The news yesterday that Disney’s exhibition terms for Star Wars: The Last Jedi are the most onerous ever demanded by a major studio sounds a lot like the sour grapes we heard two years ago from various theater owners when the Burbank, CA lot was booking Star Wars:The Force Awakens.
Disney is reportedly, per the Wall Street Journal, demanding a 65% cut of The Last Jedi‘s domestic ticket sales along with a four-week hold in each venue’s largest auditorium and a 5% B.O. penalty to any theater owner who breaks any part of the contract including taking the film off-screen. The Force Awakens held the No. 1 box office spot at 4,134 theaters in its first four weekends. Last December’s Rogue One: A Star Wars Story held at 4,157 theaters in its first four weekends and charted No. 1 for three of them.
Truth be told, no exhibition agreement is uniform and varies from chain to chain. While there was news that exhibition stocks declined Wednesday, with the big three AMC, Regal and Cinemark down a combined average of 3.1% from Tuesday due to Disney’s stiff terms, the reality is that the sky isn’t falling nor is the film business coming apart: Just wait until The Last Jedi opens on Dec. 15 and business booms again, potentially taking 2017 to a new all-time domestic B.O. record that rivals last year’s $11.4 billion. Word is that it’s the smaller mom and pops who are squawking over the news of Disney’s terms, not the big chains. Let’s check back and see where exhibition stocks are in another six-and-half weeks. Disney reps were not available to comment on this story.
When reached by Deadline about Disney’s latest terms, many rival distribution and exhibition heads weren’t shocked: Why wouldn’t Disney be charging the most for the one title that everyone wants to see this year? They continually deliver great product to their exhibition partners (Disney has amassed $1.4 billion at this year’s domestic B.O. alone) and they’re the one studio that’s still respectful of the theatrical window as other majors lobby for PVOD.
However, the biggest reason why exhibition doesn’t have to cry about Disney’s The Last Jedi bullet points is because popcorn and soda sales are bound to be through the roof. That alone is worth the cost of having The Last Jedi on the marquee. Rival distributors are projecting the eighth Star Wars movie to be the second-biggest opening of all-time at the domestic box office behind Force Awakens‘ $247.97M. Who doesn’t want to book this movie? AMC, the nation’s largest theater chain, saw its 4Q concession revenue in 2015 when Force Awakens was in play rise from $242.2M to $282.5M in 4Q 2016 when Rogue One: A Star Wars Story was on the screen; a +17% climb. Keep in mind that was during a December holiday period when ticket sales between Force Awakens and Rogue One declined in their respective year-end play from $652M ($936.7M domestic final) to $408.2M ($532.1M domestic). In 2016 alone, with Force Awakens and Rogue One book-ending each side of the year, AMC reaped record concession revenues of $1 billion, +12% over 2015.
Said one East Coast family chain boss to Deadline on the popcorn and soda riches that The Last Jedi could rain during opening weekend for an average suburban theater, “Over the four week run, let’s expect on the low-end The Last Jedi does $500M with a 65% rental and another major studio title is projected to make $200M off a 50% rental. If you grossed $100k at a $10 ticket price during your first weekend, that’s 10K people coming in to see Last Jedi. Add in concessions at $5 a person. You clear $35K from Last Jedi along with concessions of $40K (figuring 80%) for a total of $75K. Now on the $200M title, the weekend gross from the rental is $40k off a $10 a ticket with an estimated 4K people attending. You clear $20K from the film rental, and only $16K from concessions for a total of $36K. Also, if a film does $200M million it is not very likely to be a 50% rental; it’s typically around 55% or 57%. So what movie would you play?”
As far as having Last Jedi in the largest auditorium of multiplex; many don’t see that deal point being so outrageous. If that auditorium is the highest grossing one, why wouldn’t Last Jedi be playing in it? In regards to that 5% penalty that Disney is apparently tacking on, sources tell us that’s a very hard policy for Disney to enforce. Should Last Jedi need to be bumped from the biggest auditorium, independent theaters in the flyover states will have an easier time flying under Disney’s radar, however, it will be harder for big city chains to do so; read: the Arclight Cinerama Dome (Quentin Tarantino griped two years ago that Disney strong armed his 70MM The Hateful Eight out of that venue for Force Awakens). But, again, the outlook is that The Last Jedi will be well worth its weight in popcorn for a four-week run in a chain’s biggest auditorium.
Does Disney’s lofty terms for Last Jedi impact rival studios when it comes to bargaining with exhibitors over their own holiday titles, i.e. Sony’s Jumanji: Welcome to the Jungle, Universal’s Pitch Perfect 3 and 20th Century Fox’s The Greatest Showman, to name a few? Will rival studios be forced to offer lower rental terms just so that they can find a spot in a multiplex? Apparently not. They too will seek the highest terms for their movies from theater chains.
So, who has to worry the most about The Last Jedi in theaters?
Any major studio with an early November holdover or older which at that time will be 20th Century Fox’s Murder on the Orient Express, Paramount’s Daddy’s Home and STXfilms’ A Bad Moms Christmas. Ditto for any specialty titles booked a major chain-plex. In this digital age when showtimes can be added to meet demand, any title that’s not performing to full capacity will get pushed out during the course of an evening by The Last Jedi. Even before the bell rang to let kids out of schools on the West Coast to begin their holiday break two years ago, Disney’s Star Wars: The Force Awakens had already grossed $100M at the domestic box office.