Universal Trolls Theaters, Theaters Demand Tax Be Paid

The future is in play, right now.

Over the last week or so there has been an escalating war of words between Universal Pictures and a handful of theater chains? The object of their disagreement is just what role each party has to play in the continued business model of the other.

The inciting incident in this particular fracas, the equivalent of Archduke Franz Ferdinand being assassinated, was the release of Trolls World Tour a few weeks ago. Universal made the unusual – even unprecedented – decision to release it straight to premium VOD early last month because all the theaters were closed, a result of precautions taken in the midst of the Covid-19 pandemic still sweeping across the nation and world. Not wanting to lose the momentum of the marketing campaign that had already been running with a delay, the studio opted instead to break ground it and others have been eyeing for a while.

Before the release, NATO made it clear theater owners would hold a very large grudge for a very long time against Universal for making such a move. There wasn’t much that could be done to stop the wheels that had been put in motion at the time, but it was apparently necessary to make public statements like this in order to communicate the displeasure of NATO’s members at having been called, essentially, irrelevant.

Since then it has called out the success of this strategy, touting positive sales numbers for a digital release and appeared in the Top 10 titles on Amazon Prime when it was first available.

More recently it’s gotten very awkward. Here’s a short recap:

Universal: This has turned out very well, to the tune of about $100 million.

NATO: Shut up! People love the theatrical experience.

AMC: We’re so put out by this we’re refusing to play any Universal movies in the future after theaters reopen.

Regal Cinemas: Same, and every other studio needs to make sure it doesn’t even think about shortening the theatrical-to-video window.

Universal: We intend to make premium VOD something we consider regularly along with theatrical release.

Today it made good on that promise, announcing The High Note would no longer be getting a theatrical run but would instead be going to premium VOD later this month.

As Julie Alexander pointed out on Twitter, there’s a lot of context that has to be considered among all this rhetoric. Namely, that studios have wanted to experiment with premium VOD for a decade or so, but theaters have always pushed back, using their power to draw mass audiences as leverage. But, as other people have said, their refusal to even allow that experimentation or be part of the solution means they have effectively locked themselves out of conversations they could be benefitting from right now. And the leverage they once had has diminished as ticket sales – which is different from ticket revenue – declines year to year. Theaters are in a much worse negotiation position than they were a decade ago.

Universal was first through the door and as such seems to be drawing the bulk of the fire from opponents of this new tactic. Warner Bros. isn’t too far behind, though, as it announced last month its animated Scoob! will skip theaters as well. And Disney is going one further by pulling Artemis Fowl from theaters and putting it on Disney+ in June.

Some have argued that the Great Recession didn’t kill theaters even though VOD was a viable option at the time. That’s true, but streaming wasn’t nearly the powerhouse it is today, and it certainly wasn’t the case that each company had its own platform it was working overtime to monetize and turn into a Netflix-killer.

In other words, the landscape today is very different, and the closure of movie theaters may be an even more drastic moment that was originally foreseen. Studios may finally realize that theatrical release is optional, not necessary, especially for films that don’t seem to care much potential for awards consideration.

What will be interesting to watch is how, if at all, the marketing changes for these direct-to-VOD releases. Will they have the same level of promotional partnerships as their theatrical cousins? Will they receive similar advertising spending and media planning? Trolls was an aberration in that the campaign was already so far along, but we could see outside companies pull their support if they know the movie isn’t going to theaters. Or deals could change to become more contingent on what release a movie is ultimately given and how it succeeds. In other words, it could become much more like the entire rest of the advertising world, where results are what matter.

Theaters are likely past the point where they can significantly alter the future of how studios will approach their release strategy. The bluster that’s been going back and forth in the press is more about negotiating upcoming contracts than anything else, as it’s not quite plausible a massive chain would outright refuse to play films from a studio like Universal. But AMC had to say something in order to assure stakeholders – including the banks holding the company’s massive debt load – it wasn’t going gently into that good night.

No one, least of all myself, wants to see theaters disappear. But they have gone from the only game in town to the best game in town to merely one of the games in town, with its own set of advantages and disadvantages. The label “direct to video” no longer carries the derogatory connotations it once did, largely because of the investments made by studios into quality material.

While there are a number of unknowns still floating out there, what seems to be clear is that this isn’t the end. Studios can’t keep punting releases down the calendar indefinitely, as eventually there will be too much backlog for theaters to handle. And those releases will be so tightly packed the studios will be tripping over their own feet. More premium VOD titles will be announced, and the theater chains will fall farther behind the times as audiences become more used to this kind of offering.

The future, in other words, will not wait for anyone to catch up with the present.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.