After ‘Trolls’ spat, NBCUniversal chief says digital film releases are inevitable

NBCUniversal Chief Executive Jeff Shell on Thursday reaffirmed his stance that more digital film releases from Universal Pictures are inevitable, doing little to assuage theater owners who have seen their businesses devastated by the coronavirus shutdown.

Shell, in comments earlier in the week, inflamed a simmering controversy with cinema chain owners after Universal released “Trolls World Tour” directly to premium video on demand, generating nearly $100 million in online sales in just three weeks. The studio had planned a wide theatrical release to the sequel to the 2016 DreamWorks Animation movie, but theaters are closed because of the stay-at-home orders to limit the spread of the novel coronavirus.

So Universal quickly switched gears, bypassed the theater owners and released the film directly to consumers.

“There’s no question that theatrical is someday, again, going to be the central element to our business and the film business. It’s how people make their movies and how they expect their movies to be seen,” Shell told analysts on parent company Comcast Corp.’s first-quarter earnings call.

“But the flip side is that the majority of movies, whether we like it or not, are being consumed at home, and it’s not realistic to assume that we are not going to change,” Shell said. “This part of the business is going to change — like all parts of the business are going to change.”

The new chief executive noted that COVID-19 presented an immediate challenge to Universal.

“We are in a current and unprecedented environment,” Shell said. “We had a number of films, including ‘Trolls,’ that were ready to go that we had worked really hard on, and invested a lot of money in. We really had a choice: Do we delay these movies to a time when we think that theaters are going to be open again?”

He noted that Universal delayed its release of the next installment of the “Fast & Furious” franchise and “Minions” to 2021. But for “Trolls,” the company decided to “try something new that preserves the premium nature of movies, and that’s how we came up with the premium video-on-demand offering.”

“The numbers are really interesting, and it provided consumers with a product that they desperately needed at home, particularly if they had a bunch of 7-year-olds or 5-year-olds running around,” Shell said. “ It gave us the ability to make some money on something we were proud of.”

Among major studios, Universal is unique because home entertainment is the heart of its parent company, Comcast. In the first quarter it had 477,000 new broadband internet subscribers, up 27% from a year earlier. In addition, Comcast has surpassed AT&T as the nation’s largest pay-TV operator with more than 20 million customers for its Xfinity pay-TV service.

After similar comments by Shell were reported by the Wall Street Journal, theater owners lashed out. On Tuesday, struggling AMC Theatres, the largest theater chain, said it would boycott Universal Pictures movies at its cinemas.

“AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East,” AMC Chief Executive Adam Aron said in a statement addressed to Universal Pictures Chair Donna Langley. “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.”

The controversy comes four months after Shell replaced Steve Burke as chief executive of the venerable media company.

“The question is when we come out of this, what is going to be the model?” Shell asked. “I expect that consumers are going to return to the theaters, and we will be part of that, and I expect that PVOD [premium video on demand] is going to be a part of that offering in some way. It’s is not going to be a replacement; it is going to be a complementary element, and we are just going to have to see how long that takes, and where that takes us.”

NBCUniversal is reeling from a shutdown at its theme parks throughout the world, the cancellation of sporting events and the halt in film and TV production. NBCUniversal had high hopes for the 2020 Summer Olympics in Tokyo and had sold $1.2 billion in advertising.

NBCUniversal revenue fell 7%, to $7.73 billion, in the January-through-March quarter, with revenue at Universal Pictures dropping 22% and theme parks falling 32%. The company’s adjusted earnings before taxes and other costs fell 25%, to $1.75 billion.