NBCU CEO on AMC Window Deal: "We Can Build a New, More Attractive Business Model"

Jeff Shell - Getty - H 2017
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Premium VOD can reach the "growing segment" of people not going to cinemas, Jeff Shell says, adding 'Trolls World Tour' and 'King of Staten Island' exceeded expectations and had "a significant positive impact."

NBCUniversal CEO Jeff Shell on Thursday addressed Universal Pictures' historic agreement with cinema giant AMC Theatres, which will will allow the studio's movies to be made available on premium video-on-demand after just 17 days of play in cinemas, including three weekends.

The deal, which initially covers AMC's U.S. locations, shatters the traditional theatrical window of nearly three months before studios can make movies available in the home. The partners didn't detail financial terms when announced the deal on Tuesday, but AMC, the world's largest theater chain, is expected to share in the revenue from PVOD. 

On NBCU owner Comcast's second-quarter earnings conference call on Thursday, Shell said his film colleagues have been "pioneers in pursuing new distribution models." The premium VOD (PVOD) releases of Trolls World Tour and King of Staten Island "exceeded our expectations" and had "a significant positive impact" in the second quarter.

He said it also led to the "groundbreaking" AMC partnership, reiterating PVOD was a "complement rather than a replacement for a robust theatrical release." He said he wanted to commend AMC and CEO Adam Aron for their vision that "together we can build a new, more attractive business model for us both." He also signaled Universal was expecting to reach similar deals with other exhibitors. 

Shell said that in recent years it has become "increasingly more difficult" to get the same returns on movies over the first two windows. The new AMC deal would help the studio and cinemas on that front. He predicted that the deal would not lead to Universal increasing its film slate, but allow it to keep production "steady." And he suggested the deal could allow movies to return to cinemas "more quickly" amid the coronavirus pandemic.

Shell also said that there was a large and "growing segment of the population who don’t go to movie theaters" that PVOD releases can look to reach while maximizing the big marketing spending on theatrical releases. And he emphasized that the 17 day window in the AMC deal is a minimum period, meaning films doing well in theaters can continue to play there longer.

He also noted that in film, lower marketing and other spending means the coronavirus pandemic's near-term financial impact is positive, with the main negative financial hit expected to be most pronounced in 2021. He also said that given productions are the "lifeblood" of the studio, there is a creative hit from production shutdowns.

He noted how his team restarted production on Jurassic World: Dominium in the U.K. and added that the studio is continuing "full steam ahead" on its animation slate.

On the first-quarter call, he had addressed the industry debate about Universal's decision to break the theatrical window for Trolls World Tour amid the novel coronavirus pandemic, highlighting that a majority of movies are currently being consumed at home, and it was "not realistic" to expect that to change right now.

Back then, he said he expects theatrical was "some day again going to be the central element to our business," but argued that the idea behind the PVOD offer was to "preserve the premium nature of movies." And he added: "I would expect that consumers are going to return to the theaters," and PVOD "will be part" of the film business as a "complementary" offer, "not a replacement."

Similarly, Donna Langley, chair of Universal Filmed Entertainment Group, said Tuesday in unveiling the AMC agreement: "The theatrical experience continues to be the cornerstone of our business. The partnership we’ve forged with AMC is driven by our collective desire to ensure a thriving future for the film distribution ecosystem and to meet consumer demand with flexibility and optionality."