AMC Theaters faced its “most challenging quarter in the company’s 100-year history,” but CEO Adam Aron is trying to look forward, using the company’s second quarter earnings call today to address how AMC is going to compete in a streaming-focused world.
AMC announced last week that it struck a groundbreaking deal with Universal Pictures that would let the studio place films on digital rental services like iTunes or Amazon just 17 days after they hit theaters. Aron confirmed on the call that if Universal decides to take advantage of the shorter window, those movies will continue to play in theaters. There was confusion last week as to whether AMC would pull its films completely after 17 days or just offer people both options. Prior to the deal, studios were forced to either keep their films in theaters for months at a time, or forego a theatrical release entirely. As part of the deal, AMC will receive some payment for movies that are rented at home.
“Some of our competitors are anxious about this change,” Aron said on the call, as reported by Deadline. “Change is difficult for some to cope with.”
Although Aron is embracing the rapid shift to streaming now, he was singing a different tune a few months ago. After Universal Pictures decided to pull its animated film Trolls World Tour from theaters because of the pandemic in March — which would kick off a chain of events that saw studios like Warner Bros. and Disney do the same — Aron originally said AMC would ban Universal movies in its theaters.
“Some of our competitors are anxious about this change”
The threat drew eye rolls as people quickly pointed out that AMC wasn’t going to sit out on two of Universal’s biggest upcoming films, including the ninth Fast and Furious movie — F9 — and Jurassic World: Dominion. Fate of the Furious, the eighth installment in the Fast and Furious franchise, grossed more than $1.2 billion worldwide, with both the first two Jurassic World movies also grossing more than $1 billion worldwide. AMC, whose earnings this quarter were down 98 percent year over year, couldn’t afford to refuse movies from any one studio. That’s especially true when it’s Universal.
What became clear is that Aron and AMC Theaters couldn’t afford to ignore how big a business premium streaming has become; the pandemic accelerated a reality that was going to arrive either way. Studios want their films in theaters, but also want to be able to sell titles to audiences at home. The new rules are trying to keep one from cannibalizing the other, like how trailers for an upcoming movie can’t promote that it’ll be available to stream at home. That’s because Universal can’t market a movie hitting digital retailers until 10 days after the movie’s initial release, according to the new rules.
To be clear: AMC is learning to accept streaming as long as it can also profit from the situation. We don’t know how the revenue breakdown for AMC looks, although Aron said “the company would be compensated for every rental,” according to Variety. How the exact deal is structured remains unclear, Variety added. This is different from a situation where AMC is left out completely, like a studio bypassing a theatrical release entirely to stream exclusively on a platform like HBO Max or Disney Plus, for example.
“I’m expecting that this is going to become an industry standard,” Aron said, as reported by Variety. “I expect that some of our competitors will do this, if not all.”
To be clear: AMC is learning to accept streaming as long as it can also profit from the situation
Universal isn’t the only studio AMC’s eyeing, Aron also confirmed. The CEO spoke about Disney’s recent decision to bring Mulan, one of the company’s most anticipated tentpole films, to its Disney Plus streaming service where it could, but still release it in theaters where Disney Plus doesn’t operate. Instead of calling out Disney, Aron noted that “just like AMC is under duress, Disney’s under pressure too,” adding that “at some point they’ve got to monetize their movie product.” Still, he added that he hopes Disney will agree to similar terms as those in the company’s deal with Universal. (Disney CEO Bob Chapek called Mulan’s move to Disney Plus — where it will be available for an extra $30 — a one-time deal.)
Considering that AMC Theaters lost more than half a billion dollars this quarter, Aron is looking to the future positively. The CEO has acknowledged that the theatrical window (a period of exclusivity) is gone. Aron seems to think the way forward for AMC, and the industry, is to embrace that streaming isn’t going away, but it is a business they can get in on. Plus, people are always going to want to go see certain movies in a theater, he argued. That includes movies like Warner Bros. Tenet, which will play exclusively in theaters instead of being released digitally — a decision that Aron commended.
“There are certain advantages to watching a film on a 40-foot screen to watching it on a 40-inch screen,” Aron said. “If the pandemic has taught us anything, it’s that people will do anything to get out of their house or their apartment. If you told me right now I could go spend three hours at a hardware store, I would tell you that’s an exciting afternoon.”