How Universal-AMC Deal Could Reshape New Streaming Services

A landmark deal between the nation’s biggest theater chain and one of its biggest media companies sent shock waves through Hollywood as other studios tried to figure what’s next for their oldest business.

But the real question might be what it means for streaming video, especially the big new services all the Hollywood studios have been rolling out in recent months. The AMC-Universal pact breaks a long-time logjam and creates a template for similar deals elsewhere in Hollywood, while potentially throwing a lifeline to theaters struggling to stay afloat amid the pandemic’s lockdowns and chaos.

Under the deal, Universal films running on AMC screens will be able to debut for rent online 17 days after their theatrical launch, instead of the industry standard 90 days, through a new Premium Video On Demand distribution window. In exchange, AMC gets up to 20 percent of the PVOD revenue as compensation for giving up its exclusive hold on the film, and a slightly better split on its theatrical revenues. That could be worth millions of dollars on a big film.

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Hollywood studios have been trying for years to shrink the time between a movie’s theatrical and online releases, to save marketing dollars and more efficiently reach audiences. Now AMC and Universal have shown an approach that makes that possible.

But not everyone in Hollywood is excited by the prospects. Variety said other studios have yet to bite on AMC’s offer of generally similar deals (it called the deal terms “slightly different” and slightly less generous to the studios).

Disney, ever protective of its slate of family-friendly fare, has been particularly dismissive. After all, if you can rent the next Pixar film three weeks in for $20, rather than piling the whole clan into a theater and buying, say, $60 worth of tickets, what’s in it for the Mouse House?

But I also think about a friend of mine, an executive for a streaming-video company who has a 5-year-old daughter. When Universal’s Trolls World Tour took the PVOD route in April, he and his wife ended up renting the film for three 48-hour periods, at a total cost of $60, because their daughter was so into the film. His family’s experience may not be unique, at least for films that play well with young children.

Even analysts were divided. Rich Greenfield of LightShed Partners said NBCUniversal CEO Jeff Shell “will be remembered for what everyone thought was impossible.”

Analyst Meghan Durkin, by contrast, said Credit Suisse “expected a 30-day window, and were surprised to see AMC agree to only 17 days, which increases the risk many consumers will wait a few weekends to see films in home rather than going to the theater.”

That’s a legitimate concern amid all the unknowns dogging the entertainment industry here in the pandemic, but it also risks missing a much bigger picture.

Yes, Universal gets to shrink its marketing window, and build a potentially profitable new distribution opportunity. And yes, struggling AMC gets another lifeline to help keep it viable during the pandemic’s version of an economic nuclear winter.

As Universal Filmed Entertainment Group chairman Donna Langley said in a statement: “The theatrical experience continues to be the cornerstone of our business. The partnership we’ve forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality.”

But the next step Hollywood will need to consider is how it can better integrate its oldest distribution mechanism with its newest. Every major studio has at least one big streaming service.

Those services look a lot like each other, especially when, for instance, Peacock and HBO Max take turns swapping exclusive runs of the Harry Potter movies back and forth.

To truly take advantage of the new opportunity requires thinking of the streaming services as part of a broader set of offerings from a given company. Then the next step is figuring out how to maximize the potential, especially for big franchises like the DC or Marvel worlds, as they bounce from theatrical to PVOD to streaming service to whatever’s left of traditional broadcast, pay-TV and transactional/electronic sell-through operations.

Soon enough, one or another studio will start adding those PVOD film debuts as a value-add to their subscription VOD service. Pay more for your subscription, and you can also watch big theatrical releases just weeks after they hit big screens.

It doesn’t take much to imagine Universal raising the very low price of Peacock’s subscription tiers, or even adding another tier that features free early access to PVOD releases on a regular basis.

Disney and Apple AAPL just got tastes of what can happen when you add a blockbuster to your streaming diet. Both Disney+ and Apple TV+ saw huge jumps in interest when they respectively launched Hamilton and Greyhound over the same July 4 weekend.

Downloads of Disney+ apps jumped 72 percent that week, according to App Annie. And Apple now is reportedly looking at other high-profile films it can offer through TV+, beyond the $120 million Will Smith/Antoine Fuqua project it picked up in a record pre-Cannes deal last month.

Also worth pondering is whether any of the studios decide to get back into theater ownership at a time when the sector is dirt cheap and deeply challenged. Last November, the U.S. Department of Justice dropped the 1948 Paramount decrees that long had blocked their ability to own theater chains.

It’s possible one or more media company may see an opportunity to create a more integrated release strategy that includes owned-and-operated theaters, PVOD, subscription and ad-supported video, broadcast and pay-TV channels, all wrapped around a deep engagement with audiences fueled by direct-to-consumer data.

It’s an opportunity to differentiate from other big streaming services, improve audience retention, reduce rampant churn and generate more revenue.

Given how new so many of the big streaming services are, and how new the business of running streaming is to most of their owners, it may be a while before the studios venture this far into the future. But the AMC-Universal deal may open up a new world of opportunities far beyond which theater will carry a movie for how long.

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