Topsy-turvy Trolls

Colorful and crammed with catchy pop tunes, Trolls World Tour sends a message about getting along with others—ironic, given the film industry infighting it has sparked. The problem stems from the movie’s financial success, which is challenging old ideas about how Hollywood operates.

Universal Pictures planned to release the sequel to 2016’s modestly successful Trolls on April 10. But the shutdown of movie theaters because of the coronavirus pandemic forced the studio to change its plans. Many movie studios postponed releasing their most promising features to salvage potential profits, but Universal’s marketing campaign for Trolls World Tour was at its peak, and toy tie-ins had already hit store shelves. The studio decided to release the movie, along with some of its smaller offerings, as a digital rental for $19.99 on streaming platforms such as Amazon Prime Video and AppleTV.

The experiment paid off: Universal announced that in the first three weeks of release, the movie made almost $100 million as a premium video on demand (PVOD), netting more money than the film’s predecessor made in five months. Last week, Jeff Shell, the CEO of NBCUniversal, which oversees Universal Pictures as a part of Comcast, told The Wall Street Journal, “The results for Trolls World Tour have exceeded our expectations and demonstrated the viability of PVOD. As soon as theaters reopen, we expect to release movies on both formats.”

Cue the firestorm.

The same day Shell’s words appeared on the Journal’s website, AMC Theatres, North America’s largest theater chain, announced a boycott of all Universal movies. AMC Entertainment Holdings CEO Adam Aron said Shell’s statements indicated Universal’s willingness to violate “the business model that currently exists” between the two companies.

Movie theaters typically refuse to run a film unless they have exclusive screening rights for 75 days before the movie becomes available for home viewing. The arrangement ensures profitability for theater owners, but it’s also been good for movie studios. Past audiences perceived movies that skipped a theatrical release as having inferior quality. But as premium streaming services like Netflix and Amazon spend millions of dollars on original content and A-list stars, that perception is starting to change.

Studio executives like Shell have looked for ways to shake up the traditional distribution model. Box office profits have risen in recent years, but higher ticket prices for premium formats like Imax and 3D have driven those results. The actual number of tickets sold has declined. Moreover, studios typically receive 50 percent of ticket sales from theaters but 80 percent of the rental fee from streaming partners.

Other theater chains, including Regal Cinemas, followed AMC’s lead and condemned Universal’s direction. “While Universal may be pleased with the PVOD results of Trolls World Tour, this outcome should not be interpreted as a sign of a ‘new normal’ for Hollywood,” the National Association of Theatre Owners announced in a press release.

Trolls World Tour may have benefited from a lack of competition, since most studios postponed new offerings, and from families easing their price sensitivity due to shelter-in-place rules. Does one black swan event mean $20 rental fees will succeed in the future?

Shell eventually backed down from his comments, claiming PVOD could complement, rather than replace, the theater’s role, but AMC hasn’t backed down from its boycott.

The two sides have some time to work out their differences since AMC’s theaters aren’t expected to open until July, but it might take more than a feel-good pop song and a message of getting along with others to resolve this feud, which has exposed the long-term tension between theaters and studios.