The feud is over. Movie theater chain AMC Entertainment Holdings (NYSE:AMC) and the Universal Studios arm of media giant Comcast (NASDAQ:CMCSA) have agreed on film distribution terms that both sides can live with. For the next few years, AMC movie theaters will have 17 days of rights to new Universal titles before they can be released via streaming video services, a drastically shorter period than the industry's long-standing 90-day minimum window.
It seems like a big shift, and it is. It's also reasonable to expect other studios and theaters to reach similar agreements going forward. At first blush, this seems like a compromise that helps and hurts both sides equally.
Closer scrutiny of how the film business works, however, could lead one to the conclusion that AMC got by far the better end of this deal.
The best two and a half weeks
The bulk of most new films' box office receipts are earned in the first two weeks they're in theaters -- by a country mile. One only has to examine a handful of pre-pandemic releases' day-by-day ticket sales to see just how true this is.
Let's start with the most recent installment of Disney's Star Wars franchise, The Rise of Skywalker. It opened on Friday, Dec. 20, and had $89.6 million in domestic ticket sales that day. By the end of Sunday that first weekend, it had grossed $177.4 million. The next weekend was big too and pushed the U.S. gross to $377.5 million. By the end of its third weekend (which included New Year's Day), The Rise of Skywalker had made $451.6 million in domestic ticket sales. But by the time the film left U.S. theaters in March, it had only coaxed another $63.6 million out of moviegoers to bring the four-month tally to $515.2 million.
In other words, the first three weeks of a film's release -- and really, the first two weeks -- make up the lion's share of its marketability.
And this doesn't just apply to blockbusters, which naturally enjoy bursts of excitement immediately following their debuts that peter out pretty quickly. Take the highly acclaimed A Beautiful Day in the Neighborhood as an example. The story of Fred Rogers and his iconic children's TV show Mister Rogers Neighborhood opened on Friday, Nov. 22, and sold $13.2 million worth of tickets in the United States its first weekend. After the following weekend, that figure had swollen to $34.3 million. By the time the movie left theaters in March, it had racked up a total of $61.7 million in domestic ticket sales. In other words, it made more than 55% of its box office money in its first 10 days in theaters, and that was a film did unusually well later in its release window.
Underscoring the idea that A Beautiful Day on the Neighborhood was something of an outlier in terms of how long it was able to draw people to theaters, take a look at how Rocketman's U.S. ticket sales flowed following its May 31 release. The Elton John biopic sold $66.7 million worth of tickets by the end of its 17th day in theaters. But over the next 81 days it remained in U.S. theaters, it sold less than $30 million worth of tickets domestically.
Theaters still have some leverage
Don't misread the situation. AMC is definitely compromising. Although the bulk of a film's revenue-generating firepower is generally expended by the end of its third weekend, less-new movies still pull their share of stragglers to theaters. If nothing else, those films provide another opportunity to sell patrons overpriced concessions. It's better to use that screen space to drive modest revenue than no revenue at all.
So in that regard, the theater chain is clearly giving up potential revenue. Exhibitors may have to think creatively about trying other media options to monetize their space once films stop showing just two and a half weeks after they debut. This may ultimately lead to a decrease in the theater industry's physical footprint.
However, given the distribution options Universal and its studio peers now have that didn't exist back in the 1940s (when the groundwork for what became the 90-day window of theatrical exclusivity was laid), AMC Theaters did well in its recent negotiations. The direct-to-consumer path was showing promise after Universal's decision to offer Trolls World Tour online produced more revenue than the theatrically released first film in the franchise did. AT&T-owned Warner Bros.'s animated Scoob! film did quite well when it was launched as a pay-per-view feature in May.
As it turns out though, studios need theaters a little more than they may have thought they did. And there will always be some titles that only deliver their best experience when seen on the big screen.