Universal, Cinemark Agree to Change the Way Movies Are Released

(Bloomberg) -- Comcast Corp.’s Universal Pictures struck a deal with Cinemark Holdings Inc. to allow its films to go to home video after a shorter period of time, marking the second such agreement for a studio upending decades of tradition.

Under the new accord, Universal can sell its films to online audiences as soon as 17 days after they’re shown by Cinemark, the third-largest U.S. theater chain. Normally, new movies play exclusively in theaters for two or three months. It’s not clear if Cinemark will get a cut of the studio’s online movie sales.

The arrangement is similar to one that Universal signed with AMC Entertainment Holdings Inc. earlier this year and exemplifies how cinema chains are coping with the growing popularity of at-home movie streaming. Theaters have long enjoyed the exclusive right to show the newest, most anticipated films. But audiences have more entertainment options than ever, most of which don’t require viewers to leave their sofas, and exhibitors have less leverage over studios.

“We believe a more dynamic theatrical window, whereby movie theaters continue to provide an event-sized launching platform for films that maximize box office and bolsters the success of subsequent distribution channels, is in the shared best interests of studios, exhibitors and, most importantly, moviegoers,” Mark Zoradi, Cinemark’s chief executive officer, said in a statement.

Discussions about changing the so-called theatrical window have become more intense as a result of the coronavirus pandemic. Most theaters have been closed for large portions of 2020, making Hollywood studios even more eager to strike new arrangements that allow them to put their films online quickly.

Public Spat

At one point, the talks became so heated that they spilled into public view. In April, Universal executives touted that one of the studio’s movies that was supposed to come out in theaters in 2020, “Trolls World Tour,” was instead extremely popular online, making theater owners furious. Their businesses depend on being the only place audiences can see new movies, and if studios bypass cinemas and make their films available elsewhere, that poses an existential threat.

At the time, AMC CEO Adam Aron lashed out at Universal Chairman Donna Langley, threatening to sever ties.

“AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours,” he said in a letter to the studio executive. “However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.”

Universal and AMC mended fences by agreeing to shorten the period of time theaters have exclusive access to new movies to 17 days. In exchange, AMC gets a cut of Universal’s online movie revenue, known as premium video-on-demand sales. AMC’s Aron said the arrangement has helped the chain stay afloat through the pandemic crisis.

Cinemark’s agreement with Universal is mostly the same, with some variations. If a Universal film makes more than $50 million in its first weekend at the box office, it cannot be sold online until 31 days after its premiere in Cinemark theaters. Other, less-popular movies can be sold online after 17 days if both companies agree. Cinemark and Universal wouldn’t say whether they will share premium video-on-demand revenue.

Cineworld Group Plc -- owner of Regal, the second-largest U.S. cinema circuit -- is now the only major chain that hasn’t struck similar terms. In July, Cineworld executives slammed the Universal-AMC deal as “the wrong move,” and said it would continue a boycott of movies from the studio. But Regal theaters are currently closed, a move designed to save money due to the effects of the coronavirus pandemic.

©2020 Bloomberg L.P.