Trolls World Tour is the best proof yet that Hollywood might not be as reliant on theaters as it has been for more than a century. The film made nearly $100 million in the past three weeks through digital sales, according to The Wall Street Journal, reportedly bringing in more revenue for Universal than the original Trolls’ entire domestic theatrical haul. It’s an impressive figure, and it speaks to the continued threat to movie theaters — but it in no way suggests that movie theaters are going away or that studios are severing their ties.
Trolls World Tour’s on-demand success comes at a particularly scary time for movie theaters. Both independent theaters and major chains are staring at dim prospects for the rest of the year. AMC Theaters, the largest cinema chain in the United States, is generating no revenue right now as theaters across the country remain closed. Theaters are also seeing increasing competition from streaming services like Netflix and Disney Plus, which are getting a major influx of subscribers as people stuck at home sign up. Some studios are even offloading titles to Netflix directly as they try to figure out what’s next.
A streaming-first approach doesn’t work for every movie
Studios have wanted a more flexible relationship with theater operators for a while since their normal agreements require most films to have an extensive theatrical screening before heading to home media and streaming. Besides the obvious reasoning for NBCUniversal to pivot Trolls World Tour to a digital release at this moment (the pandemic), digital releases can also be a more lucrative route. Rentals have already “generated more revenue for Universal than the original Trolls did during its five-month domestic theatrical run,” according to the Journal. Trolls World Tour’s nearly $100 million in rentals isn’t close to the original Trolls’ box office revenue ($153.7 million domestically), but studios keep a bigger share of sales from digital releases than they do from ticket sales. (Disclosure: NBCUniversal is an investor in Vox Media, which owns The Verge.)
Digital-first releases can also help studios market their own streaming platforms. Disney turned its upcoming Artemis Fowl movie into a Disney Plus exclusive, and Warner Bros. moved Scoob to a digital release, with plans to bring it to its new streaming service, HBO Max. Both are services that Disney and WarnerMedia see as the crown jewel of their businesses going forward, so growing their subscription base with exclusive offerings like Scoob and Artemis Fowl is a business move the industry will see continue. Theatrical windows would usually prohibit a studio like Disney from releasing a movie on its own streaming platform or through digital rental services for several months following the film’s initial theatrical release.
Theaters are so concerned by these moves that AMC Theaters said it would stop screening films from Universal after the studio boasted of Trolls’ success. “Universal’s unilateral actions and intentions have left us with no choice,” Adam Aron, AMC Theaters CEO, wrote yesterday in a letter to the studio. “Exhibitors will not forget this,” John Fithian, the chief of the National Association of Theaters Owners, told The Hollywood Reporter.
“Exhibitors will not forget this.”
But a streaming-first approach doesn’t work for every movie, and studios don’t want to cut them off completely. By bypassing a theatrical release and going straight to a rental option, studios risk losing out on the combined revenue of having a theatrical release and a secondary digital rental window. Trolls World Tour’s digital release may have produced impressive revenue for Universal, but there’s no guarantee it’ll beat the original film’s total revenue in the long run — rentals now could mean fewer rentals later. The film likely also benefited from the unique circumstances of everyone being stuck at home, schools being closed, and parents needing new ways to keep kids entertained.
That’s why blockbusters expected to make far larger box office figures have been delayed. F9 will now come out in April 2021, nearly a year past its original release date, when Universal hopes it can capitalize on a full theatrical release and cross $1 billion at the global box office. NBCUniversal head Jeff Shell even said that, while Trolls “demonstrated the viability” of digital releases, the studio intends to “release movies on both formats” once theaters reopen.
Blockbusters still stand to bring in far more money at theaters
Studios still want to release their biggest movies into theaters. WarnerMedia CEO and newly announced AT&T CEO John Stankey said last week that the studio “will continue to champion creative work that is worthy of the theatrical experience.” Disney chairman and head of studios Alan Horn recently said he sees a world in which midtier movies go directly to Disney Plus, but blockbusters like Avengers: Endgame, which generated $2.8 billion worldwide in 2019, stay in theaters. Studios will do whatever makes the most sense for their business in a world where theatrical releases and direct to consumer platforms exist side-by-side. Sometimes that means adhering to the traditional theatrical window and release, sometimes it means going straight to audiences at home.
This is also why AMC’s threat to drop Universal films is unlikely to stand. Aron’s decision is extreme, and it seems unlikely that AMC Theaters will stop carrying Universal movies by 2021, when some of the studio’s biggest films, including F9, are set to be released. AMC has said it risks running out of cash due to theater closures and has raised even more debt to make it until theaters start reopening.
Cutting out movies like F9 or the third installment in the Jurassic World franchise, which could easily generate more than $1 billion at the box office, would be a huge loss to theaters. Instead, Aron’s statement should be taken as a reminder that movie theater owners are wary of more studios using their own streaming platforms and VOD services to release movies directly to consumers, seemingly whenever they want.
Trolls World Tour shows where the industry has long been headed. Rental platforms like iTunes created the opportunity for digital-first distribution, and streaming services like Netflix showed that the appetite to watch digital-first shows and movies is nearly endless. Trolls World Tour proved that, for some films, it’s a viable alternative to theaters — in certain cases. But there’s a difference between Trolls World Tour and F9, and there’s a reason one moved to VOD and the other was delayed a full year.