Fresh off raising $500 million in new debt to keep some cash flowing at least into the fall, AMC Entertainment has gone to war with Universal Studios and any other movie company that might be contemplating shortening the exclusive theatrical window in the wake of the Covid-19 shutdown.
In a sharply worded letter addressed to Universal chairman Donna Langley Wednesday, AMC CEO Adam Aron said the theater chain will no longer show Universal films on any of its screens in the U.S., Europe or the Middle East.
The gauntlet was thrown in response to comments NBCUniversal CEO Jeff Shell gave to the Wall Street Journal this week noting that the studio’s direct-to-VOD release of Trolls: World Tour had “exceeded our expectations and demonstrated the viability of PVOD." Once theaters reopen, Shell added, “we expect to release movies on both formats."
Universal announced this week that Trolls had grossed $100 million since being made available across a range of premium VOD platforms — a figure that no doubt sent a chill down the spines of theater owners everywhere.
“This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable to AMC Entertainment,” Aron wrote. “Accordingly, we want to be absolutely clear, so that there is no ambiguity of any kind. AMC believes that with this proposed action to go to the home and theatres simultaneously, Universal is breaking the business model and dealings between our two companies. It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us.”
“Therefore,” Aron added, “effectively immediately AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East. This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat.”
AMC was joined on Wednesday by Regal Entertainment owner Cineworld, which issued a statement reaffirming its policy of “not showing movies that fail to respect the windows.”
It’s a fight that’s been coming for some time. But with theaters shut up tight due to stay-at-home orders, even as the studios are eagerly pursuing their own direct-to-consumer strategies, a flare up now was probably inevitable.
In AMC’s case it was also probably unavoidable. The company told investors earlier this month that it had enough cash available to stay afloat until a presumed partial reopening of theaters in mid-July. Nearly all of that $299.8 million in available cash, however, is in the form of existing credit facilities — part of the $10.5 billion in debt already on its balance sheet — and will need to be paid back.
It just added another $500 million in debt, at a rompin’, stompin’ interest rate of 10.5%, and depending on when theaters actually reopen and how willing consumers are to go to them, could very well need to raise more. Any indications that the major studios are backing away from exclusive theatrical releases for their biggest films could foreclose any hope of raising additional capital for AMC.
On the other hand, AMC has much less chance of being able to meet its debt obligations if it really makes good on its vow to shut its doors to Jurassic World: Dominion and the rest of Universal’s upcoming slate, to say nothing of those of any other studio that follows Universal’s lead.
In other words, it’s a fight AMC probably can’t win, but one it can’t afford to lose, either. Its best — perhaps only — hope is to try to bluff Universal into backing down.
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