You’ve probably heard that AMC Theaters and Regal owner Cineworld aren’t too happy with Universal right now. In fact, they’re so angry over NBCUniversal CEO Jeff Shell’s recent comments that both companies have announced that they are refusing to screen the studio’s films. If that decision holds, that’d mean no upcoming tentpoles like  Fast and Furious 9 and Jurassic World: Dominion at their locations.

Universal led the VOD charge when shutdowns first began by making The Hunt, The Invisible Man and Emma. available for at-home viewing soon after they arrived in theaters. Given the fact that these movies had no chance of making more money once theaters closed down, what choice did the studio have? The next wave came in the form of yet-to-be-released movies, like Trolls World Tour, largely forgoing a theatrical release all together and going straight to VOD instead. (Apparently Trolls did play at select drive-in movie locations.)

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Again, what choice did Universal have? Everyone, no matter the industry, is doing what they can to keep their businesses afloat. In the case of a movie studio, that means continuing to churn out content in an effort to make a profit. On top of that, with productions shut down for the time being, that also means that those studios have a limited amount of product to sell. Some movies, like those that come with a $200 million+ price tag, wouldn’t be good candidates for the straight-to-VOD release strategy. Something like Trolls World Tour however? That might be a smart play and a number of outlets are reporting that the end results are exceeding Universal’s expectations.

The movie reportedly cost about $90 million to make and has already made close to $100 million in digital rental fees. Looking at the first Trolls movie, that one cost about $125 million and concluded its domestic theatrical run with a grand total of $153.7 million. At the three week mark? It already had about $116 million in the bank. Not much of a difference there between the original and the sequel, right? Perhaps, but it’s not a one-to-one given the current state of the industry and the likely overhaul we’re about to see in release strategies moving forward.

On the one hand, that $100 million could have been far higher with a traditional theatrical release assuming folks renting the movie were watching it with multiple people. But, this release model takes the theater chains out of the equation and that means Universal keeps a significantly higher percentage of the profits, 80% according to The Wrap. Perhaps Trolls World Tour really is a big financial hit for Universal, but is it smart to use its current success to reshape the future release strategy for the studio? Absolutely not and that’s what makes Shell’s comment, the one that encouraged both AMC and Cineworld to put their foot down, quite alarming. 

According to The Wall Street Journal, Shell stated,“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD.  As soon as theaters reopen, we expect to release movies on both formats.” Perhaps this really will prove to be a viable financial route for movie studios going forward. Who really knows? After all, everything is in flux right now. But that’s precisely why making such a statement in the middle of a pandemic is a terrible decision that could doom the theatrical experience before it even has the chance to start up again. 

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Image via Universal

What happens when production restarts and there’s more competition in the digital realm? And how will early digital releases affect ancillary markets that are currently suffering due to the virus, like hotels and airlines? And what about piracy? Will early VOD options lead to an increase in piracy and then a decrease of at-home purchases? Using the traditional model, a movie’s first few weeks on the big screen only make up a portion of all-time earnings. Now is not the time to cause a rift between studios and theaters chains when, one, Trolls World Tour is just a single data point for testing the viability of the PVOD market and, two, that state of the industry is bound to change drastically as soon as restrictions are lifted. Even when studios accumulate more data points, it’s vital to keep in mind that what works during quarantine might not work after.

On the other hand, it’s also necessary to note that we don’t know exactly what Shell means when he says, “We expect to release movies on both formats.” How small does he plan to make that window? How many Universal releases will “make sense” for the PVOD strategy? Yes, there is a chance that Shell’s comments are being overblown and incremental changes to release strategies must change with the increase in streaming platforms, but making significant statements about the future in such trying times seems rather irresponsible, especially when you have theater chains creeping dangerously close to bankruptcy. 

This conversation will be well worth revisiting as additional data rolls on planned theater releases going digital and as we inch back closer to some degree of normalcy, but it’s still important to stress that now is not the right time to be making short sighted statements or decisions.