Perhaps taking a cue from rival movie theater chain AMC Entertainment (NYSE:AMC), Cinemark Holdings (NYSE:CNK) has worked out a new movie exhibition agreement with Universal Studios, owned by Comcast (NASDAQ:CMCSA). Simply put, Cinemark will enjoy exclusive rights to show a film for the first three weekends following its premiere, and if it does well, it will get another two weekends of exclusivity before Universal can monetize that movie as a streaming pay-per-view.
It seems like business as usual within the video entertainment world, which is changing quickly in the wake of the COVID-19 pandemic. Universal altogether canceled the theatrical release of Trolls World Tour earlier this year, as movie houses were closed to curb the spread of the virus. Instead, it released the film directly to consumers as a premium video-on-demand title, breaking records in the process.
Walt Disney's Mulan was also kept out of theatrical loops and instead offered to existing Disney+ subscribers for an additional fee. Meanwhile, AT&T's Warner Brothers took a chance on releasing Tenet in theaters after they had mostly opened up by early September, and while it wasn't a flop, it clearly struggled. It's noteworthy that Warner recently decided to release Wonder Woman 1984 in theaters the same day it intends to offer it -- for free on Christmas day -- to HBO Max subscribers as a streaming title.
To the extent movie theaters have a fighting chance of surviving COVID-19, Cinemark's deal with Universal bolsters those odds. It got the much better end of the bargain, suggesting studios know they still need brick-and-mortar movie houses.
It's all over in an instant
There's no need to mince words here -- the bulk of a film's box office ticket sales are made by the end of the third weekend it's in theaters. A really big movie can make money that matters through the fifth weekend. Cinemark just secured a minimum of three weekends for Universal's new films, with an option to add two more for movies worth the movie chain's time and trouble.
The graphic below visually tells the tale, plotting the day-by-day U.S. ticket sales for Once Upon a Time...in Hollywood. The film's box office exceeded $140 million in the U.S. alone during the 210 days it was available. But it had done over $100 million of it by the end of the 17th day. By the end of its 31st day, it had produced over $123 million in box office revenue.
Glass wasn't as big of a hit, but like Once Upon a Time...in Hollywood, it did most of what it was going to do shortly after its release. The sci-fi thriller produced nearly $89 million of the $111 million it would go on to drive in U.S. ticket sales by the end of its third weekend.
Finally, just for good measure, last summer's Five Feet Apart was never going to be a blockbuster. It was expected to add some nickels and dimes to Lions Gate Entertainment's 2019 top line, and it did. The movie drove nearly $46 million in domestic ticket sales over the course of 77 days in theaters. Nearly $36 million of it came in the first 17 days.
Granted, studios and theaters split these ticket sales up. Universal could collect more revenue per sale by selling its digital movies directly to consumers. Nevertheless, these three graphics illustrate the potential power theater chains still wielded before the pandemic took hold. Moviemakers still want to work with theaters -- and not against them -- for a reason.
Keep tabs on the next few theatrical flicks
The agreement between Universal and Cinemark is (for the time being anyway) unique to Universal and Cinemark. The studio struck a similar deal with AMC Theaters in July, but that agreement only gives AMC three weeks of exclusivity. The movie house chain doesn't have the option of picking up another two weeks of exclusivity, regardless of a film's performance. Other studios have yet to make similar agreements with exhibition venues.
They may well be in the offing, though, given that a couple of industry leaders have taken such measures.
Whatever's in store, this is a much-needed glimmer of hope for theaters. While they can do little about restrictions linked to the persistent impact of the coronavirus, if they're all given this sort of exclusivity by more studios, they'll still be winning the lion's share of the film industry's business.
The key question investors must consider is, will consumers wait a full five weeks to see a hit movie online, or will they decide they can't wait and visit a theater instead? We're about to find out. Keep close tabs on box office numbers for the films that actually make it to theaters in the near future. They'll be the big hint as to the answer.