Universal Defends Trolls Decision But Says OnDemand Is Not A Theater Replacement

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NBCUniversal CEO Jeff Shell didn’t exactly walk back his comments about using an OnDemand or a direct to consumer model to release movies, but he did clarify them and begin the process of extending an olive branch to the theater chains. The executive appeared on a conference call to discuss first quarter earnings alongside Comcast CEO Brian Roberts, and during the conversation, he both defended the studio’s decision to release Trolls World Tour as a Premium Video OnDemand offering (or PVOD) and clarified that he expects theaters to be the “central element” of Universal’s release strategy.

Shell also further clarified that PVOD is not a replacement for theatrical offerings. In addition, Comcast CFO Mike Cavanagh said all decisions will be made for future movies on a title-by-title basis, as far as what the release plan will look like. Here’s a portion of Shell’s quote, courtesy of The Hollywood Reporter…

“(The theater experience) is how people make their movies and how they expect the movies to be seen.”

If you’re out of the loop here, I’ll offer a quick summary of what’s going on. In short, when studios release movies into theaters, it is for a period of time known as the “theatrical window.” That’s basically an exclusive period in which the movie runs in theaters and is not available to rent or watch at home. Because of recent theater closures, Universal released Trolls 2 directly to consumers, or via PVOD. 

Theater chains weren’t happy about the decision as they hoped it would be a title that could screen after reopenings, but from Universal’s perspective, the movie was “ready to go” and executives didn’t want to wait. The drama had mostly died down until Shell gave an interview in which he seemed to imply he wanted to release movies in the future both in theaters and via OnDemand. Those statements caused both AMC and Regal to release aggressive responses saying they either won't play Universal movies or won't play ones that break the theatrical window.

 

So, the question is what to take away from these new statements. To me, it seems like Universal is trying to walk the line between not publicly apologizing for this dust-up but also trying to signal to theater chains that it will respect the theatrical window on bigger titles. At the end of the day, both AMC and Regal have made it clear it will not program Universal movies that don’t respect the window. They don’t have any financial incentive to do that, and it’s hard to see them budging on anything except maybe the length.

Universal, as well, has every financial incentive to work with the movie theaters. Trolls 2 may have found some success using PVOD, but how many movies can that realistically work for? In addition, some of the company’s biggest titles, Fast And Furious as an example, are clearly shot and made for the big screen. They don’t translate as well to being viewed at home, and it’s hard to imagine they would put up nearly the total grosses if the theater was removed from the equation.

 

There’s always a healthy bit of tension and sometimes even barely concealed animosity in the movie business. Too many egos, too many fingers in the cookie jars and too many billions of dollars are at stake to ever have perfect harmony. Typically, these battles mostly occur behind closed doors, as discussed at length in this Deadline piece. This battle did not occur behind closed doors, but it’s hard to imagine anyone involved letting that get in the way of what has been and should continue to be a productive partnership down the road. Movie theaters need studios to supply good content, and studios need movie theaters to turn these offerings into events and/ or something to do with friends, dates, etc.

The conversations, especially behind the scenes, are not finished yet. I would imagine Universal will continue going back and forth with the theater chains for awhile, but ultimately, this feels like the first step toward reconciliation. And that’s a good thing.