Five months ago, I and many other people declared that despite Universal’s Trolls World Tour skipping theaters to premiere digitally, the idea of Disney exploring the same route with big blockbusters like Mulan was preposterous.
I was wrong.
Mulan, regarded as one of Disney’s biggest films of the year, will premiere exclusively on Disney Plus in the United States and other countries where Disney Plus is available. The film will cost an additional $30, which people will own as long as they are Disney Plus subscribers. Disney has essentially created a video-on-demand portal within its own streaming service, which will give Disney 100 percent of sales revenue, 100 percent control over how people watch the movie, and 100 percent of user data.
“We’re very pleased to be able to bring Mulan to our consumer base that has been waiting for it for a long, long time as we’ve had to unfortunately move our theatrical date several times,” Disney CEO Bob Chapek said on an earnings call.
Moving Mulan, a film that, in pre-COVID times, may have generated north of $1 billion at the box office, to Disney Plus is a radical shift for the entertainment industry. While Chapek told analysts on the call that Disney is “looking at Mulan as one-off,” a Disney source told The Verge that “we put in enough work behind the scenes that this is definitely not a one off.” Even with the new distribution path, Mulan isn’t likely to make what it would have in pre-coronavirus times, but it’s a new option that Disney executives are excited about. As Chapek spoke about the new launch model for Mulan, he stressed that Disney’s team is interested to “see what happens” both in terms of subscriber growth and how many people purchase the film.
Reading between the lines, Chapek doesn’t want to piss off theater owners associations, but he’s not trying to ignore the possibilities that Disney Plus can do more. It would be obtuse to ignore an obvious, new revenue stream. That’s true while companies face ongoing economic turmoil in the midst of the pandemic, and it’ll still be true after the beginning phase of the pandemic subsides.
Back in March, when I wrote that Disney was probably never going to debut a tentpole film on Disney Plus, it felt like the pandemic wouldn’t last this long. The world five months ago is not the same as the world today, and the entertainment industry five months ago is radically different from what it is today.
Although the pandemic is to blame for the sudden shift in strategy for three of the world’s biggest film companies — Universal, Warner Bros., and Disney — the outcome seemed inevitable. Home entertainment revenue last year saw massive gains, largely driven by different types of streaming options. The pandemic has accelerated trends that likely would have played out in years to come; what may have happened in a decade occurred in mere months. Disney’s announcement felt like the rope finally snapping, and it has led to a series of existential questions. Will movie theaters survive? Will studios prioritize digital releases as conglomerates try to build their streaming bases?
Theaters aren’t dead. The studios still want to play their biggest films in theaters, like Christopher Nolan’s repeatedly delayed Tenet. Going forward, however, they’ll also want to be in homes as fast as possible, pushing people to their own streaming platforms or digital rental spaces where studios can take a much bigger cut of the revenue. It’s basic capitalism: studios want whatever revenue avenues there are.
Take other moves that studios have made. Universal entered a new agreement with AMC Theaters to shorten the theatrical window (the length of time that a movie has to play in theaters). Now, Universal can move its films to rental platforms like iTunes or Amazon after 17 days instead of several weeks. (In the future, it’s possible films could land directly on Comcast’s streaming service, Peacock, should it add a similar rental system like Disney Plus.) Other studios like Warner Bros. are moving some of its titles to digital-only exclusives, while Paramount and Sony are selling off a portion of their movies to Netflix and Amazon.
I previously argued that Disney wouldn’t move Mulan or Black Widow to Disney Plus because theaters were too important for the studio. That’s still true. Disney made $13.2 billion last year, accounting for nearly 30 percent of the $42.5 billion global box office revenue the film industry saw. In a February interview, co-chairman Alan Horn told The Hollywood Reporter that theatrical releases still make a lot of money for Disney, and because of how expensive making tentpole films is, theaters are necessary. It’s also why, in markets where Disney Plus isn’t available, Disney will release Mulan in theaters.
While it’s not the death of theaters, it is proof of the incoming rapid collapse of the theatrical window. Half of the industry’s total $42.5 billion box office revenue came from three studios: Disney, Warner Bros., and Universal. This gives the studios more power to make certain demands. Those demands are likely to be shorter windows — those studios are going to want the freedom to take movies out of theaters much earlier than ever before and move them to those direct-to-consumer platforms where they can earn between 80 and 100 percent of the revenue.
The big question now is how much power Disney and other studios hold as a combined force. Disney’s move with Mulan insinuates that blockbusters could premiere on Disney Plus and in theaters on the same day. Theaters aren’t going to want that. In the television space, disagreements between content providers and distributors often lead to “carriage disputes” — where a cable provider like Verizon loses access to a network because of contract negotiations. In carriage disputes, content providers (broadcasters) tend to have the upper hand, and that’s also arguably the case here; sure, studios want to be in theaters, but theaters need those studios films.
Big blockbuster movies, once the beginning phase of the pandemic subsides, will still play in theaters. A movie like Avengers: Endgame also isn’t going to leave theaters after two weeks or even two months. Studios will keep their biggest blockbusters in theaters as long as they’re bringing people in.
The big changes will come to the mid-budget films that aren’t going to generate $750 million or even $1 billion in theaters. Those movies might play for two weeks before jumping over to streaming platforms, giving the studios the ability to have their films in theaters (important for first- and second-week box office revenue on top of awards eligibility), and then push people to streaming services they’re trying to grow.
It’s a business model that’s never really been tried before in earnest. Even though in many ways, this evokes a Hollywood model from decades ago, where studios owned movie theaters and had more control over distribution of its films. That changed in 1948. Studios have been banned from owning theaters for more than 70 years, and in that time, the industry has changed completely. No one really knows how this will go. Mulan, as the largest film to be released in a straight-to-streaming debut, will be a major signal for the rest of the industry.
There are a few different paths available to Disney now: release a movie straight on Disney Plus, release a movie in theaters and bring it to Disney Plus after a short period, release a movie simultaneously in theaters and on Disney Plus, or release a movie exclusively in theaters.
Five months ago, I would have thought that for titles like Mulan and Black Widow, the latter option was the only possibility: a big Disney movie could only be a theatrical event. Now, Chapek has made it clear that Disney Plus isn’t just another product for the company; Disney is Disney Plus.