COVID Compels Changes to First Run Options

By now, it’s not exactly news that the COVID-19 pandemic has disrupted the world of Hollywood as much as it has the rest of our lives. Production plans halted, entire studios furloughed, and blockbuster films pushed back for months are just a few of the changes that were unthinkable just two months ago.

Within the span of one week, two major players in the entertainment industry took steps that will likely have repercussions long after the plague has ended.

Screenshot of the Academy of Motion Pictures Arts and Sciences’ announcement regarding changing the rules for Oscars eligibility.

The Oscars Allows Consideration of Streaming Movies

Bowing to the likelihood that many theaters will be closed for an extended period of time this year, leaving little time for films to debut on the big screen, and therefore qualify for Oscars nominations under the normal rules, the Academy of Motion Pictures Arts and Sciences announced that movies that can only be streamed as a result of the crisis will be eligible for consideration.

This is a drastic departure from the Academy’s Rule Two, which requires a “film be shown in a commercial motion picture theater in Los Angeles County for a theatrical qualifying run of at least seven consecutive days, during which period screenings must occur at least three times daily.” In previous years, this has lead to HBO, Netflix and other “new media” studios to lease out one of the many theaters in the Hollywood area to run their films for a limited engagement upon the big screen.

While the exemption only lasts as long as the Safer At Home restrictions are still in effect in California, the Academy is expanding the markets where a film could be shown – circumstances permitting – to qualify. New York City, the San Francisco Bay Area, Chicago, Miami, and Atlanta have been designated as other qualifying locations.

Not directly related to the current crisis, the Academy announced that this Oscars, the 93rd Academy Awards, will be the last time members will receive the nominated movies via mail. Instead, Academy members will have to access them via the Academy’s members-only streaming site. This year, Academy members who are still subject to quarantine, or otherwise unable to travel, will be able to watch submitted films through this portal as well. Studios have 60 days from the film’s streaming or video-on-demand (VOD) release date to upload them to the secure Academy Screening Room site.

Billed as a one-time exception, it could be that once the genie is out of the bottle, so to speak, this rule change will be hard to put back in. For their part, studios prefer the control inherent in a secure streaming site as it prevents movies from being pirated from the screener DVDs – and Academy members, like most people, prefer the convenience of VOD. Adding to this is the emergence of Netflix and others as major players in Hollywood who do not typically release movies to the big screen.

This is, in some ways, a repeat of history when HBO and other cable studios came to dominate television’s Emmy Awards after its first entry in 1999. That lead to a 17-year run as the most nominated studio for the awards. A streak that ended in 2018 when Netflix took the crown. In 2019, Netflix initially released Martin Scorsese’s gangster drama The Irishman in five Los Angeles and three in NYC, before expanding to 22 on the second weekend and ultimately 500 nationwide. It paid off with the movie receiving 10 Oscar nominations – including Best Picture. It also was nominated for five awards at the Golden Globes and another 10 for the British Academy Film Awards. It will not be unexpected for the Academy to feel extra pressure to make this one-time exception, the norm, especially with most of the major studios also operating their own streaming services, with Sony being the notable exception on any meaningful level.

Universal Goes Same-Day VOD

On Thursday the 23rd of April, NBCUniversal CEO Jeff Shell announced that the studio plans to release more of its films to VOD on the same day as their theatrical release. This, of course, is a departure from the typical 12-16 weeks between a studio releasing a film to theaters and it being available to watch at home. That period itself has shrunk considerably from the half-year period typical at the beginning of this century. The primary beneficiary of this policy would be NBCUniversal’s own streaming service, Peacock, which is scheduled to launch on July 15th of this year.

But NBC has deals with other carriers, including Netflix and Xfinity that allow them to carry content from NBC and Universal Pictures. Shell cited the performance of the studio’s animated film Trolls World Tour. The cartoon was intended for a theatrical release on April 10th, which of course was largely cancelled by the shutdown of theaters across the country. Instead it was released for digital rental that day. According to Universal, it became the studio’s most successful one-day rental and had brought in $95M within its first 19 days, equalling its production budget. In fact, Trolls World Tour took in more “box office” in three weeks than its predecessor Trolls did in five months in the theaters. In an interview with the Wall Street Journal, Shell was quoted as saying, “The results for ‘Trolls World Tour’ have exceeded our expectations and demonstrated the viability of PVOD. As soon as theaters reopen, we expect to release movies on both formats.”

NBCUniversal’s apparent abandonment of the theatrical release window drew immediate blowback from the National Association of Theater Owners who condemned the studio’s use of “unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases.” They noted that NBCUniversal appeared to be counting changes compelled by the nationwide shutdown as evidence of changing consumer trends.

The response from AMC Theatres was even stronger. In an open letter to Universal Pictures Chairman Donna Langley, AMC Theatres CEO Adam Aron announced that his chain would no longer screen any of Universal’s pictures at its theaters in the United States, Europe or Middle East. He announced that the policy was “effective immediately and will not change once the company’s 1,000 theaters reopen.

This is a spectacular game of chicken has consequences for Universal’s blockbusters which require theatrical release to recoup their production and marketing costs. Key among these would be F9, the ninth installment of the Fast & Furious franchise which was pushed back to a May 2021 release date due to the pandemic. Universal still has high cinematic hopes for the relaunch of its Dark Universe movies, now branded as Universal’s Monsters.

While these new takes on the classics are to now be done by the smaller Blumhouse Studios following the disappointment of Tom Cruise’s The Mummy, they are still intended to be cinematic productions. Universal Pictures’ website lists, perhaps optimistically, eight movies and three “event” films remaining for this year, starting with The King of Staten Island debuting June 12. AMC is the largest theater chain in the US with 8,218 screens, followed by Regal Entertainment and Cinemark at 7,350 and 4,544 respectively.

With an over-flowing cinematic calendar due to pushed-back releases from earlier this year, it would appear that AMC can afford to cut Universal from its screens for some time. The question is not only whether NBCUniversal can make its already threatened numbers with nearly a third of movie screens boycotting its product, but also whether other studios may feel compelled to risk the ire of theater companies and abandon the theatrical window as well.

-30-