Photo: Noam Galai / Contributor

Universal and AMC, the largest theater chain in the U.S., struck an unprecedented multi-year deal on Tuesday to allow Universal films to appear on premium video on-demand services after being made available in theaters for 17 days — a significant departure from the traditional 90-day theatrical window.

Why it matters: The move represents a major step toward shifting movie consumption habits from theaters into homes, even after the coronavirus pandemic subsides. It also signals a new era for the struggling movie theater business, which has faced near-collapse during the outbreak.

Details: Deal terms weren't disclosed, but in a statement, AMC CEO Adam Aron says the agreement includes his company sharing revenue from the movies that air on-demand with Universal.

  • AMC could take a 10% cut of each video sold by the studio to viewers on-demand, sources tell the Hollywood Reporter.
  • Recently, movies that have skipped the theatrical window during the coronavirus have sold on-demand for $19.99 to rent for 48 hours.
  • The agreement preserves the exclusive theatrical window for at least the first three weekends of a film’s release (17 days), which is when the majority of a film's revenue is generated, per AMC.
  • It also includes a traditional distribution agreement, wherein AMC has agreed to distribute Universal films in its theaters for years to come.
  • "[I]n total, Universal and AMC each believe this will expand the market and benefit us all," Aron said.

The big picture: Other studios will eventually want to get the same treatment as Universal, which means this deal is likely to trigger a set of arrangements between other studios and exhibitors. Those agreements, made possible due to the pandemic, will redefine the relationship between the theater industry and Hollywood studios long-term.

Be smart: The announcement comes as even more of a shock given how bitter the feud between AMC and Universal was at the start of the pandemic.

  • Universal was the first studio to skip the theatrical window altogether amid the pandemic, when it put "Trolls World Tour," among other titles, on-demand for 48-hour rental at the same time as the film debuted in theaters this April.
  • The movie's success — netting $100 million in three weeks from North American on-demand sales — inspired other movie studios to follow for other films.
  • The trend has provoked the theater industry, which remains mostly closed. In April, AMC lashed out against Universal over the threat of more movies skipping their theatrical releases during the pandemic.
  • AMC already signaled to investors that it may not survive the pandemic, adding in a recent government filing that "substantial doubt exists about our ability to continue as a going concern for a reasonable period of time."

The bottom line: Theater chains have been adamant that releasing movies on-demand at the same time they debut in theaters cannot become the new normal once the COVID-19 pandemic is over. But their years-long resistance to the idea is facing pressure as theaters remain shuttered due to social distancing guidelines.

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