June 8, 2020
With the success of Universal Pictures’ PVOD release of Trolls Word Tour, and the studio’s plan to distribute future theatrical feature films concurrent with digital retail, Wedbush Securities media analyst Michael Pachter contends a compromise between studios and exhibitors resulting in a shorter theatrical window is coming.
With studios reportedly making 80% on a movie’s digital release compared with 50% for theatrical, the incentive to go direct-to-consumer is financially appealing. At the same time, theatrical revenue and home entertainment marketing for major movie franchises such as “Fast & Furious,” “Star Wars,” “Mission: Impossible,” “James Bond” and “Spider-Man,” among others, is immense.
Universal’s next major PVOD release, The King of Staten Island from director Judd Apatow, is slated for June 12. And Disney is expected to release smaller movies on its Disney+ SVOD platform.
“We very much believe in the value of the theatrical experience,” Disney CEO Bob Chapek said on the recent fiscal call. “But we also believe that either because of changing and evolving consumer dynamics or because of certain situations like COVID, we may have to make some changes to that overall strategy.”
Pachter said he views Disney’s tepid approach to transactional VOD as limited in the long-term. He says Disney’s switch will spark further debate and negotiations on the existing theatrical windows and revenue share agreements.
“What we expect is that the exhibitors will make some small concessions on the windows or revenue share for these smaller films that would otherwise go to PVOD, so that all parties can maximize profitability, but the exhibitors cannot bend on simultaneous releases or they will go out of business,” Pachter wrote in a June 8 note. “The studios do not have any incentive to push the exhibitors out of business, and we believe that a mutually beneficial arrangement can be found before the studios begin releasing new content to theaters later this year or in 2021.”