Cineworld then released the following statement: