Continuing saga PVOD (Premium Video on Demand)
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Posted On: 08/12/2020 8:53:50 AM
Continuing saga PVOD (Premium Video on Demand)
https://www.fool.com/investing/2020/08/11/5-r...ersal.aspx
5 Reasons AMC Made a Deal With Universal
AMC did a 180 on early home video releases when it signed a deal with Universal last month.
Adam Levy
Adam Levy
(TMFnCaffeine)
Aug 11, 2020 at 9:00AM
Author Bio
Last month, AMC Entertainment (NYSE:AMC) inked a new deal with Comcast's (NASDAQ:CMCS.A) Universal Studios, marking a drastic change of course for the theater owner. The new distribution agreement allows Universal to take its films to premium video on demand (PVOD) home distribution channels just 17 days after their theatrical debut.
AMC wouldn't budge on the three-month exclusive window for years, and now it's offering terms that give it just three weekends. But in light of the COVID-19 pandemic and other industry trends, AMC was the first theater chain to work with studios to offer a better distribution agreement for today's environment.
During AMC's second-quarter earnings call, CEO Adam Aron discussed why the company made the deal with Universal and its hopes to ink similar deals with other studios.
A crowded movie theater.
Image source: Getty Images
1. Studios are getting bolder with direct-to-consumer strategies
More and more major film productions are making direct-to-consumer releases. Aron points out that Netflix is making theater-worthy productions, and they rarely see the silver screen. Meanwhile, Disney (NYSE
IS) released Hamilton to Disney+ subscribers early, and it's offering subscribers a chance to watch Mulan next month through a PVOD model. It's increasingly dedicated to the direct-to-consumer model.
Other studios are also finding ways to get their films in front of home audiences and skipping the theater. And while much of the shift is related to COVID-19, there's a strong potential for studios to run more experiments with premium home video debuts even when the public health crisis is under control.
2. The economics make sense
Under current PVOD releases, AMC doesn't receive any economic benefits. Under the agreement with Universal, AMC gets a cut of every PVOD sale regardless of where it's sold.
AMC's modeling very high cannibalization rates from PVOD releases, Aron said. "In some circumstances, we would need for the incrementality to be small for us to be ahead of the game," he said, noting each release will be different.
Smaller films see most of their box office proceeds in the first couple weeks. The impact of PVOD on those releases will be small.
Big tentpole films made for theaters historically have seen longer runs. That's good for both AMC and studios. But if studios decide to move those films to PVOD earlier, it could have a negative impact on AMC.
Aron notes the number of releases grossing over $100 million in the U.S. and Canada last year totaled just 30, and only 15 grossed over $150 million. What's more, studios will likely postpone PVOD for those films, as they have more to gain from theatrical distribution. Those factors ought to mitigate the impact of PVOD distribution on box office results.
https://www.fool.com/investing/2020/08/11/5-r...ersal.aspx
5 Reasons AMC Made a Deal With Universal
AMC did a 180 on early home video releases when it signed a deal with Universal last month.
Adam Levy
Adam Levy
(TMFnCaffeine)
Aug 11, 2020 at 9:00AM
Author Bio
Last month, AMC Entertainment (NYSE:AMC) inked a new deal with Comcast's (NASDAQ:CMCS.A) Universal Studios, marking a drastic change of course for the theater owner. The new distribution agreement allows Universal to take its films to premium video on demand (PVOD) home distribution channels just 17 days after their theatrical debut.
AMC wouldn't budge on the three-month exclusive window for years, and now it's offering terms that give it just three weekends. But in light of the COVID-19 pandemic and other industry trends, AMC was the first theater chain to work with studios to offer a better distribution agreement for today's environment.
During AMC's second-quarter earnings call, CEO Adam Aron discussed why the company made the deal with Universal and its hopes to ink similar deals with other studios.
A crowded movie theater.
Image source: Getty Images
1. Studios are getting bolder with direct-to-consumer strategies
More and more major film productions are making direct-to-consumer releases. Aron points out that Netflix is making theater-worthy productions, and they rarely see the silver screen. Meanwhile, Disney (NYSE
IS) released Hamilton to Disney+ subscribers early, and it's offering subscribers a chance to watch Mulan next month through a PVOD model. It's increasingly dedicated to the direct-to-consumer model. Other studios are also finding ways to get their films in front of home audiences and skipping the theater. And while much of the shift is related to COVID-19, there's a strong potential for studios to run more experiments with premium home video debuts even when the public health crisis is under control.
2. The economics make sense
Under current PVOD releases, AMC doesn't receive any economic benefits. Under the agreement with Universal, AMC gets a cut of every PVOD sale regardless of where it's sold.
AMC's modeling very high cannibalization rates from PVOD releases, Aron said. "In some circumstances, we would need for the incrementality to be small for us to be ahead of the game," he said, noting each release will be different.
Smaller films see most of their box office proceeds in the first couple weeks. The impact of PVOD on those releases will be small.
Big tentpole films made for theaters historically have seen longer runs. That's good for both AMC and studios. But if studios decide to move those films to PVOD earlier, it could have a negative impact on AMC.
Aron notes the number of releases grossing over $100 million in the U.S. and Canada last year totaled just 30, and only 15 grossed over $150 million. What's more, studios will likely postpone PVOD for those films, as they have more to gain from theatrical distribution. Those factors ought to mitigate the impact of PVOD distribution on box office results.
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