While it’s still highly unlikely that major Hollywood studios will re-route high-profile blockbusters such as F9 or Wonder Woman 1984 to video-on-demand platforms, the success of DreamWorks Animation and Universal’s Trolls World Tour is opening the door for greater experimentation. The sequel reportedly cost $90 million to produce, but because of the kinder revenue cuts of VOD, Universal may actually wind up earning more of a net profit than they did on its predecessor, which grossed nearly $350 million worldwide.
How is that possible when Trolls World Tour has not even earned one-third of the original’s gross?
Studios retain roughly 80 percent of the digital rental or purchase fee as compared to 50 percent of domestic ticket sales, according to The Wall Street Journal. Overseas, the split between studios and exhibitors is believed to be around 25 percent for the former. That is how Universal has earned upwards of $77 million in revenue from Trolls World Tour, which the outlet reports has sold $95 million in rental fees since its release earlier this month. Simply put, studios get a bigger piece of the VOD pie, which helps to offset lower overall sales. That’s a potential game-changer in an era of narrowing theatrical viability.
Again, it doesn’t make much economic sense for blockbusters that are poised to threaten the $1 billion mark to suddenly start dropping on VOD, especially if their studios haven’t already spent the bulk of their marketing budgets as was the case for Trolls World Tour. There’s simply too much money to be made otherwise for a major Marvel release of a Star Wars blockbuster.
But this win for Universal and the more generous revenue-sharing set-up does open the door for more mid-budget films to successfully launch at-home, especially during the COVID-19 pandemic. It’s partly why Warner Bros. has rerouted the animated Scoob! for a VOD release in May and why mid-budget comedies such as Judd Apatow’s The King of Staten Island and Seth Rogen’s An American Pickle (originally set for theatrical release via Sony) are set to debut on VOD and HBO Max, respectively. Artemis Fowl has been removed from the release schedule entirely and is now set for an exclusive debut on Disney+. These are safer options that presumably cover the studio’s downside.
Major exhibitors still largely require an exclusive theatrical window of roughly 75 days before films can be made available on secondary markets such as digital download. That carries with it a costly marketing expense for studios with no guarantee that audiences will show up. For non-franchise fare that doesn’t guarantee a built-in audiences, studios can save hundreds of millions of dollars in marketing and theatrical costs for risky films by opting for at-home release.
The success of Trolls World Tour does not make this a certainty. It’s just one film that is off to a solid start and hardly an indicator of future change. But Hollywood is a copycat ecosystem, and other studios will begin to survey the upside of a similar strategy.