AMC Theatres and Universal’s unprecedented deal will put movies on demand much faster

Universal Pictures was one of the film studios to respond quickly to the COVID-19 pandemic, pushing its movies to premium VOD early and thereby landing itself in hot water with AMC Theatres, the world’s largest movie theater chain. But after a monthslong public spat, the two companies have come to a multiyear agreement that should keep both parties happy — and that signals a seismic change in the way films are distributed.

The conflict started in March, before we had any idea of how long public places like movie theaters would be closed, when Universal released Trolls World Tour onto premium VOD platforms at the same time it had been scheduled to hit theaters.

AMC took this shortening of the traditional theatrical “window” — the period during which movies play exclusively in theaters — as a direct affront, and announced in retaliation that it would no longer show any Universal films at all. (This has turned out to be a pretty irrelevant threat, since U.S. movie theaters have remained closed since March.)

On Tuesday, the two companies announced they had agreed to a new theatrical window of just 17 days, or three weekends, before a Universal movie can be sold on premium VOD. This is a significant shortening of the previous window, which was closer to 90 days for physical home-video releases and about 75 days for digital releases.

Here’s what this means in practice: The next Jurassic Park movie, Jurassic World: Dominion, is currently scheduled to debut in theaters on June 11, 2021. Assuming that theaters are open by then, you could head to your local multiplex to watch the conclusion to the Jurassic World trilogy — or you could just wait until June 28, and watch it on your TV at home by renting it for $19.99.

Image: Universal Pictures

Despite these shortened theatrical runs, Universal’s business model still relies heavily on movie theaters. 2015’s Jurassic World made over $1.67 billion at the global box office. And it demonstrates the importance of the three-weekend window, too. During its first three weekends of release, Jurassic World pulled in $500 million at the domestic box office — more than 76% of its eventual tally of $652 million, after its theatrical run concluded five months later.

“The theatrical experience continues to be the cornerstone of our business,” said Donna Langley, chairwoman of Universal Pictures, in a news release. “The partnership we’ve forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality.”

While this new window may seem catastrophically shorter for AMC Theatres, it’s probably a positive in the long run. The old theatrical window, which was closer to six months as recently as the mid-2000s, was created around the advent of the home-video market in the 1980s, to prevent studios from releasing copies of a movie on VHS, DVD, etc., while it was still playing in theaters.

But that was also built on the idea of movies having long tails at the box office, still making money two or three months after premiering in theaters. These days, movies’ box office performance is largely front-loaded into their first few weekends of release. They’re quickly replaced by other films, often from the same studios that produced the previous hit.

With this new quickened pace, the 70- to 90-day window of exclusivity doesn’t really make sense for anyone. Most movies would fall into a dead zone during which they were no longer in theaters and couldn’t be released on VOD or Blu-ray. In other words, no one was making money on them for almost two months. This new deal should help fix that problem.

Under its agreement with AMC Theatres, Universal can release a movie on premium video-on-demand (PVOD) platforms — charging upwards of $19.99 to rent it — once it has spent three weekends (a minimum of 17 days) playing exclusively in theaters. AMC will also get a cut of these PVOD sales, which is revenue that it could desperately use, with theatrical reopening still a massive question mark in the United States.

“AMC will also share in these new revenue streams that will come to the movie ecosystem from premium video on demand,” said AMC Theatres CEO Adam Aron. “So, in total, Universal and AMC each believe this will expand the market and benefit us all.”

There’s no word on how exactly AMC will share in the PVOD market — other than via its own AMC Theatres On Demand app, which will be one of many digital homes for Universal films. For now, no other film studio has come to an agreement for adjusted theatrical windows with AMC, and Universal hasn’t announced a partnership with any other major theater chain, such as Regal Cinemas. However, with this first domino falling, it’s possible that other announcements are coming in the near future.