AMC Theatres Refuses to Play Universal Films in Wake of 'Trolls: World Tour'

The threat came after comments made by NBCUniversal CEO Jeff Shell regarding the on-demand success of the family film and what that means for the future.

AMC Theatres on Tuesday delivered a blistering message to Universal Pictures, saying the world's largest cinema chain will no longer play any of the studio's films in the wake of comments made by NBCUniversal CEO Jeff Shell regarding the on-demand success of Trolls World Tour and what it means for the future of moviegoing post-coronavirus pandemic.

Earlier in the day, Universal revealed that Trolls World Tour racked up an estimated $100 million in premium VOD rentals in its first three weeks in North America, more than enough to put the film on the road to profitability, according to the conglomerate. That's not far behind the $116 million grossed by the original Trolls in its first three weeks at the 2016 domestic box office on its way to topping out at $153.7 million in the U.S. and Canada and nearly $347 million globally, not adjusted for inflation.

Universal sent the animated family film straight to PVOD amid the ongoing pandemic and widespread theater closures.

"The results for Trolls World Tour have exceeded our expectations and demonstrated the viability of PVOD," Shell told The Wall Street Journal, which first reported the numbers. "As soon as theaters reopen, we expect to release movies on both formats."

In a strongly worded letter to Universal Filmed Entertainment Group chairman Donna Langley, AMC Theatres chairman and-CEO Adam Aron said Shell's comments were unacceptable. AMC is the largest circuit in the world.

"It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice. Therefore, effectively immediately AMC will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East," Aron wrote.

"This policy affects any and all Universal movies per se, goes into effect today and as our theaters reopen, and is not some hollow or ill-considered threat," he continued. "Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes. Currently, with the press comment today, Universal is the only studio contemplating a wholesale change to the status quo. Hence, this immediate communication in response."

It didn't take long for Universal to respond. The studio issued an evening statement saying it remains dedicated to moviegoing, and that Shell's comments were misconstrued. (The statement also took a dig at AMC and the National Association of Theatre Owners for trying to "confuse" matters.)

“We absolutely believe in the theatrical experience and have made no statement to the contrary. As we stated earlier, going forward, we expect to release future films directly to theaters, as well as on PVOD when that distribution outlet makes sense. We look forward to having additional private conversations with our exhibition partners but are disappointed by this seemingly coordinated attempt from AMC and NATO to confuse our position and our actions," Universal said.

"Our goal in releasing Trolls World Tour on PVOD was to deliver entertainment to people who are sheltering at home, while movie theatres and other forms of outside entertainment are unavailable. Based on the enthusiastic response to the film, we believe we made the right move," the statement added.

AMC has been particularly hard hit because of its debt load heading into the pandemic. Following the closure of all AMC locations in the latter half of March, Wall Street analysts predicted that the circuit would be forced to file for Chapter 11 bankruptcy, but grew more bullish after the company issued a $500 million debt offering earlier this month (Aron himself is among the corporate staff furloughed because of the closures).

Added Aron in his letter to Langley: "While Universal’s unilateral pronouncements on this issue are unpalatable to us, as has always been the case, AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours. However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end."

Aron's letter capped an afternoon of high drama regarding Shell's remarks. NATO weighed in first, saying that while Universal may be pleased with the PVOD results of Trolls World Tour, this outcome should not be interpreted as a sign of a "new normal" for Hollywood.

"Universal does not have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases," said NATO president and CEO John Fithian. "Theaters provide a beloved immersive, shared experience that cannot be replicated — an experience that many of the VOD viewers of this film would have participated in had the world not been sequestered at home, desperate for something new to watch with their families. We are confident that when theaters reopen, studios will continue to benefit from the global theatrical box office, followed by traditional home release."

In a later statement responding to Universal, NATO vice president and CCO Patrick Corcoran added "unfortunately Universal has a destructive tendency to both announce decisions affecting their exhibitor partners without actually consulting with those partners, and now of making unfounded accusations without consulting with their partners."

For the most part, Universal — like the other major Hollywood studios — has delayed its event films so that they can have a theatrical release, including 59 and the next Minions.

Trolls World Tour, along with Warner Bros.' Scoob! and Disney's Artemis Fowl, are exceptions.

Cinema owners have said they understand why some movies may need to go straight to home entertainment, but Shell's comments struck a nerve. "Universal has taken the first step toward changing the paradigm," says a studio executive at another company, noting that film distributors have wanted to test early PVOD for years.

The current hope is that theaters will be open by July 17, in time for Christopher Nolan's Tenet, followed by Mulan on July 24 and Wonder Woman 1984 in mid-August.

April 28, 6:30 p.m. Updated with Universal's statement.

Read Aron's full letter to Langley, below.

Dear Donna,

At this time of national emergency and the coronavirus wreaking havoc on the entire world, I hope that you and your loved ones are healthy and safe. I worry — and I wish the best for — the health of all of our industry colleagues. Never in our lifetimes has there been a more challenging time.

Amidst a global pandemic as a backdrop, I wish we were spared from also having to address a different issue that arises from Universal actions currently underway.

For 100 years, AMC Theatres has served as a strategically critical and highly profitable distribution platform for movie makers, and for all that time the exclusivity of the theatrical release has been fundamental. When a movie is “Only in Theaters,” consumers perceive it to be higher quality entertainment. Countless filmmakers and moviegoers believe that their creative works are best enjoyed by consumers on the big screen. And we all know that those theatrical releases indeed boost publicity, positive word-of-mouth, critical acclaim and downstream revenues.

For much of the past four and a half years, I have been in direct dialogue with Jeff Shell and Peter Levinsohn of Universal about the importance of a robust theatrical window to the viability of the motion picture exhibition industry. Throughout that time, AMC has expressed a willingness to consider alternatives to the current windowing strategy common in our industry, where the aim of such alternatives is to improve both studio profitability and theater operator profitability.

Universal stated it only pursued a direct-to-home entertainment release for “Trolls World Tour” because theaters were closed and Universal was committed to a lucrative toy licensing deal. We had our doubts that this was wholly Universal’s motivations, as it has been a longstanding desire by Universal to go to the home day and date. Nonetheless, we accepted this action as an exception to our longstanding business practices in these unprecedented times.

In today’s Wall Street Journal, Jeff Shell is quoted as saying that:

“The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD,” Mr. Shell said. “As soon as theaters reopen, we expect to release movies on both formats.”

This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable to AMC Entertainment, the worlds largest collection of movie theatres.

Going forward, AMC will not license any Universal movies in any of our 1,000 theatres globally on these terms.

Accordingly, we want to be absolutely clear, so that there is no ambiguity of any kind. AMC believes that with this proposed action to go to the home and theatres simultaneously, Universal is breaking the business model and dealings between our two companies. It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us. It also presumes that Universal in fact can have its cake and eat it too, that Universal film product can be released to the home and theatres at the same time, without modification to the current economic arrangements between us.

It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice. Therefore, effectively immediately AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East. This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat. Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes. Currently, with the press comment today, Universal is the only studio contemplating a wholesale change to the status quo. Hence, this immediate communication in response.

AMC has invested significant time and energy with Universal executives over the past few years trying to figure out a new windows model that would be beneficial both for your studio and for our theatre operations. While Universal’s unilateral pronouncements on this issue are unpalatable to us, as has always been the case, AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours. However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.

Sincerely,

Adam Aron

CEO and President

AMC Entertainment