AMC bans Universal films from its theaters over 'Trolls World Tour' spat

New York(CNN Business) AMC Theaters says it will no longer screen films made by Universal Pictures — a serious escalation of a dispute over the merits of releasing movies in theaters before allowing the public to watch them online.

AMC CEO Adam Aron announced the ban in a letter to Universal chairman Donna Langley on Tuesday, telling her that the decision was triggered by a quote NBCUniversal CEO Jeff Shell gave to the Wall Street Journal about the blockbuster digital success of "Trolls World Tour."

While the animated children's film was initially scheduled for a theatrical release, the coronavirus pandemic has made that an impossibility for now. So Universal bypassed theaters in favor of launching the movie on-demand.

That move appears to have paid off: The studio has earned nearly $100 million in rental fees since its digital release April 10. Shell told the newspaper that the movie "exceeded our expectations and demonstrated the viability" of on-demand video.

But it was Shell's next quote that really incensed AMC, which is controlled by China's Dalian Wanda Group and owns Odeon and UCI — Europe's biggest cinema operator.

"As soon as theaters reopen," Shell added, "we expect to release movies on both formats."

The rise of streaming and video on-demand has led studios to grapple with theaters over what is known as the "theatrical window," the length of time that a movie plays in theaters before it is offered on other platforms. High-profile figures in Hollywood, including director Steven Spielberg, have spoken out about maintaining the distinction between streaming and theatrical releases, for example.

The pandemic, though, has upended the movie industry, at least temporarily. Major film studios — including Universal — have shifted some movies like The Invisible Man" and "The Hunt" to on-demand platforms, while delaying the theatrical release of potential blockbusters like the upcoming Fast & Furious film "F9" as businesses and governments attempt to stop large crowds from gathering and potentially spreading the disease.

In the letter, which AMC also released publicly, Aron said the movie giant accepted Universal's decision to release "Trolls" digitally as an "exception" in "unprecedented times."

But he said Shell's remarks about releasing movies on "both formats" as theaters reopen represented a "radical change" to the business model that "represents nothing but downside for us and is categorically unacceptable" to AMC.

"Effectively immediately AMC (AMC) will no longer play any Universal movies in any of our theaters in the United States, Europe or the Middle East," he said, adding that the policy is "not some hollow or ill-considered threat."

Aron added that the theater chain isn't trying to punish Universal specifically, but will apply the ban to "any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes."

Universal, meanwhile, disputed Aron's interpretation. The film studio said in response to the AMC letter that it "absolutely" believes in the theatrical experience and "have made no statement to the contrary."

"Our goal in releasing 'Trolls: World Tour'" on demand "was to deliver entertainment to people who are sheltering at home, while movie theatres and other forms of outside entertainment are unavailable," a Universal spokesperson said in a statement. "Based on the enthusiastic response to the film, we believe we made the right move."

The company said that it expects to release films directly to theaters in future, as well as on-demand "when that distribution outlet makes sense." It added that it looks forward to having "additional private conversations with our exhibition partners" and it was disappointed in the attempt "to confuse our position and our actions."