Change is a constant in life and business. Adaptation is the key to success in business. The entertainment, media, and sports industries and businesses are no different.
With the stunning decision last week that Universal, one of the major movie studios in Hollywood, brokered a deal with one of the biggest movie theater chains, AMC, to shorten the theatrical window, it is sure to change Hollywood for years to come. The typical theatrical window (time between release in a theater and home viewing through video-on-demand (VOD) or television video-on-demand (TVOD) or rental is between three (3) months and nineteen (19) weeks or four and half (4.5) months. The deal between Universal and AMC, normally adversaries in the argument over shortening the theatrical window, is now seventeen (17) days from release to home entertainment enjoyment.
Why did this deal happen? Long thought to be impossible to move, there are three important changes that occurred to allow the deal between Universal and AMC to occur to shorten Hollywood’s theatrical window.
1. Streaming
The technology and content behind streaming has been ever increasing since its inception. Streaming opened the door to shortening the theatrical window because the immediacy of content consumption that it creates. Consumers are always at the forefront of how content is delivered because it is their interests and pocketbooks that drive (or at least should) drive decision making.
2. Pandemic
This author wrote previously that when discussing the power of television during a pandemic: “Time and content are in important thing. When people have more time, they generally consume more content.” The pandemic only sped up what was already going to occur anyway on shortening the theatrical window because of streaming. The restrictions (perceived or government-ordered) of in-person contact further forced the theatrical window to shorten sooner.
3. Success of VOD
NBCUniversal, the parent of Universal Pictures, has clearly been on a path to compete with Netflix and Amazon in terms of content distribution. Its deal to purchase Fandango and VUDU, plus its release of the Peacock streamer are all proof of that. However, the tipping point of pandemic plus the success of Trolls World Tour that has made over $100 million in rental purchase revenue to date via immediate VOD release ultimately led to the Universal-AMC deal.
Three questions remain: (1) how will other studios, streamers, and theaters react; (2) how will the Academy of Motion Picture Arts and Sciences (Academy/Oscars) react; (3) will revenue figures be the same for VOD vs. traditional theatrical release?
To point one, Netflix has already purchased the Egyptian Theater in Hollywood. Consumers consistently want and demand things more quickly and efficiently, especially content that has the technical ability to be streamed immediately. The solution may be in offering consumer choice. Release on VOD and have in theaters that are open and maybe the theater choice is less expensive to drive attendance (that is what Universal did for their Trolls release). Clearly, studios, streamers, and theaters will need to adapt and change to meet the market where it is at and where it is going.
As to point two, the Academy has already shown a willingness to change the rules for the pandemic. It would be surprising to see the rule changes not stay permanent or at least not bend going forward to adjust for market demand. This decision, however, will ultimately be a major driving factor in whether other studios, streamers, and theaters shorten theatrical windows, particularly the studios and streamers who are fighting for the Oscars.
Finally, to point three, revenue was down in Universal’s recent release of Trolls compared to the previous traditional theatrical release. However, are the numbers down because people are spending less money during the pandemic? Do people need time to adjust to the new shorter theatrical window model? Will the revenue increase once a simultaneous release (VOD and theater) can occur on a wider scale? Will consumers demand more content with content arriving sooner in their homes, which presents more opportunity? The likely answer to each of those questions is likely yes.
Either way, change is afoot in Hollywood.
