Disney and theater operators clash over 'Avengers'

Disney and theater operators clash over 'Avengers'

Walt Disney Co.'s "Avengers: Age of Ultron" is a global juggernaut, taking in more than $650 million in ticket sales worldwide since debuting last weekend.

But "Avengers" has touched off a dispute between Disney and U.S. theater owners over new rules for showing the company's movies.

The dispute centers on terms of a licensing agreement amended by Disney in March that changes how movie passes and ticket discounts are handled for its films, including "Avengers."

In a recent letter to Disney, John Fithian, president of the National Assn. of Theatre Owners, said he had received "an avalanche of complaints, concerns and fears" from his members over the licensing agreement.

Among the objections was changing the hours of when theaters could show discounted matinee screenings of Marvel Studios' "Avengers," according to a person with knowledge of the letter's contents.

In the April letter, Fithian also cited concerns about using a national average ticket price published by his trade group as the basis for calculating box-office revenue splits, rather than the standard practice of using local market prices.

Such a practice, Fithian wrote, would discourage theaters from offering discounts and lead to a "cycle of price increases" that may violate federal and state price-fixing rules.

Disney has recently backed away from its stipulations on matinee screenings and is exploring other ways to calculate revenue splits that would not use a national ticket price average, the person with knowledge of the matter said.

A spokesman for Disney said that since sending a letter in March outlining revised terms of the licensing agreement it has only heard from a handful of exhibitors and is willing to discuss the matter with any theater owners.

Underscoring its growing global clout, Disney renegotiated its terms with exhibitors in 2013, allowing it to command a more generous cut of the box-office take on certain tent-pole pictures. The company will receive about 60% of receipts in the U.S. and Canada on the "Avengers" film.

That's well above the roughly 50/50 revenue split typically agreed upon by studios and theater owners, although some other blockbuster Hollywood films have been handled similarly in recent years.

On a Tuesday morning conference call with analysts, Disney Chairman and Chief Executive Robert Iger was asked about the dispute with theater owners.

"We have obviously with our film strategy created and will continue to create huge value for the theater owners here in the United States and around the world," he said. "And clearly with the hand that we have got — Disney and Pixar and Marvel and 'Star Wars' — our discussions in terms of the rates that we get paid or the splits have factored in the films that we release."

Iger said he would not "get specific about how much more we could get or what the nature of the discussions are."

"I want to emphasize, again, the investment this company has made in its motion pictures and the results are evident in terms of the value ... to the theater owners," Iger said.

Disney's clout with exhibitors is only expected to grow with the forthcoming release of "Star Wars: The Force Awakens," the first movie made in that franchise since the company acquired Lucasfilm for $4.05 billion in 2012. "The Force Awakens," directed by J.J. Abrams, comes out Dec. 18. The picture has generated intense interest from fans; the film's second teaser trailer racked up more than 88 million views in just the first 24 hours after it debuted online in April.

Analyst Robin Diedrich of Edward Jones Research said that the success of the new "Avengers" film and other movies from producer Marvel give Disney "a little more leverage than other brands, frankly, in going to talk to theater owners."

"And, certainly, with what we are seeing with the trailers on 'Star Wars' and we know that is a well-established brand — they have to be thinking about that as well," Diedrich said.

Disney reported Tuesday that its domestic theme parks and its consumer products business drove the company to a 10% increase in net income for its fiscal second quarter.

The Wall Street Journal first reported on Disney's dispute with theater owners.

Shares of Disney were up a little more than 1% to $112.15 in midday trading on Tuesday after closing at $111.03 on Monday.

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Copyright © 2016, Los Angeles Times

Updates

12:18 p.m.: This article was updated to include comments from Disney and additional background.

6:22 p.m.: This article was updated to reflect the correct number of views for the "Star Wars: The Force Awakens" trailer.

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