LOS ANGELES — Universal Pictures and the largest movie chain in the world, AMC Entertainment, have reached a deal to bring movies to theaters and homes a mere three weeks apart, almost certainly changing the way that Hollywood does business.
The deal, announced on Tuesday, gives Universal the right to make its movies available in homes through premium video-on-demand after just 17 days of play in AMC theaters — down from roughly 90 days, long the industry norm. Universal may opt to let big-ticket sellers play exclusively in theaters longer than 17 days. The studio controls the “Fast and Furious,” “Jurassic World” and “Despicable Me” franchises.
“The theatrical experience continues to be the cornerstone of our business,” Donna Langley, chairman of the Universal Filmed Entertainment Group, said in a statement. “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.”
No firm start date for the deal was set because theaters remain closed by the pandemic. AMC has said that it hopes to begin reopening in “mid- to late August,” but has pushed that time line back several times as virus cases have surged around the country. Universal has cleared its schedule until October, when it will release “Candyman,” a remake of the horror classic, directed by Nia DaCosta and co-written and produced by Jordan Peele.
AMC and Universal said they would start negotiations for international releases in the coming weeks. AMC has major operations in Europe and the Middle East.
Given the size of AMC in the United States, where it operates more than 8,000 screens, rival cinema chains — most of which operate their businesses more traditionally — may have no choice but to rewrite their exhibition deals with Universal and other studios. Regal and Cinemark, the second- and third-largest chains in North America, did not respond to requests for comment.
The deal with AMC covers Universal’s Focus Features division, which specializes in small films like “The High Note,” a drama starring Tracee Ellis Ross and Dakota Johnson. Such art-house movies tend to build an audience slowly over months of theatrical play, unlike Universal’s core offerings, which sell most of their tickets in their first and second weekends.
“Focus is part of this program, and they are one of the most important indie film distributors on the planet, so I’m really concerned about the future of independent film,” Ted Mundorff, the president of ArcLight Cinemas in Los Angeles, said in a phone interview. “I can’t see that indie film can survive with shortened windows.”
Studios in general and Universal in particular have long wanted to shorten the exclusive window given to theaters, but theater chains have aggressively resisted change. They have worried that people will be reluctant to buy tickets if they can see the same film on their living room television set or iPad screen just a couple weeks later. The standoff has allowed Netflix and other streaming services to dominate home entertainment. Netflix films collected a field-leading 24 nominations at the most-recent Academy Awards, with a minimal presence in theaters.
AMC declared war on Universal in April when the studio, following the pandemic-related closure of theaters, publicly vowed to make movies available without any exclusive theatrical run. Universal began releasing movies like “Trolls World Tour” and Judd Apatow’s “The King of Staten Island” on demand, charging $20 for a 48-hour rentals. The results were strong. Over its first three weeks of availability in North America, “Trolls World Tour” generated $100 million in rental fees through online stores like iTunes and Amazon Prime Video and on cable systems like Comcast, Universal’s parent company.
Studios typically keep 80 percent of premium on-demand revenue. Ticket sales for theatrical releases are split roughly 50-50 between studios and theater companies.
At the time, Adam Aron, AMC’s chief executive, called Universal’s on-demand plans “categorically unacceptable” and said AMC would boycott Universal and any other studio “contemplating a whole change to the status quo.”
But the longer the pandemic went on, the more Universal and AMC came under pressure to come up with a new paradigm. The companies began negotiating, with AMC agreeing to limit exclusivity and the studio offering a major concession: For the first time, it agreed to share a portion of all premium on-demand rental revenue with AMC, significantly reducing the risk of earlier home availability for the chain. Neither Universal nor AMC would say how much AMC will be getting, but Mr. Aron appeared to be pleased with his cut.
“AMC enthusiastically embraces this new industry model,” he said in a statement on Tuesday, calling the deal “historic” and saying that his company was “participating in the entirety of the economics of the new structure.” At the same time, he said that clearing a path for Universal to improve its own profitability could benefit AMC by leading to the greenlighting of more theatrical movies, including comedies and dramas, which Universal and other studios have cut back on in recent years.
Mr. Aron added, “Just as restaurants have thrived even though every home has a kitchen, AMC is highly confident that moviegoers will come to our theaters in huge numbers in a post-pandemic world.” He predicted that people will be especially eager to get out of their homes — and visit theaters, which plan to reopen with numerous safety protocols — after hunkering down for months.
Since the coronavirus shut down theaters in mid-March, quite a few studios have opted to sell off smaller films — which are often riskier in terms of drawing a theatrical audience — to streaming services rather than waiting out the uncertain return of theaters. The move has kept money flowing to studios, but analysts say that it has undercut theaters by training consumers to expect new films to be instantly available in their homes.
Universal led the charge. Paramount Pictures gave up the Issa Rae-Kumail Nanjiani comedy “The Lovebirds” to Netflix, along with Aaron Sorkin’s Oscar hopeful “The Trial of the Chicago 7” starring Sacha Baron Cohen as Abbie Hoffman. “The SpongeBob Movie: Sponge on the Run,” which Paramount was initially supposed to release in theaters in May, will move to its parent company Viacom’s revamped streaming service CBS All Access in 2021. Warner Bros. sent its animated film “Scoob” to premium on demand and to its streaming sibling HBO Max. Sony Pictures sold “Greyhound,” a World War II Navy drama written by and starring Tom Hanks, to Apple TV+, buoying the struggling service’s cachet. Sony sold the Seth Rogen vehicle “An American Pickle” to HBO Max for release next month.
Disney made “Hamilton” available on its streaming service in July, canceling the film’s planned theatrical release and creating a cultural sonic boom that startled theater owners.
Jeff Shell, the chief executive of NBCUniversal, hasn’t been the only one trying to upend the antiquated “windows” rules that have dominated the movie business for decades, to the increasing consternation of consumers. Netflix, the original disrupter, offered to work with the theaters if they would agree to a much more truncated time between exclusivity in their theaters and when films could reach the streaming platform. It’s been a proposition that the largest theater chains refused to entertain as recently as last fall with the release of Martin Scorsese’s 3.5-hour opus “The Irishman.” Back then, Netflix was willing to offer a 45-day window; the theater chains were unwilling to come down from 60 days.
Netflix opted to work with the smaller, independent theaters that would allow for “The Irishman” to play exclusively for 26 days before becoming available on the service for its 158 million subscribers. (Now the service boasts a subscriber base of 183 million worldwide.) AMC’s willingness to opt into a 17-day window will surely appeal to the streaming services like Netflix and Amazon. The question is whether or not Amazon or Netflix could devise a revenue-sharing model similar to the one Universal is offering AMC for its premium on-demand portion of sales.
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