APRIL 28 EVENING UPDATE: An extraordinary war of words broke out on Tuesday night (April 28) after AMC Theatres said it will not carry Universal films following comments earlier in the day by NBCUniversal head Jeff Shell in light of the premium VOD release of Trolls World Tour.
The AMC riposte prompted a reply from Universal in which it affirmed its belief in the theatrical experience and also said it will release films on premium VOD when it made sense, further expressing disappointment in a ”seemingly coordinated attempt from AMC and NATO to confuse our position and our actions.”
The studio’s comments in turn sparked a sharp rebuke from the National Association Of Theatre Owners (NATO) accusing Universal of making a “reckless charge” about AMC and NATO, adding, “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.”
The brouhaha began after Shell told The Wall Street Journal that once cinemas reopened he expected to release films theatrically and on premium VOD in light of the digital release of Trolls World Tour, which according to the publication has generated close to $100m in sales in its first three weeks.
A while later AMC Entertainment CEO and president Adam Aron released a public letter to Universal Filmed Entertainment Group chairman Donna Langley in which he said the apparent unilateral shift away from theatrical distribution by Universal “represents nothing but downside for us and is categorically unacceptable to AMC Entertainment”.
The AMC head said his response would also apply to ”any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us”.
Aron noted AMC had spent years trying to work out a new windows model that would be mutually beneficial to his company and Universal, and signed off by saying, ”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.”
On Tuesday evening a Universal spokesperson 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. In fact, given the choice of not releasing Trolls World Tour, which would not only have prevented consumers from experiencing the movie but also negatively impacted our partners and employees, the decision was clear.
”Our desire has always been to efficiently deliver entertainment to as wide an audience as possible. 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 theatres, 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.”
Rounding out the back-and-forth, NATO weighed in last night and said, ”Earlier today NATO issued a statement regarding Universal Studios’ public comments in the Wall Street Journal regarding that studios’ evaluation of the results of releasing the movie Trolls World Tour directly to the home without a theatrical release, and specifically that Universal would release future movies both theatrically and to the home.
“Also today, according to various public press reports, AMC released a letter that company sent to Universal stating AMC’s individual company reaction to Universal’s public statement earlier in the day in the Wall Street Journal. NATO and AMC did not coordinate those statements in any way. Indeed, AMC had no comment on NATO’s draft statement when sent to NATO’s Board of Directors, nor did AMC participate in the Board deliberations regarding that statement. Regarding AMC’s reported letter to Universal, NATO had no involvement with nor knowledge of that letter before reading about it in the press.
”Without any knowledge of the facts, or the common courtesy to inquire about those facts, Universal nonetheless made the reckless charge this evening that the company is “disappointed by this seemingly coordinated attempt from AMC and NATO to confuse our position and our actions.” 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.”
At least one other major exhibitor contacted by Screen, Cinemark, had not commented on its stance going forward.
Aron’s letter appears below:
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 world’s 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.
CEO and President