AMC’s agreement with Universal criticized by its competitors

AMC’s agreement with Universal criticized by its competitors

Under terms of the deal, Universal will be allowed to put movies on digital platforms after just 17 days of theatrical release, or a movie’s third weekend, instead of the customary 60-75 days. In exchange, the studio will share an undisclosed portion of on-demand rental proceeds with AMC.

The principals heralded the deal as a digital-forward move that still accommodates the traditional — and, not insignificantly for studios, highly lucrative — business of theatrical moviegoing. The two companies, which had each rattled their sabers in advance of negotiations in recent months, declared a win for both sides.

But questions immediately arose about just how many movies will fall under the deal. Universal was unlikely to pull its biggest films to a low-revenue on-demand platform after just three weekends, when the company could still add more than 25 percent to its box-office total. “Jurassic World,” the 2015 reboot that is one of Universal’s biggest modern-day hits, garnered an additional $150 million after its third weekend on top of the $500 million it had already made.

At the more modest end, “The Secret Life of Pets 2” last summer added an additional $40 million to the $118 million it had taken in.

Smaller-budgeted films that weren’t performing strongly in theaters could be moved after 17 days, but those films are less likely to make an economic or cultural impact.

If the studio does follow through, it would face another issue: All the other theater owners.

Four independent operators interviewed by The Post, all of whom requested anonymity so as not to appear publicly critical of colleagues and counterparts, said they were upset by the deal, particularly noting that AMC negotiated an agreement that only benefited itself but still shortened the window for everyone else.

“So now our window ends and what we do have to show for it?” one said.

Three of the four said they were unlikely to play Universal movies if the deal proceeded.

The head of the parent company of Regal, the country’s second-largest chain, went public with his unhappiness.

“[W]e clearly see this as a wrong move at the wrong time,” Mooky Greidinger, chief executive of Cineworld, told the industry trade site Deadline. “Clearly, we are not changing our policy with regards to showing only movies that are respecting the theatrical window.”

Universal is unlikely to try to impose the terms without bringing other theaters into the revenue-share. AMC controls about one-quarter of the 40,000 screens in the U.S., not nearly enough to make or break a movie.

When all those separate deals have been negotiated, with other theaters and chains gathering their own percentage, “how much money will be left over for the studio?” one theater owner said — a reason the owner believed Universal would be uninterested in taking advantage of the deal for many movies.

Spokespeople for AMC and Universal did not respond to a request for comment for this story.

Windows can be a tricky issue for theater owners. A studio’s policy affects everyone equally but many theaters have different sales patterns and needs, with some seeking to rotate new product in quickly and others looking to wring value from older movies.

The National Association of Theatre Owners, which as a matter of policy does not weigh in on the actions of members, did not comment on the deal.

No other studios have yet followed Universal, with Sony Pictures considered the next-most-aggressive in seeking to shorten windows. Other studios, such as Disney and Warner Bros., are considered very theater-friendly and have not historically pushed hard for window changes.

The agreement comes as AMC and other theaters feel the pinch of the covid-19 pandemic as did studios — the closure of theaters this spring prompted Universal to put several planned theatrical moves on digital-rental platforms and NBC Universal chief executive Jeff Shell said Universal would continue to turn to digital event after the pandemic ended.

AMC may have its own more immediate reasons for cutting a deal. The company is facing a debt crunch due to the pandemic, and the agreement could provide revenue from digital rentals if consumers do not return to theaters.

Universal has at least three big U.S. releases scheduled for the fourth quarter, including the Jordan Peele-produced horror remake “Candyman,” the animated sequel “Croods 2,” and the Western “News of the World,” which reunites Tom Hanks with his “Captain Phillips” director Paul Greengrass. All of them could bring AMC much-needed revenue if they open in theaters to a nervous consumer base that then stays home, thus prompting Universal to enact the window clause.

Digital windows have been an issue for more than a decade. Some studio executives think that theaters hold on to movies for too long; there is a point, they believe, at which a movie’s theatrical momentum has slowed but a film can still take advantage of residual marketing heat in on-demand venues, though there have been few test cases to demonstrate the point.

Consumers, habituated by Netflix’s on-demand approach, clamor to see films right away.

But anything close to release simultaneity for Hollywood’s biggest movies is, according to most experts, the stuff of economic fantasy. Studios cannot sustain franchise movies, with as much as $200 million in production costs and an equal sum in marketing expenses, with digital revenue.

For a movie that takes in $300 million at the U.S. box office, as the top nine films each did last year, a $5 rental would require more than 40 million homes to rent it, once revenues are shared with distribution partners, an impossibly high number. (The highest-rated network show this season, “NCIS,” averages 15 million viewers — and it’s free.)

Studios would need to build movies much differently, at far smaller budgets, to make them feasible in a primarily digital world.

“And at that point,” one theater owner said, “isn’t that Netflix?”

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