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Theater Owners’ Exclusive Rights to New Films Shaken by Virus

Universal Puts New Films Online as Virus Disrupts Viewing Habits

(Bloomberg) -- NBCUniversal is putting its newest films online in response to the coronavirus and restrictions that are keeping people from theaters, potentially breaking the cinema industry’s decades-old grip on movie releases.

Pictures will be available for a 48-hour rental on cable systems owned by NBC parent Comcast Corp. and other services, the studio said Monday. DreamWorks Animation’s “Trolls World Tour” will be the first release, with other movies available as soon as March 20.

While others haven’t said whether they’ll also bring films to homes sooner, Universal’s move will be closely watched by Hollywood executives who have have long sought to shrink the “theatrical window,” the 70 to 90 days of exclusivity enjoyed by cinema owners. An earlier home release could cut marketing costs and boost revenue for the studios.

“It’s going to be hard to go back once they get a taste of it,” said Tom Ara, co-chair of entertainment at the law firm DLA Piper, noting that Chinese companies have also released films online in lieu of a theatrical releases.

Traditionally, when a movie is released, theater owners get exclusive screening rights for up to three months. That’s followed by high-priced online rentals, along with digital and physical DVD sales through retailers like Walmart and Amazon.com. After that, studios sells TV rights to premium cable channels like HBO and streaming services such as Netflix.

Netflix Inc., as one of the biggest movie producers in Hollywood, has also challenged big theater chains by releasing its movies for streaming on the same day they open in cinemas. The major chains, however, have refused to screen its pictures.

Sales Cycle

Now the novel coronavirus is upending the historical sales cycle. Limits on mass gatherings to stop the spread of Covid-19 have forced cinema chains to shut auditoriums and limit ticket sales -- leading to the worst weekend ticket sales in two decades.

Major exhibitors may not be in a position to fight this time around. Their shares have plunged with the closings of theaters and the broader market’s drop due to coronavirus fears. Both AMC Entertainment Holdings Inc. and Cinemark Holdings Inc. face possible downgrades in their debt ratings.

While movie theaters closed weeks ago in China, the impact in the U.S. was sudden, in some cases after studios had spent tens of millions of dollars marketing films to potential audiences that now have no theaters open nearby. No. 2 U.S. exhibitor Regal said only Monday it would fully close its circuit.

“Given the rapidly evolving and unprecedented changes to consumers’ daily lives during this difficult time, the company felt that now was the right time to provide this option in the home as well as in theaters,” a spokesman for Universal said in a statement.

What of Mulan?

Fans have also called for Walt Disney Co. to offer “Mulan” online, after its release date was pushed back from March 27.

But deciding to scuttle or undercut theatrical sales for a $200 million production isn’t as easy as it is for a horror film that cost just $7 million to make.

Universal, which is charging $19.99 for the rentals, took its step with a trio of movies that look to have limited box office prospects. “Invisible Man” had already been in release for a few weeks, while “The Hunt” arrived in the middle of the crisis and did just $5.3 million in its opening.

“Trolls World Tour” was set to open April 10, with Box Office Pro forecasting $23.5 million in North American sales for the opening weekend.

To contact the reporters on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net;Kelly Gilblom in Los Angeles at kgilblom@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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