AMC’s Trolls feud proves movie theater chains are becoming their own worst enemy

Who could have guessed that Trolls World Tour, of all things, would be the film tearing apart the movie business?

This week, Universal Pictures announced that the animated sequel Trolls World Tour — which had been scheduled to hit theaters April 10 — earned more in three weeks of $20 digital rentals than the original 2016 film earned during its five-month theatrical run.

The film’s performance in the streaming market proved the viability of “premium video on demand” (PVOD) as an option for movie releases, according to Jeff Shell, the head of Universal’s parent company NBCUniversal.

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

AMC Entertainment Holdings, Inc., the world’s largest theater chain, treated the last part of that statement like a metaphorical grenade lobbed at the theater industry, and CEO Adam Aron issued a sternly worded response.

Going forward, the chain would refuse to screen any of Universal’s films, Aron threatened.

To borrow a line from Anchorman: The Legend of Ron Burgundy: Boy, that escalated quickly.

It’s no secret that movie theater chains are in murky waters right now when it comes to their collective financial future. Even if the threat of coronavirus lessens to a point where theaters can reopen for business, audiences aren’t likely to flock to crowded spaces in pre-pandemic numbers anytime soon, and the theaters themselves will likely have to enforce some degree of social distancing that could limit ticket-selling potential.

On top of all that, all of the shuffling by movie studios has resulted in a release calendar that has Christopher Nolan’s sci-fi thriller Tenet and Disney’s live-action remake of Mulan — both set for late-July premieres — as the next major movie releases from any studio.

Given all of those factors working against theater chains’ post-coronavirus outlook, you’d think they would be welcoming any future opportunity to offset their pandemic losses — but you’d be wrong.

In declining to screen any upcoming Universal movies, AMC is giving the cold shoulder to Fast & Furious 9, Minions: The Rise of Gru, and the James Bond thriller No Time To Die. Essentially, the theater chain is willing to sacrifice the revenue generated by the next installments of three of the highest-grossing franchises of all time.

There’s an old adage about cutting off your nose to spite your face that seems apt here, but even that grisly metaphor doesn’t capture the full effect of AMC’s overreaction — and the negative repercussions it could have on more than just AMC’s theaters.

If AMC does indeed decline to screen films produced by studios embracing the on-demand, streaming marketplace, it would likely benefit competitors like Regal Entertainment Group and smaller chains or independent theaters where AMC isn’t the only option for audiences. However, in the regions where AMC is the only option, it would likely push audiences toward streaming services and on-demand offerings in greater numbers — and in doing so, encourage studios to head in the same direction.

Theater chains’ aggressive rebuke of anything and everything produced by studios that have warmed to on-demand streaming is the sort of bridge-burning decision that could end up backfiring spectacularly in the long run, forcing studios to embrace PVOD and other options for their projects to make up for nonexistent theatrical runs.

With studios receiving a far greater portion of streaming and digital rental revenue (around 80% of the sale) than they do with box-office ticket sales (around 50%), the allure of going PVOD is already there — so any decision pushing them further in that direction is a dangerous gamble for theaters, to put it mildly.

At this point, the feud is still going strong, with the public back-and-forth between AMC and Universal recently joined by the National Association of Theatre Owners trade organization and other parties with an interest on one side of the fracas or the other. This is all happening as the threat from coronavirus isn’t showing any definitive signs of going away in the U.S., despite some states’ controversial decisions to open up businesses again.

All of that suggests we’re still a far way off from returning to anything resembling normal — particularly when it comes to the movie business. There are plenty of indications that the process of making and watching movies (and so many other elements of our lives) will be very different on the other side of this pandemic, but the all-or-nothing (and potentially self-destructive) approach AMC is embracing might end up being more dangerous to the future of theaters than the pandemic ever was.

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