As of right now, Disney (DIS) is still planning to release the live-action remake of Mulan on July 24, one week after Christopher Nolan’s Tenet unofficially reopens cinemas. Yet just because that is the Mouse House’s tentative plan doesn’t mean things will go accordingly. Mother nature laughs at our intentions and the unprecedented coronavirus pandemic has left a return to theatrical cinema in a sea of uncertainty.
While the industry has been preparing for a mid-July reopening, major markets such as New York, Los Angeles, San Francisco and Chicago are far from safe bets. San Francisco, in particular, is now targeting a potential August reopening. Warner Bros. and Disney can provide all the lip service they want about rescuing cinema—there’s absolutely zero chance they open a film without those key cities fully operational. Ticket sales in New York and Los Angeles can account for between 10 percent and 20 percent of a film’s entire domestic gross.
Though it doesn’t make much financial sense for a blockbuster film to be released via PVOD or streaming, Wall Street analyst Michael Nathanson suggests that Disney could reroute the $200 million Mulan to those platforms to avoid any further delays or box office misfires. In addition to the complications facing theaters, Nathanson argues that Disney would have to “un-furlough a lot of their employees” in distribution and marketing. “I don’t think it’s a given that Mulan‘s going to be released as we think.” In early March, there was speculation that the COVID-19 outbreak could force the film out of China, which is planning to reopen in June, entirely.
Nathanson points to the $100 million-budgeted Trolls World Tour impressive performance for Universal on PVOD as proof of concept. However, that release arrived amid varying circumstances. Universal had already spent the bulk of its marketing budget by the time theaters were closed and a decision was made to press forward with the low-risk animated feature. As a more expensive and larger-scale movie that could potentially threaten the $1 billion mark at the worldwide box office, Mulan stands to lose a significant chunk of its potential revenue by opting for a PVOD release before being added to Disney+ shortly after.
A traditional theatrical release carries multiple windows of earnings potential: ticket sales, electronic sell-through (EST), DVD/VOD rental, Pay One, Network and Pay Two. An at-home release eliminates many of those windows. However, it does offer its own benefits. Studios traditionally keep 50 percent of domestic ticket sales and 25 percent overseas, with the rest going to exhibitors. In the case of digital rental or purchase fees, studios claim roughly 80 percent. Disney would have to crunch the numbers and decide if a bigger piece of a smaller pie is worth the hassle.
Nathanson argues that rerouting the film to at-home platforms “could give Disney a bit of a boost and limit churn” on Disney+, which has been the company’s sole bright spot during the pandemic. Streaming gains via Disney+, Hulu and ESPN+ have been the only business endeavors to help Disney stock since the pandemic began.
“If they do kill Mulan, that could help the narrative. In a perverse way, that could be better for Disney stock in a long run than having Mulan go to theaters.” Really, it’s a matter of priority at this point. Does Disney want to save a potential worldwide hit for theatrical consumption or does it want to provide a jolt for its direct-to-consumer business?