Universal and AMC are looking like saints in the exhibition business right now after taking a kicking in the teeth by rival circuits for their controversial deal last week to crunch the theatrical window to 17 days with an option for PVOD thereafter.
Disney’s announcement Tuesday after the market closed that it is bringing Mulan to its 60.5 million Disney+ subscribers for a rental of $29.99 (and in theaters in those places of the world that don’t have the streaming service) over Labor Day weekend is indeed seismic, unprecedented, and stoking fears in exhibitors about their future livelihoods.
Of those exhibitors we spoke with this afternoon, many were blindsided by Disney’s decision. Some rival distributors already saw the writing on the wall, some believing that Disney’s decision to take Hamilton straight to Disney+ over Independence Day weekend was a punch in the face to exhibition; that movie was originally intended to be a theatrical event.
“They don’t need exhibition partners anymore! Why would you share your profitability with an outside company?!” cried one owner of a dine-in cinemas chain. “Think about it: if 10% of their subscribers buy into Mulan, that’s $181 million Disney makes. If 50% of their subscribers rent Mulan, that’s $906 million! That’s money that Disney gets to keep all on their own!”
Mulan, just as COVID-19 was setting in back in early March, came on domestic tracking with a forecasted weekend of $80M+.
“This is a death blow to theaters — did we just lose Disney as a provider? Think about this, every exhibitor has to readjust and start over with everything in their rental deals. If all of the studios are going PVOD, we have to negotiate our terms by occupancy rates; R-rated movies will no longer play at 10 a.m., they’ll play at 7 p.m. and 10 p.m. We’ve just become a destination restaurant that has an upper level of entertainment. If you’re a mall 20-plex theater — you’re toast,” continued the exhibition boss.
When reached about the Disney move today, NATO provided no comment.
Essentially, no Mulan means no moola for domestic theaters. While some assume Disney gets the opportunity to cut its marketing costs on a theatrical/Disney+ release of the Niki Caro-directed movie based on the 1998 animated feature, the fact is, like Universal/DreamWorks Animation’s Trolls World Tour, Mulan has already been bolstered by a tentpole marketing campaign with a Super Bowl spot, a Hollywood premiere, and the first teaser dropping in early July 2019 during the Women’s World Cup, the latter stunt yielding 175.1M online global views (52M from China).
Said MKM Partners’ Eric Handler today about the shocking news: “It’s definitely the sign of the times. Disney has been the biggest supporter of the theatrical window over the last several years, and they know how to maximize all windows. We’ll have to see what happens. The more successful it is, the more they have to think about the streaming service as their own PVOD platform. It’s a big test, and some ways it’s a big risk because this has never been done before. It’s a bit of a shock especially since Tenet was dated. They don’t have to wait for the results of Tenet going forward to go ahead with their plan.”
Despite the current ire of mid-level exhibitors, there are some cooler heads prevailing out there about Disney’s Mulan pivot. There are some who believe CEO Bob Chapek when he said during the company’s earnings call where he made the announcement that the Mulan experiment is “a one-off as opposed trying to say that there’s a new business windowing model.” We’re in the middle of a pandemic, Disney released some pretty bad numbers today and Disney+ is the only thing that’s working for them. What’s appeasing Wall Street is when entertainment congloms adapt and make lemonade out of lemons in these currents times, i.e., creating revenue events out of finished movies instead of rolling the dice on a big event movie theatrically, which is risky right now. Also, some who’ve already seen Mulan say it’s OK, not great, which could factor against it at the box office in a marketplace that’s not completely restored.
Just like with Universal and AMC’s news last week to shorten windows — it remains to be seen whether other exhibitors go along with it — we don’t know the financial impact of these decisions until movie theaters open up. Universal swears that it won’t shorten the window on a tentpole, and that the plan is strictly meant for product that doesn’t perform at an enormous global level, or smaller fare. All of this noise is over what many are theorizing right now, but not what’s actually being practiced.
Says one film finance sage who funds feature productions: “Disney has no revenue coming in now, they’re losing money on theme parks, they can’t get TV into production. If 50% of subscribers rent it — well, that’s a lofty projection. It can make between $300M-$400M, but I don’t think it switches anything in the long term in shaking up moviegoing. I don’t think they can do this on a regular basis. There’s still a lot of money to be made in the theatrical windows model. These market conditions are unusual. People would rather have a theatrical experience with their family rather than being cooped up.”
Case in point: look at the box office numbers coming out of South Korea and China. People are starved for entertainment, and we’re social creatures. Just look at the number of people who have flooded the beaches and bars as local areas have reopened. Movie theaters have outlived their death knell for generations.
In addition, despite the immediate Chicken Little-like response from exhibition, let’s not forget the industry records Disney continually sets at the theatrical box office, with $13.2 billion worldwide alone last year. They, along with Marvel, do build their movies for the big screen, and know the power of its resonance down into the theme parks.
The move to put Mulan on Disney+ is arguably a temporary pandemic case of Disney looking out for Disney.
Says indie Kentucky theater owner Rick Roman, “Disney should give my theatre and all the theatres opened Mulan. I’ll play it even if it’s on PVOD. Watching Mulan on the big screen is a way different experience than watching it on TV. I bet I will sell the about same number of tickets even though it’s available in homes. People want the experience of seeing movies on the big screen.”
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