Film Studios Weigh the Pros and Cons of Streaming Releases
AMC Theatres Breaks With Universal
With movie theaters closed around the country and films ready to release, executives at large American studios have been forced to face tough questions: Is it better to hold movies for theater release or opt for an all-digital release while audiences are stuck at home?
For Comcast’s Universal Pictures (CMCSA), the choice was relatively straightforward. Trolls World Tour was ready for an April 10 release following a huge marketing campaign. Universal went for a digital release on various streaming services, offering $19.99 rentals of the movie. That strategy pivot paid off, and three weeks later, Trolls World Tour had made close to $100 million for Universal. That’s more than the 2016 Trolls movie made during five months in American movie theaters. Jeff Shell, Head of NBCUniversal, has said the success of Trolls World Tour made the possibility of moving to premium video-on-demand (PVOD) a viable option for the company. However, he also confirmed “As soon as theaters reopen, we expect to release movies on both formats.”
Shell’s thoughts were not well-received by those in the movie theater business. “It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice. Therefore, effective immediately AMC will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East,” AMC’s (AMC) CEO Adam Aron wrote in a letter to Universal Studios .
Streaming by the Numbers
For studios like Universal, streaming is increasingly more lucrative than theater-only releases. It’s estimated that somewhere around five million households have rented Trolls World Tour online, which adds up to $95 million in rentals and $77 million in revenue.
It would take much longer to make that same amount of revenue from a run in theaters, as studios split their revenues from theatrical runs with companies like AMC. When the first Trolls movie had a theatrical release in 2016, it made $153.7 million at the box office, but Universal’s cut was just $77 million.
The release of Trolls World Tour has made Universal the same amount of money as its prequel in a shorter amount of time. It makes sense that this kind of release would be attractive to studios. Still, it’s possible that the record-breaking release was partially due to a captive audience being stuck at home. Additionally, other studios have postponed many of the releases that would normally compete with Trolls World Tour, so the movie’s success hasn’t been challenged the way it would have been under normal circumstances.
Coming Soon to the Film Industry
The future of the film industry and its relationship with movie theaters will be interesting to watch as states slowly begin to reopen. On Friday, some theaters are expected to restart operations in Texas. Studios will have to decide whether they want to go back to business as usual, or to continue relying on streaming platforms.
For the past several years, it has been clear that most Americans consume the majority of television and movies through streaming services like Netflix (NFLX) and Amazon (AMZN). The film industry, however, has pushed back against studios who want to try releasing movies directly to streaming. The pandemic has changed all of that. This year, for the first time, films released directly to streaming will be eligible for Oscars. The shift is intended to be temporary, and studios must have planned on a theatrical release before the pandemic to be considered.
It’s unlikely that the relationship between studios and movie theaters will be gone for good. In some cases, for highly anticipated releases like Fast & Furious or Star Wars, it would be a significant challenge for streaming to beat out the box office. Even Universal has postponed the releases of what they expect to be big-screen hits as they await the United States’ return to movie theaters.
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