Studios bypass cinemas with lucrative lockdown premieres

Updated: Jun 4

An animated musical extravaganza about a group of pop-loving trolls may turn out to be the most important film in recent Hollywood history. Trolls World Tour, which has become a lockdown hit, notching up digital sales of $100m (£80m) in three weeks, has become the focal point of a battle that could forever change moviegoing habits in the Netflix era.


With cinemas closed, Hollywood studios are challenging the sacrosanct tradition that multiplexes air films first for up to three months, before their release on other platforms such as pay-TV, DVD and streaming. Instead, they are pushing new films straight to fans at home.

Universal Pictures has been the most aggressive of the Hollywood studios with its strategy for Trolls World Tour. The film had been due for a global cinema release on 10 April, but instead became the most high-profile movie to be made available solely on digital services such as Amazon’s Prime Video at £15.99 ($19.99).

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Universal gets a greater cut of revenue from digital services than at the box office, which means the film has made the same amount of profit in its first three weeks as the first Trolls film did during its entire five-month run in US cinemas.


Emboldened by its success, last week the company indicated that it would collapse the cinema release window by releasing films digitally at the same time. “As soon as theatres reopen, we expect to release movies on both formats,” said Jeff Shell, the chief executive of parent company NBCUniversal.


Those comments immediately prompted the world’s two biggest cinema operators – AMC, which owns the Odeon chain in the UK, and Cineworld – to issue a global ban on screenings of all films from the maker of the Fast & Furious and Jurassic World franchises when business restarts. The operators accused Universal of “breaking the business model” that has underpinned the Hollywood movie system for generations.

“Universal has cast the first stone,” said Jeff Bock, an analyst at research firm Exhibitor Relations. “This is exactly what the theatrical exhibition world had always feared – proof that bypassing theatres could be a viable model of distribution for studios. Like it or not, the floodgates have opened. This is just the beginning, and the longer it takes for theatres to open on a worldwide scale, we’re going to see the PVOD [premium video on demand] schedule become more and more populated.”


That schedule is now filling up. Universal announced last week that Judd Apatow’s new comedy The King of Staten Island would scrap its planned cinema release on 19 June and premiere on-demand instead. And Warner Bros is doing the same with Scoob!, the first full-length animated Scooby-Doo film, which was meant to hit cinemas on 15 May.

Lockdown hit Trolls World Tour has notched up sales of £80m since its direct-to-digital release for Universal. Photograph: Photo Credit: DreamWorks Animation LLC/AP


However, when it comes to true blockbusters, Hollywood studios, including Universal, are so far choosing to keep them in cinemas and reschedule their releases. The straight-to-digital strategy is only considered to be viable for mid- and lower-budget films forecast to earn at most a few hundred million at the global box office. The first Trolls film made $346m worldwide.


Disney’s Mulan and Black Widow, the James Bond film No Time To Die, Warner Bros’s Wonder Woman 1984 and Universal’s Minions sequel – all potential $1bn-plus hits – are just some of the titles that have been shifted to later this year with a cinema release still firmly in mind.


Global box-office revenues hit an all-time record of $42bn last year, dominated by blockbusters including Avengers: Endgame. Theatrical release represents a huge slice of income that is difficult for studios to ignore. When a film’s big-screen run is finished, there is a second wave of income from digital and on-demand services; this double-window revenue stream would disappear if multiplexes were taken out of the equation.


“Studios are not releasing ‘tier one’ titles on PVOD,” said Richard Broughton, analyst at research firm Ampere. “It’s unlikely that PVOD will be able to replace theatrical revenues for these titles. PVOD releases would also likely cannibalise secondary windows. If you rent a film for £15.99, you’re not then going to rent it again for £5.99 a few months later. But you might do that if you had seen it at the cinema first.”

There are also other issues making a total shift away from cinemas unlikely, for now at least. China, for example, along with many developing countries, has a tiny digital-video rental market, which would severely limit income from direct digital releases, whereas it boasts the world’s second-biggest cinema box office market, at $9bn a year.


And with PVOD releases such as Trolls priced at $19.99, it is unlikely that the strategy will work outside high-income markets such as the US and the UK.


However, coronavirus has sideswiped cinema chains, which means direct-to-digital successes such as Trolls give studios more leverage. “Trolls is operating under optimal conditions – lockdown, kids at home and limited competing media,” says Broughton. “Having said this, the success of Trolls does offer studios leverage with cinema owners for a greater share of box office income for secondary titles. The option of the PVOD window improves their positioning.”

Unless Covid-19 causes longer-term closures or serious attendance issues in cinemas, the chains remain confident they will return to the top of the pecking order for film releases.

“These circumstances will not persist and should not be taken by anyone as a sign of lasting change,” said Phil Clapp, chief executive of the UK Cinema Association, the national trade body for cinema operators.


“We are absolutely confident that when cinemas are able to reopen safely, the public will once again respond to the unsurpassable big-screen experience. After people have been required to spend weeks and sometimes months in lockdown, it seems unlikely, to say the least, that the first response of many will be ‘let’s stay in and watch a film.’”

But if audiences do decide to bypass cinemas and stay in, Hollywood studios will have to follow them.

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