Universal And AMC Reach Historic Deal Shortening Theatrical Exhibition Window From 3 Months To 3 Weeks

The war is over.

AMC Theatres famously threw a huge fit and swore to never play Universal Pictures movies in its theaters after the studio released Trolls World Tour to video on demand at the same time as it hit theaters earlier this year. But now the two sides have come to terms and reached an historic new deal which could become the new normal going forward.

This multi-year agreement means that Universal can put any of its movies on PVOD (premium video on demand) within just three weeks of its theatrical debut. Before the pandemic came along, that "window" of time between theaters and digital release used to be three months long, so the fact that America's biggest theater chain has agreed to these terms is a very big deal.

Variety reports that AMC president Adam Aron says his company will "share in these new revenue streams," which I believe marks the first time a theater chain will receive a cut of a studio's digital rentals. The deal stipulates that Universal can only release its movies through premium on demand services, which cost around $20 to rent, until three months after they debut in movie theaters. At that point, the studio will be able to lower the sale or rental price to more traditional on-demand price points (ex: $3-$6 for rentals).

This means that in theory, Universal could put out a huge movie like Jurassic World: Dominion or F9 in theaters, and then drop it on PVOD just 17 days later. But the studio will likely take a "wait and see" approach with every movie it releases, tracking each film's box office performance and deciding on a per-movie basis if they're going to make audiences travel to theaters to see it or if they can afford to drop it on demand. Universal says big movies will likely have longer exclusive theatrical runs, but if a smaller film comes along and performs surprisingly well at the box office, Universal has the right to hold that in theaters for as long as it wants.

"The theatrical experience continues to be the cornerstone of our business," said Donna Langley, chairman of Universal Filmed Entertainment Group. "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."

"Focusing on the long-term health of our industry, we would note that just as restaurants have thrived even though every home has a kitchen, AMC is highly confident that moviegoers will come to our theatres in huge numbers in a post-pandemic world," said Aron. "As people enjoy getting out of their homes, we believe the mystical escape and magical communal experience offered at our theatres will always be a compelling draw, including as it does our big screens, big sound and big seats not to mention the alluring aroma of our perfectly prepared popcorn."

I expect other studios will make similar deals of their own in the coming days, but as Variety notes, this will likely have wide-ranging effects across the entire film industry. (This could totally change the way a movie is marketed and how money is allocated for marketing campaigns, for example.) While the outlet refers to this as a "multi-year" deal, it's unclear exactly how long these terms will apply. But once consumers get used to this new normal, it seems like it will be difficult, if not outright impossible, to go back to the way things used to be.

I'm also curious if this is inadvertently signing a death certificate for the theatrical experience. Putting the pandemic and all of those ramifications aside for a second, audiences have been visiting theaters less and less in recent years thanks to the rise in streaming entertainment and the increased quality of home entertainment setups. Now that people can wait just three weeks to see a movie, I can imagine lots of folks taking that opportunity to only pay $20 to watch a movie at home with their whole family instead of paying $100 to take the family out to the theater a few weeks earlier to see the same movie.