On Tuesday, The Walt Disney Company (DIS) announced during its disappointing Q3 earnings report that it will release the oft-delayed $200 million blockbuster Mulan directly to Disney+ for a $29.99 fee starting September 4. By the time of the film’s release, Disney+ will be available in more than 20 territories across the globe. Mulan will still arrive in theaters in regions that are once again safely operating theaters and in regions that will be safe to reopen by September. As of late July, 18% of global exhibitors had resumed business. Still, this is a massive pivot for the Mouse House that has far reaching implications for the economics of blockbuster delivery, especially as the COVID-19 pandemic rages on.
The standard Disney blockbuster earns roughly 35% of its global gross through domestic ticket sales and roughly 65% thanks to overseas business. Though Mulan is set to arrive in certain regions outside of North America, the reliability of the blockbuster box office in the wake of the coronavirus is a massive uncertainty. Last week, IMAX reps said they expect 90% of its global network of theaters — roughly 1,400 screens across 70 markets — to be open by the end of August.
Disney CEO Bob Chapek said that he views this situation as a “one off” and not as a “new business model,” but that Disney will be paying close attention to the insights gained by Mulan‘s performance.
At $30, Mulan will need roughy 7 million rentals to cover its $200 million production budget, and that’s assuming that the film tanks at the overseas box office, which is unlikely all things considered. It’s worth noting that the biggest pay-per-view event ever was the 2015 Floyd Mayweather vs Manny Pacquiao fight, which generated $410 million on 4.6 million PPV buys at $89.95 per pop. Disney announced Tuesday that Disney+ now boasts 60.5 million subscribers, which means that about 12% of the platform’s customer base will need to purchase the film (again, discounting foreign box office). Disney reps have confirmed that the $30 fee is not a rental, but a purchase. However, it is expected that Mulan will eventually migrate to the regular Disney+ library at some point.
Will content-starved audiences be willing to wait out the PVOD period until they can access the film on Disney+ at no extra charge? And how significantly will illegal piracy, which is guaranteed to crop up the moment the film hits the streamer, impact overseas box office? These are consumer behaviors we can’t reliably project in this unprecedented environment.
Disney’s release strategy for the film—a PVOD option on Disney+, which requires two paywalls of access—is similar to how the company sells UFC PPVs on ESPN+. In that scenario, you need a subscription to the streamer and you need to purchase individual events. For the UFC, only the biggest cards have performed well on ESPN+ PPV, where as other middling events have struggled. One reason why Disney has opted for this strategy is that it provides them with 100% of the revenue generated, as opposed to 80% of a traditional PVOD release through a cable company, iTunes, or Amazon. Though Chapek may have described the pivot as a “one off,” if it proves to be financially viable, could Marvel’s Black Widow be next?
“We’ve put in enough work that it’s not a one off,” a Disney+ source told The Verge‘s Julia Alexander.
Conventional worldwide theatrical rollouts still represent the greatest economic potential for tentpole blockbusters. Look how long it took Disney to concede to the pandemic’s reality and finally move Mulan after multiple release delays. They clearly preferred to push it into theaters. While Disney has debuted exclusive films on Disney+ that were originally meant for theatrical release, Mulan is the first big bucks blockbuster to make the transition, hence the $30 price point. Whether or not this is a singular event or a beacon for cinematic change (following in the footsteps of last week’s historic AMC-Universal deal) will depend entirely on how successful Mulan is.
