Is Universal Trolling Theater Owners With 'Trolls'?

With movie theaters closed because of the coronavirus, Universal Pictures became the first studio to debut a major release on video-on-demand platforms. (Universal Pictures)

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The new film, "Trolls World Tour," was engineered for family moviegoing. A sequel to the 2016 animated musical that grossed nearly $350 million worldwide, the Universal Pictures release features the voices of Sam Rockwell, Anna Kendrick and Rachel Bloom, along with songs by Justin Timberlake, SZA and Mary J. Blige.

And, starting today, it's not coming to a theater near you.

In what could be a tectonic shift in how big-budget studio films are released, Universal decided to bypass a theatrical release entirely and bring "Trolls World Tour" directly to home entertainment platforms.


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With tens of thousands of multiplexes around the globe shuttered by the coronavirus pandemic, other studios have postponed the theatrical premieres of their high-profile movies, including "Wonder Woman 1984," "Black Widow," "No Time to Die," "Mulan" and "A Quiet Place Part 2."

A handful of low-budget independent films (such as "Never Rarely Sometimes Always"), once penciled in for an art house run, instead have debuted directly on video-on-demand venues. And some studios have rushed titles that just opened in theaters, such as "Onward," "The Hunt" and "Birds of Prey", to home entertainment sites, rather than wait for the typical 90-day period between a theatrical and a digital release.

But no other studio has decided to skip a theatrical release entirely for a film as prominent as "Trolls World Tour," produced for a reported $100 million. Universal is making the film available today on a variety of platforms for a rental fee of $19.99, including Apple TV, Amazon Prime and YouTube. (The movie also will play several dozen drive-in theaters, none of which are in Los Angeles County, where they have been ordered to close.)

Universal's decision comes at a desperate moment for theater owners.

Even before the pandemic forced the worldwide cinema closure and the elimination of almost every penny of revenue, exhibitors faced collapsing per-capita admissions (down 15% in the last decade) as streaming sites such as Netflix, Hulu and Disney+ gained market share. As theaters have upgraded their facilities with stadium seating, high-tech sound systems and concession upgrades, they have taken on massive amounts of debt, leaving some chains teetering on insolvency.

AMC Entertainment, the nation's largest chain, could soon become the most notable exhibitor to file for bankruptcy protection, according to MKM Partners analyst Eric Handler.

The National Association of Theater Owners, the trade group for exhibitors, blasted Universal's "Trolls World Tour" decision, with NATO head John Fithian threatening, "Exhibitors will not forget this." But theater owners have little leverage; if they want to retaliate against Universal when theaters reopen, would they simply refuse to play the studio's next "Fast and Furious" sequel? If so, they would be boycotting one of the top film franchises of all time.

The theater owners further argue, according to a study they commissioned before the pandemic, that movies with a theatrical release tend to perform better on streaming platforms than films made exclusively for those sites. In other words, digital customers gravitate toward films they recognize from having played at the multiplex.

Still, the economic argument for studios to switch to streaming and video-on-demand is compelling. Unlike theatrical revenues, typically split 50-50 between distributors and exhibitors, the share of income from streaming and videohat returns to a studio is much higher.

In announcing his studio's decision about "Trolls World Tour," NBCUniversal head Jeff Shell said in a statement: "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. NBCUniversal will continue to evaluate the environment as conditions evolve and will determine the best distribution strategy in each market when the current unique situation changes."

In July, Universal parent Comcast will soon launch the company's new streaming site, called Peacock. And former Disney head Bob Iger, who oversaw the recent launch of that studio's streaming site, said in an interview with Barrons that Disney could soon premiere more movies on Disney+ than in theaters.