Why streaming won′t save Hollywood | Film | DW | 09.08.2020

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Why streaming won't save Hollywood

Disney's decision to release its $200 million 'Mulan' online might help short-term but digital revenues won't make up for billions lost at the box office.

Actress Liu Yifei among other Chinese warriors in red caps and tan pants

Disney will release "Mulan" online in North America and other regions

This week Disney shocked cinema owners around the world when it announced that it won't release its hotly anticipated, $200 million (€169 million) blockbuster film Mulan in theaters. Instead, the live-action epic will go online.

Theaters around the world were counting on the movie, a live-action remake of Disney 1998 animated hit, to help bring movie fans back to theaters after months of coronavirus-imposed lockdown.

Instead, Disney will sell Mulan directly to fan over its new streaming service, Disney+. From September 4, Disney+ subscribers will be able to rent Mulan for $29.99 (€25.30). As long as they keep paying their Disney+ membership fee —$6.99 a month in the US, €6.99 a month in Europe —customers can watch the movie as many times as they want.

Read more: Animated film in Germany

The Mulan move appeared to help Disney, which has been financially battered by the coronavirus pandemic. Disney's stock jumped more than 5% on the news, despite reporting a $4.7 billion (€3.96 billion) loss from April to June this year. Instead of focusing on losses at the studio's movie and theme park businesses, investors saw a positive story in Disney's digital operations, which are soaring.

In just nine months, Disney+ has racked up 60.5 million subscribers worldwide, according to company reports. To compare, it took Netflix seven years to get that many people to sign up of its service. Disney originally set a target of 60 million to 90 million Disney+ subscribers by 2024. At this rate it will blow right past that.

Disney embraces the future — and a better profit margin

For many, apparently, releasing Mulan online is sign that Disney is abandoning its traditional cinema past and embracing a digital future.

"Out of both success (Disney+) and necessity (COVID-19 disruption), Disney is moving to push its streaming strategy to new levels of investment and growth," writes Morgan Stanley analyst Benjamin Swinburne in a recent report.

Bob Chapek

"We're looking at 'Mulan' as a one-off," says Walt Disney CEO Bob Chapek

On the surface, Disney's Mulan move looks like a win-win for the Mouse House.

The high-profile movie is sure to attract even more subscribers to Disney+. And the move could, theoretically, make Disney even more money than putting the film in theaters.

When a Hollywood studio releases a film in cinemas, the profits from every ticket sold are typically split 50-50, half for the studio, half for the movie theater. But every penny of every digital copy of Mulan sold on Disney+ will go to—you guessed it—Disney.

Many have argued selling films online at a high-price,called Premium Video On Demand, or PVOD, is a better deal for Hollywood studios than putting them in theaters. In April, Universal did a PVOD release for Trolls World Tour, a sequel to its 2016 animated musical Trolls. From the $100 million in digital sales on the film in the US, it's been estimated Universal cleared $77 million in profits, around the same amount it made from the $154 million the first Trolls film took at the US box office.

But Mulan is a lot bigger than Trolls World Tour. Before corona, Disney could reasonably have expected the movie to gross more than $1 billion worldwide. That's what Aladdin, its last life-action adaptation, took at the global box office

To make those profits on Mulan, the studio would need around 30 million people — or half of Disney+ subscribers — to rent Mulan at $29.99 a pop. A tall order, especially in a world hit by a once-in-a-lifetime economic recession.

Actress Liu Yifei in the film Mulan

Disney is still planning to release Mulan in theaters across most of the world, including China

Outside North America, the stream is only a trickle

Disney is also missing out on millions of fans that don't buy movies online. Compared with the theatrical box office, the PVOD market in much of the world is still tiny. In China, the world's second-largest movie market, it's nearly non-existent,according to the Hollywood Reporter. Even in the U.K., PVOD sales last year made up just 5% of the country's $3.2 billion home entertainment market.

Actress Scarlett Johansson in an outdoor action scene with something burning in the background

A normal theatrical release this November is planned for the new Marvel movie "Black Widow" starring Scarlett Johansson

"The digital business has spiked because of the COVID-19 lockdown with everyone at home streaming movies, but that's not been nearly enough to compensate for losses for films they were, or still are, planning to release theatrically," says David Garrett, head of Mister Smith Entertainment, an independent film production and sales company based in London.

Digital piracy: an ongoing threat

And digital releases have a dark side: piracy.

A new study by British analysts at Muso suggests that studios releasing films online faster has led to a spike in piracy as better rip-offs are available sooner.

After the coronavirus cut short the theatrical release of Sony's Bloodshot, a Vin Diesel action movie, it rushed out the film on PVOD — only to see a massive 1,600% increase in piracy streaming in the following seven days. Piracy traffic for Sonic the Hedgehog, a Paramount title, jumped 719%, according to data piracy authority MUSO.

Read more: Countries with the highest usage of illegal film-streaming sites

To compare, Warner Bros.' Joker, which started in US cinemas on October 4 last year and had a full theatrical release window, saw only a 29% increase in pirate site visits after a high-quality copy of the film leaked on November 10.

Walt Disney Logo

60.5 million subscribers have signed up for the Disney+ streaming service since it launched last October

That explains why even Disney is hedging its bets with Mulan's digital premiere. In China and many other places Disney+ is not available, meaning that in most of the world Mulan will get a regular theatrical release.

Warner Bros. is taking a similar approach with Christopher Nolan's sci-fi epic Tenet, which will open in theaters outside the US in late August with a limited US release September 4.

"We're looking at Mulan as a one-off, as opposed to saying there's some new [business] model that we're looking at," Disney's CEO Bob Chapek told investors this week.

For its next big movie, the Marvel film Black Widow, Disney is sticking to the plan of a regular theatrical roll out on November 6. By then, Hollywood hopes the tired cinema business will be up and running again and it won't have to exchange cinema dollars for digital dimes.

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