AMC Theaters and Universal Brawl After ‘Trolls World Tour’ Is Online Hit

AMC said Universal’s films were no longer welcome in its cineplexes.

A drive-in theater in Florida showing “Trolls,” with social distancing in effect. The film’s sequel, “Trolls World Tour,” has been a hit, but angered theater owners.
Credit...Vic Micolucci/Agence France-Presse — Getty Images

LOS ANGELES — Universal Pictures took a victory lap over “Trolls World Tour” on Tuesday morning, saying that the film’s successful video-on-demand release had proved a new business model. The studio vowed to make more movies available without an exclusive theatrical run, even when theaters reopen.

AMC Theaters, the largest theater operator in the world, took the studio’s assertion as a declaration of war.

Adam Aron, AMC’s chief executive, told Universal late on Tuesday that it would no longer book any of the studio’s films. Universal is home to the “Jurassic World,” “Fast and Furious” and “Despicable Me” franchises. The studio also owns Focus Features, a specialty division.

“With this proposed action to go to the home and theaters simultaneously, Universal is breaking the business model and dealings between our two companies,” Mr. Aron wrote in a letter to Donna Langley, Universal’s chairwoman. “It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us.”

Mr. Aron called Universal’s plan “categorically unacceptable” and said AMC would also boycott any other studio “contemplating a wholesale change to the status quo.”

Most movies still arrive the same way they have for decades. They appear first in theaters, for an exclusive run of about 90 days, and then in homes through premium video-on-demand, or PVOD in industry parlance. Theater chains, including AMC, Regal and Cinemark, have fought off efforts to shorten the exclusivity period. They worry that people will be reluctant to buy tickets if they can see the same film on their living room television set or iPad screen just a few weeks (or days) later.

Universal said in a statement that it was “disappointed.”

“We expect to release future films directly to theaters, as well as on PVOD when that distribution outlet makes sense,” the statement said in part. “We look forward to having additional private conversations with our exhibition partners.”

Universal set off AMC’s response by disclosing data about the online performance of “Trolls World Tour.” The animated sequel to “Trolls” had been set for theatrical release on April 10. When theaters started to close because of the coronavirus pandemic, Universal said it would instead offer the film as a $20 online rental. About five million people rented “Trolls: World Tour.”

“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Jeff Shell, chief executive of NBCUniversal, told The Wall Street Journal, which first reported the viewership numbers. “As soon as theaters reopen, we expect to release movies on both formats.”

Studios retain roughly 80 percent of premium video-on-demand revenue. In contrast, studios receive only about 50 percent of ticket sales.

NBCUniversal, which is owned by Comcast, has been itching to shorten or eliminate the exclusive period given to theaters for some time, in part because it would allow the company to reduce marketing costs. (Studios currently mount separate campaigns to support the arrival of films in theaters and then later in homes.) Such a move would also lift Comcast’s core cable division and, perhaps, help the company’s upcoming streaming service, Peacock, gain traction in the marketplace.

Studios are also aware that consumers have been impatient about being unable to see all movies whenever and wherever they want. Netflix has already been chipping away at the exclusivity model.

In the past, Universal has also faced fierce opposition from multiplex chains like AMC, Regal and Cinemark. In 2011, Universal abandoned a plan to make “Tower Heist” available on V.O.D. — for $60 — three weeks after it arrived in theaters after they refused to play the film at all.