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The news: Universal Pictures animated film “Trolls World Tour” has earned $95m in its first 3 weeks on-demand, having skipped its theatrical release due to Covid-19. Universal said they will release more films direct to VOD as a result.
US and European cinema trade groups NATO and UNIC criticized Paramount. The CEOs of top cinema chains AMC and Cineworld (Regal) threatened to no longer carry Universal films in theaters if Universal proceeds. (Read more)
The takeaway:
- The shutting down of cinemas is forcing studios to take risks they needed to take anyway in releasing films on-demand. Positive results from this during Covid-19 will make it much more likely the practice continues (at least for same-day release with theaters) after.
- Direct-to-VOD release doesn’t need to generate more topline revenue than a box office release to be more profitable, since the studio is only getting half the box office earnings but 80% of VOD earnings.
- Threats by cinema chains are empty. They have no leverage to negotiate here. Already struggling, they need every dollar they can get to survive after this crisis. Even if blocking a studio’s films would hurt the studio over the year ahead and be an effective long-term strategy, cinemas can’t afford the short-term loss. It may even expose them to shareholder lawsuits.