AMC Entertainment has agreed to an exclusive deal with Universal Pictures to allow film releases from both Universal and Focus Features to be made available to audiences in the home on PVOD after a 17-day theatrical run, marking a substantial reduction from the industry standard of up to 90 days.

AMC Entertainment, owned by Wanda, has agreed to an exclusive deal with Universal Pictures to allow film releases from both Universal and Focus Features to be made available to audiences in the home on PVOD after a 17-day theatrical run, marking a substantial reduction from the industry standard of up to 90 days. The reciprocal deal will see AMC compensated for the potential erosion of box office through an unspecified split of PVOD revenues. AMC will also be able to screen those titles on its own recently launched AMC Theatres on Demand VOD platform. The deal relates to the US market although negotiations are reportedly underway for AMC’s international screens. 

The new deal is a shake up for the theatrical industry and heralds a new era of exhibitor-studio partnerships. The deal is predicated on growing the overall market for titles that are released on PVOD after a shorter theatrical run and, through savings on efficiencies, the greenlighting of more titles for theatrical release. Universal's window for traditional EST and VOD remains unchanged, the deal is purely aimed at opening up a new consistent premium window directly after theatrical release.

The deal also marks a turnaround for AMC, who had refused to screen movies from Universal after the studio stated it intended to replicate the success of Trolls World Tour on PVOD (after forgoing a theatrical release due to the closure of theatrical screens), by releasing other titles simultaneously. 

Wanda/AMC is the largest exhibitor globally with over 16,680 screens of which just under half or 49% are located in North America. AMC accounts for approximately 19% of the roughly 41,000 screens in North America. Wanda/AMC is also present in 16 other international territories including UK, Saudi Arabia and Australia.

Our analysis

This is a landmark deal in wider film distribution terms, coming off the back of a tumultuous year for cinemas, which has seen the near outright closure of 97% of global screens in mnasy cases for at least four months or more and a dearth of new releases over the typically strong summer blockbuster season. The deal comes as other studios have also had to adopt novel distributon strategies such as a staggered day and date release before the prime US market in case of Warner's Tenet.

It had previously appeared that most studios were opting to preserve the current nature of studio-exhibitor relationships by rescheduling the majority of theatrical releases to later in 2020 or into 2021 (due to COVID) with only a handful of titles, including Trolls and other mostly smaller or kids movies, opting to go straight instead to PVOD. Universal itself had strategised to push the majority of major movies back into late 2020 or beyond.

Even in this new model, it is clear the theatrical experience is intended to remain as the primary value creator. While increased funding could be pushed into production (through other savings), it is uncertain if this will include more bigger budget event films, that are the mainstay of the theatrical experience and conversely those not suited to a very short release window.

Exhibitors have previously refused to screen movies that don’t respect the longstanding theatrical window, and a similar stance could yet ensue. Fellow exhibitor Cineworld, the second largest global exhibitor with 9,605 screens across 15 territories, (of which Regal in the US accounts for 75% of its total) has already opposed the concept. The company has not, however, reportedly been privy to intricacies of the deal. One of the primary concerns is the cannibalisation of tickets sold, which would, in turn, impact concessions revenue, a major source of exhibitor revenue, although the deal seems to offer sufficient compensation at least for AMC.

The backdrop of COVID-19 is arguably not the best time for many exhibitors to negotiate ground-breaking terms. While the deal may be a stronger fit for AMC, partly due to its own VOD platform known as AMC Theatres on Demand (only a few exhibitors have embraced VOD services), Universal would arguably need this to work on wider scale to succeed. It is also not clear how the move affects premium screen brands Imax and Dolby Cinema who also take a share of box office revenues. Imax had 190 screens with AMC and Dolby 148 in AMC’s US cinemas in 2019. Movies are typically screened for just two weeks on Imax screens, and these tend to skew in the bigger event film category. 

Although 17 days (or three weekends) has been stipulated as the timeframe before moving to PVOD this is likely to apply to those titles that were underperforming rather than all titles as a matter of procedure. Major titles such as No Time to Die, for which Universal has international rights, would arguably benefit from longer exclusivity. A longer run time may also allow more people to see titles in cinemas due to per screen occupancy limits during COVID-19 and as long as social distancing guidelines remain and therefore the 17 days is at odds with this premise. 

For theatrical, Omdia had forecast a 58% decline for worldwide BO in 2020, although that was before the delay of the return of major releases until late August from early July. The annual decline is forecast at 76% with the event of a second wave, depending on the duration and start point.

Within the home, the pandemic has built opportunity for greater content consumption and has created a systematic shift for consumers, increasing usage of transactional video overall. Before COVID-19, Omdia had forecast total consumer spending on transactional online video to grow with a CAGR of 3.6% over the next five years globally. This was upgraded to 4.2%, reaching $8.47 billion in 2024 due to general consumer shifts towards transactional. Before this PVOD AMC/Universal deal, Omdia had forecast that PVOD releases through 2020 would account for $316 million globally with upward potential dependent on slate and lockdown timing.

Depending on other exhibitor deals and if other studios begin striking similar windowing deals, transactional online video will begin to see significant uptake. With PVOD windows having the potential to release titles three weekends after theatrical, PVOD, EST, and VOD windows will be able to capitalize on the tail ends of large marketing budgets often only reserved for the theatrical window. With such a high supply of streaming content available, earlier windowing will allow home entertainment to take advantage of word of mouth and consumer zeitgeist more easily across windows. 

The potential risk to this experiment is in a permanent shift in audience mindsets in forgoing theatrical experiences for a short wait (especially considering wider risks of social outings from COVID) for the same title on PVOD, plus the potential erosion of theatrical as the overall value generator. The deal, therefore, underscores the need for strong negotiations on the part of exhibitors and underscores rationale for further consolidation in the exhibition sector or alternatively in partnerships that create a strong base of power. Currently, the top 10 global exhibitors account for around 34% of the world’s screens, while in the US, the top 10 exhibitors account for 58% of total screens, of which the top three control 50% alone.

While the step change has ultimately been carved out by theatrical stakeholders, there could also be an opportunity for other entities such as streaming platforms, which have been eyeing the breakdown of the elusive theatrical window for some time, to enter similar agreements. While it is not clear if a new entrant would offset exhibitors in the same way, the precedent of the potential erosion of theatrical windows has already been set in motion.

For Universal, there is an economic upside from lower associated marketing spend. Under this new benchmark, a decision to transfer a film from theatrical to digital may need to be made at short notice, so distributors will need to be flexible in terms of how to steer or sustain the initial marketing campaign. In this collaboration, there is also the possibility of sharing of customer data, which may be one of the most valuable assets for both parties, in terms of knowing which customers to target and how decisions are made.

Omdia anticipates that more studios may begin to trial and test similar PVOD deals to gather whether shortening the theatrical window will benefit a title’s lifetime revenues. If only Universal proceeds with this type of deal, customer confusion will create friction when trying to understand what titles can be expected to be available across platforms. 

Nonetheless, the products of this deal will not become clear until the back end of 2020 (with the release of the relevant titles) leaving some time for either widespread acceptance and shoring up of similar deals or alternatively fresh conflicts to emerge in this epic for which there may yet be many changes to the narrative.