AMC vows to bar Universal movies from its theaters after video-on-demand comments

AMC vows to bar Universal movies from its theaters after video-on-demand comments

29 Apr    Finance News

AMC Entertainment, the world’s largest movie-theater chain, said Tuesday it will no longer play any movies from Universal Pictures after comments by NBCUniversal CEO Jeff Shell that the entertainment giant plans to release future movies directly to homes on-demand.

A Wall Street Journal report Tuesday detailed how Universal’s decision to make the animated kids movie “Trolls World Tour” immediately available for digital rentals after its theater release was scrubbed earlier this month due to the coronavirus pandemic paid off, earning the studio nearly $100 million in three weeks, more than the studio previous “Trolls” movie earned in a five-month theatrical release in 2016. (That movie grossed $154 million at the box office, but Universal only made about $77 million; the rest went to theater operators.)

Shell told the Journal that the premium video-on-demand arena has long been a goal. “The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Shell told the Journal. “As soon as theaters reopen, we expect to release movies on both formats.”

That brought a fiery response from AMC. In an open letter late Thursday addressed to Universal Studios Chairman Donna Langley, AMC CEO Adam Aron said: “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.

“Going forward, AMC will not license any Universal movies in any of our 1,000 theatres globally on these terms.

“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 theatres simultaneously, Universal is breaking the business model and dealings between our two companies.”

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Generally, theaters require an exclusive 90-day window between a movie’s theatrical release and its availability for home rental or digital download.

Aron said he was not bluffing. “Effectively immediately AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East. This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat.”

Aron added that the same policy would take effect for any other studio that “unilaterally abandons current windowing practices absent good faith negotiations between us.”

Universal is one of the largest Hollywood film studios, and if AMC carries out its threat it could have huge implications on the movie industry. In recent years, Universal’s releases have included the Oscar-winning “1917” as well as the megahit “Fast & Furious” and “Despicable Me” franchises.

The sharp escalation in a long-simmering war between movie makers and distributors came the same day that another longstanding movie rule fell, as the Academy of Motion Pictures Arts and Sciences announced that, due to the pandemic, movies will not be required to have a theatrical release in order to be eligible for the Oscars, for this year only.

AMC has been hit hard by coronavirus-related shutdowns, and earlier this month it was reportedly in talks with a law firm to discuss a potential Chapter 11 bankruptcy filing. About a week later, the company said it had enough liquidity to withstand a closure of operations until Thanksgiving and had commenced a private offering of $500 million of first lien notes due in 2025.

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NBCUniversal is a unit of Comcast Corp. CMCSA, -0.34% , whose shares are down 15% year to date, compared to AMC’s AMC, +23.21% 43% decline and the S&P 500’s SPX, -0.52% 11% retreat.

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