How Much Is Cinemark Giving Up by Allowing Universal Films to Stream Sooner?

Another huge crack in movie theaters’ longtime defense of the three-month theatrical window came Monday when Universal Pictures and Cinemark agreed to shorten the time to as little as 17 days, similar to a deal the studio made with AMC Theatres back in July. But Cinemark was able to secure a new clause that ensures they won’t lose millions in box office revenue from major blockbusters hitting home markets so soon after opening in theaters. As with the AMC deal, the studio, along with indie unit Focus Features, will be able to place films on premium video on-demand after three weekends of exclusive theatrical release. In exchange, the theater chain will receive an undisclosed portion of PVOD sales from that early home release period. Sources with knowledge of the deal have told TheWrap that Cinemark will receive similar PVOD profit-sharing. But here’s the big change: If a Universal film earns an opening weekend of at least $50 million, Cinemark will be guaranteed at least five weekends of theatrical exclusivity before the studio can exercise the PVOD option. AMC will also receive this guarantee through a favored nations clause, insiders said. That’s a huge concession gained for the two chains because it means they are guaranteed to hold on to a month-long theatrical window for the biggest blockbusters. For a long time, theaters fought against shortening the 90-day window because tentpoles often performed well at the box office for six weeks or longer. But as box office performance for most films has become more frontloaded and the opening weekend has become more important, a greater percentage of the average blockbuster’s domestic grosses have come from the first five weeks that have been secured through Cinemark’s new clause. “We’ll still have to see how this deal actually plays out in practice, but the Cinemark deal does at least change the parameters of potential future talks between studios and theaters about changes to the window,” Boxoffice analyst Shawn Robbins told TheWrap. “There probably weren’t a lot of theater owners aside from AMC that would agree to shorten the theatrical window to as much as 17 days, but if Universal is willing to settle on 31 days, could we see future talks follow that example or maybe even grow to 45 days? Regardless, it shows a great willingness by both sides to compromise.” As an example of how two additional weeks can make a difference, let’s look at some recent installments of Universal’s two biggest franchises: “Fast & Furious” and “Jurassic World.” In April 2015, “Furious 7” grossed $353 million in North America, a domestic high for the “F&F” series. Of that amount, 93.7% of those tickets were sold in the first five weekends in theaters. Similarly, the 2018 film “Jurassic World: Fallen Kingdom” grossed $384 million after five weekends in theaters — 92% of the film’s $417 million domestic total. Granted, not every hit film would be guaranteed a month of exclusivity through this clause. Jordan Peele’s breakout hit “Get Out,” also a Universal release, opened to $33.3 million — well below the $50 million requirement — but legged out to a domestic total of $176 million. But Universal has stressed that it will not exercise the PVOD option on all of its films, and a  studio would have more incentive to keep a slow-burning hit like “Get Out” in theaters to maximize profitability. While there’s been no word on other studios attempting to negotiate similar deals with theaters on their films, the pandemic-fueled shutdown of theaters have forced exhibitors to reconsider the theatrical window and embrace a new normal where streaming and on-demand are becoming a more popular option for consumers. Theaters also benefited from Universal’s decision to keep two starry holiday season films on the 2020 calendar: the animated sequel “The Croods: A New Age” (due out next week) and Tom Hanks’ period drama “News of the World” (slated for a Christmas Day opening). It’s unclear how many theaters will still be open by the time these films arrive — governors in several states are imposing increasingly strict regulations and closure orders as COVID-19 infections continue to spike. But theaters able to stay open will have a couple major studio releases for the first time since Warner Bros.’ “Tenet” debuted in September — and Universal will be able to release both on PVOD just a few weeks later to take advantage of home audiences looking for new films to watch at Christmastime. Regardless of whether theaters will be able to bounce back from the pandemic shutdowns (and how quickly), these deals could radically change Hollywood. Streaming services like Disney+, WarnerMedia’s HBO Max and NBCUniversal’s Peacock could put major blockbusters on their platforms earlier than ever before without seriously cannibalizing the bottom lines of major movie theater chains. However, there’s one element of the theater industry that could still be threatened by this paradigm shift: indie cinemas. With thousands of multiplex screens between them and studios still needing theaters to make a profit on blockbusters, AMC and Cinemark have the leverage to insure that a shortened theatrical window doesn’t harm their interests. But regional chains and mom-and-pop theaters, which run on much tighter profit margins, might get squeezed out of this deal, particularly when it comes to PVOD profit-sharing. As the pandemic puts greater financial strain on theaters with each passing week, the gap between the haves and have-nots among exhibitors may continue to widen. But Robbins said the industry is a long way from reaching that difficult point. “There’s still four other major studios and plenty of other theater owners that have yet to really show where they stand on changing the theatrical window, and with the pandemic still going, we’re still at least six months away from really knowing what impact this deal will have on the box office,” he said. “We may have to wait until ‘F9’ or a similar Universal blockbuster comes out after the pandemic before we can really see how it could change things.”