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AMC bans Universal films amid 'Trolls World Tour' digital sales success

'Trolls World Tour' earned nearly $100M in PVOD rentals during its first three weeks, and its creating a battle between theater chains and big-budget studios. Yahoo Finance's Alexandra Canal breaks it down.

Video Transcript

ZACK GUZMAN: Welcome back to live market coverage here on Yahoo Finance. I'm Zack Guzman. And right now, there is a battle brewing in Hollywood. If you had told me in January that the debut of "Trolls" at the theater-- or a digital release of "Trolls" would have been the thing that made Universal consider the fact that they might be able to do away with debuts in theater,s I would have said, you're crazy. But "Trolls World Tour" has been performing so well in a digital release that Universal is floating the idea of maybe not having to work with theaters anymore.

And that is a showdown that is brewing right now between AMC and Universal. And for more on that, I want to get to the details with Alexandra Canal in this week's "Fame and Fortune." and, Ali, I guess, you know, we're in uncertain times here. Studios need to think about releases. But interesting to see AMC firing back.

ALEXANDRA CANAL: Oh, yeah. This is a big battle right now. "Trolls World 2" is really the first Guinea pig in this experiment of whether or not movies need the theater in order to be successful. And at $20 a pop for just a rental-- a premium VOD offering-- it's certainly delivered, bringing in roughly $100 million for Universal in just three weeks. If we compare that to the original "Trolls" movie, which debuted in theaters back in 2016, they brought in roughly $116 million in its first three weeks-- so not too far behind there.

NBC Universal CEO praising the movie's performance, saying this shows how viable premium VOD offerings are. And in the future, they're going to explore both on-demand releases as well as in a theater release says. Now, this prompted quite the intense response from AMC. They wrote a scathing statement saying, in part, quote, "it is disappointing to us, but Jeff's comments as to Universal's unilateral actions and intentions have left us with no choice. Therefore, effective immediately, AMC will no longer play any Universal movies in any of our theaters in the United States, Europe, or the Middle East. This policy is not some hollow or ill-considered threat."

Now, it did not take long for Universal to respond. They wrote back in part, quote, "we absolutely believe in the theatrical experience and have made no statement to the contrary. As we stated earlier, going forward, we expect to release future films directly to theaters as well as on PVOD when that distribution outlet makes sense." Now, PVOD offerings can be incredibly lucrative for the studios.

For example, when a movie is released in a theater, those profits are often split 50/50 with the theater chain. However, on-demand, studios receive about 80% of those profits. So it's no denying that "Trolls World Tour" was a big win for Universal. I don't think it's going to prevent them from releasing movies in theaters, especially for big blockbusters like "Fast and Furious 9." We'll see if AMC walks back some of those comments.

But you'll have to remember that AMC is under a lot of financial stress and turmoil right now. They do not want to see the status quo change, because that could essentially mean the end of their business.

ZACK GUZMAN: Yeah, I mean, once they reopen. But we are seeing shares of AMC offer another 10% as this drama unfolds here. Again, "Trolls World Tour" killing it on the digital offering, so it doesn't really necessarily help their negotiating position. But when we do look broader than just Universal and AMC, of course, there will be another side of this-- whether it is just putting things out on streaming or if it's back in theaters. But interesting to think about production and the new rules on actual sets that studios will have to institute here to protect the actors and production people on set as well-- potentially, Ali, no more smooches on screen.

ALEXANDRA CANAL: Potentially no more smooches, yes. According to the "Hollywood Reporter," Hollywood is experimenting with what a post COVID-19 industry could look like. That includes quarantining sets, antibody testing, offering airplane-like meal kits instead of craft services, and, yes, potentially doing a split screen for more intimate scenes. I did speak to our good friend, friend of the show Jeff Wiener, who is an executive producer of the "Bourne Supremacy" series.

And he told me that Hollywood is going to do whatever it takes to make this work, but that these will be temporary changes until a vaccine is found. However, I've spoken with some analysts who think this will fundamentally change the industry. Just take a look at the Oscars. A couple of days ago, the Academy came out and said they will be loosening the eligibility requirements for nominations.

That includes accepting streaming movies. Before, a movie had to premiere or debut in the theater in order to be considered. Now, this is just a temporary rule change for this upcoming Oscars season, but it does beg the question of whether or not this should be permanent. Because if this pandemic has showed us one thing, it's that streamers have the most access to consumers. And at the end of the day, that's really what entertainment and media is all about-- making sure your content gets to the consumer, that they view it, love it, and then we share it with our friends and family.

ZACK GUZMAN: Yeah. And I mean, if it's cheaper to consume as well-- think about seeing "Trolls World Tour"-- if it's only $20 for the whole family to watch, a lot cheaper than taking the whole family to the theater as well. But, Alexandra Canal, in our "Fame and Fortune" segment, thanks so much for breaking that down.