Universal and AMC Make Up for the Good of Cinema and Consumers

on July 29, 2020

Covid-19 has impacted many industries and forced changes that might have seemed impossible just last year—working from home, distance learning, online shopping and entertainment. As Covid-19 cases are continuing to climb in the U.S., the prospects for movie theaters to reopen seem bleak. AMC theaters were due to reopen on July 15, as part of a phased rollout, but now opening has been delayed to August. Reopening plans included a series of safety and health measures such as initially capping movie showtimes at 30% seating capacity, cleaning every theater between each showtime, disinfecting seating areas nightly using electrostatic sprayers, temporarily reducing menu selections at concession stands, upgrading ventilation systems in theaters and requiring all AMC employees to wear masks while in the theater. Interesting to note that AMC’s CEO, Adam Aron, said that customers would be strongly encouraged, but not required to wear masks.

According to data from Screen Engine/ASI, 13% of frequent moviegoers, defined as people who go six or more times a year, say they plan to return to theaters right away, no matter what’s playing, while 29% said they would go when there’s a movie they’re interested in. Another 18% said they plan to wait until the pandemic is entirely over. The 1000 or so theaters that have been open across the United States face customers’ concerns as well as lack of content. Big movies that were due to open in early summer have been postponed, like Mulan now expected the third week in August. Others like Tenet have been postponed and will be first released overseas where the reopening of theaters has been going more smoothly than in the U.S.

Releasing a big movie in these circumstances is a significant risk, but these big productions have to get their money back somehow. So alternatives started to emerge that might not give the big opening weekend kind of cash but will certainly help the bottom-line. For the theaters, the concerns are different. It is about not selling tickets as well as not profiting from concessions spend. This last factor has been the one preventing any deals to be made before Covid-19. Theaters owners are also concerned that the number of customers will never quite recover. Some theaters even considered screening older movies just to get people back into the habit.

A Win-Win or a Give and Take

This is the environment that set the scene for the deal on Tuesday this week between AMC Theatres and Comcast Corp’s Universal Pictures who agreed that studio’s movies could be made available to U.S. audiences at home after just three weekends – or 17 days – in cinemas. The agreement comes with a revenue share deal that sees AMC receive a portion of the sales for the first weeks when a movie is offered as premium on-demand video. As a reminder, the typical timeline between theaters and home release is 90 days.

Studios have argued for years that the long window between theater and home release increased their advertising costs to remind the public of the movies being released. Furthermore, when smaller productions were released on the same weekend as blockbuster titles, they had no choice than leverage more heavily the home release.

Comcast knew that the early home release model could work. Earlier in the year, NBCUniversal released Trolls 2 World Tour, which generated roughly $100 million worth of rental revenue during its first few weeks of availability, almost matching the first film’s box office take. At the time, AMC threatened to stop showing Universal’s movies in theaters. Emboldened by the success of Trolls, Universal also released Emma and The King of Staten Island directly to the home, bypassing the theaters.

It seems that Covid-19 forced AMC’s hand in accepting this revenue share deal from showing the movies through its AMC Theaters on Demand platform rather than being bypassed for good. I would also like to think that AMC’s final agreeability might have something to do with knowing that new movie productions will not come by without money. So in a way, they are investing in their future by funding new content.

What about the Consumers?

For the consumer, these early releases mean spending $20 just to rent the movie. This is usually how much a blockbuster costs to buy when it is first released on digital. Of course, the rental price covers everybody who will be watching it in the home compared to having to pay individual tickets at the theater. Significant savings for consumers come from the concessions. If you have been to the cinema, you know that popcorn, candy, or drinks can end up costing the same if not more than the movie itself.

I don’t doubt that the big screen and sound of the theaters will return to be appealing to the public when going to the movies will not seem like putting your life at risk. Still, hard to believe AMC will be able to go back on this decision entirely. Of course, movie theaters have been challenged before, like in the late 50s, when TV sets started growing in popularity. Going to the theater provides you with a much more immersive experience even now that technology at home is getting better with both size and quality of the screen as well as the quality of the sound.

Many argue it is not necessarily technology that will bring us back to the theater but the social construct of the cinema experience. I am more skeptical about this point as our world is becoming more and more about personal experiences rather than communal ones. As far as technology goes, theaters will soon face competition from more screens than just out TV and some of those screens, like in VR, will have the ability to drop us right into the content.