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What Odeon vs. Universal means for the future of cinema

The cinema industry is one of those that has been crippled by coronavirus. With cinemas forced to close and many major releases put back, the whole business is in a kind of stasis. But this could now be shattered by a row between a film studio and one of the world’s largest cinema chains, which could be the beginning of the end for film.

   The row began in the most seemingly innocent of places – the release of Trolls World Tour. The film was intended to be released in cinemas at the start of April, but coronavirus obviously meant that was no longer possible. In response, Universal made it a streaming release, and had a lot of success. In three weeks, it reportedly generated $100m, with 5 million rentals. As the film has exceeded Universal’s expectations, it is now looking at skipping the theatrical releases of some films, heading straight to streaming and on-demand services. Jeff Shell, the chief executive of NBCUniversal, said: “The results for Trolls World Tour have exceeded our expectations and demonstrated the viability of [premium video-on-demand]. As soon as theatres reopen, we expect to release movies on both formats.”

   It is these comments that have incensed cinema owners. There has typically been a theatrical window of roughly three months before releasing films on other platforms. This strategy is intended to maximise the box-office value of every movie – you go to a cinema because, for several months, you literally cannot see a film anywhere else. In response to Universal’s move, Adam Aron, the chief executive of AMC Theaters (which owns Odeon) said a ban on all Universal films would apply to all its outlets worldwide. He also wrote a letter to the studio’s chair, accusing the company of “breaking the business model and dealings between our two companies”. Cineworld has now come out in support, although Vue says it will still show Universal films.

If even 10% cinema’s prospective customers stay at home and watch the film on streaming, that will cripple the cinema

   Already faced with the Netflix model of release, cinemas simply cannot afford major studios to do the same. Money is already tight in the cinema industry, with studios taking a large chunk of any ticket revenue, and AMC was in financial difficulties long before the global pandemic. Ticket revenue is declining year on year. Importantly, as Disney comes to represent an increasingly larger share of the box office, the House of Mouse can put pressure on cinemas to run their films for longer and demand a bigger share of the revenue, leaving less for the cinemas themselves. Take the new Star Wars film, for example – Disney took 65% of your ticket price. When you factor in other costs, there’s not much left over for the cinemas. For less powerful studios like Universal, streaming offers a larger revenue share than cinematic releases, so it’s an attractive option.

   It should be stressed that the success of Trolls World Tour is down to the particular moment – people are stuck at home with their kids, and so this is the perfect film to watch. Universal said that it would only look beyond cinema premieres “when it makes sense”. In a statement, the company said: “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.” Cinemas, however, simply cannot afford this transition – without the bums on seats approach, with people coming to the cinema to see big releases, many will be forced to close. If even 10% cinema’s prospective customers stay at home and watch the film on streaming, that will cripple the cinema.

   The strict stance adopted by AMC is a necessary one – if other studios follow Universal, the cinema is done. They need the threat of streaming releases scrapped, and they’ll be hoping that a ban will indicate the severity of the situation. There are big Universal releases coming up, including No Time to Die and Furious 9, and the studio won’t want them to flop because they are only released on streaming. Make no mistake, this will have larger ramifications for the film industry. Although streaming releases may be a short-term boon for studios, they’ll be powerless to stop account sharing, etc., and the general diminished revenue will eventually make big-budget films unsustainable.

   Covid-19 is threatening to destroy an industry that was already struggling to survive. The AMC reaction may seem a petty one, but it really is a company trying to prevent its own death – if Universal follows through with a plan that prioritises streaming releases, our film industry is going to change. I never thought the Trolls World Tour would mark the end of the cinema as we know it, but it’s looking increasingly likely.

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