AMC, Universal Ink Pivotal Deal to Shrink Exclusivity Window

Hollywood film studio Universal Pictures and AMC Theatres, which operates more than 8,000 screens in the U.S., signed a historic multi-year agreement to allow Universal’s films to launch on video-on-demand only 17 days after their theatrical debuts, breaking the long-standing industry norm of 90 days between the two releases. Universal may, however, let tentpole movies play exclusively in movie theaters beyond 17 days. According to Universal Filmed Entertainment Group chair Donna Langley, “the theatrical experience continues to be the cornerstone of our business.”

The New York Times reports that, “no firm start date for the deal was set because theaters remain closed by the pandemic … [but] AMC has said that it hopes to begin reopening in ‘mid-to-late August’.” Both companies said they will “start negotiations for international releases in the coming weeks.”

Additionally, because of AMC’s size, “rival cinema chains … may have no choice but to rewrite their exhibition deals with Universal and other studios.”

ArcLight Cinemas president Ted Mundorff noted that the new model — which includes Universal’s art house division Focus Features — will not work well for indie or small films that tend to build audiences slowly “over months of theatrical play.” “I’m really concerned about the future of independent film,” he said. “I can’t see that indie film can survive with shortened windows.”

Studios have long pressed exhibitors to shorten their exclusive window, which has allowed “Netflix and other streaming services to dominate home entertainment.”

Universal first threw down the gauntlet in April after movie theaters were closed by releasing “Trolls World Tour” and “The King of Staten Island” via premium on-demand, to strong results: in its first three weeks, “Trolls World Tour” earned $100 million in rental fees. Studios retain 80 percent of premium-on-demand revenue, while ticket sales are split 50-50 with theatrical exhibitors.

AMC chief executive Adam Aron declared Universal’s strategy “categorically unacceptable” at the time. But, as the pandemic has dragged on, the two “came under pressure to come up with a new paradigm … [and] began negotiating.” AMC agreed to “limit exclusivity” and Universal, “for the first time … agreed to share a portion of all premium on-demand rental revenue with AMC,” although neither company would reveal details. Both companies declare themselves pleased with the results of the deal, with Aron calling the deal “historic.”

Variety reports that, as part of the deal, “Universal only has the ability to put its movies on premium on-demand … it cannot sell films or rent them for lower on-demand fees, in the $3 to $6 range, until three months after they debut in cinemas.”

In practice, that means that “the studio has the option to capitalize on its new freedom with mid-budget fare, comedies, and horror movies that might not have as robust runs in cinemas … [although] if smaller movies perform better than expected on the big screen, Universal can wait to put it digital rental services.”