Mulan is coming to Disney+.
There are four important pieces of context. The first is yesterday’s announcement that Disney reported a $3.5B hit to operating income from its theme parks. This was despite the obvious (and perhaps even reckless) push to reopen those theme parks in the midst of a pandemic. The announcement of Mulan’s streaming release has two advantages. It shifts the media conversation, and it reassures shareholders that the company is doing something to guarantee income in the immediate future.
The second is that streaming services are booming during the pandemic. Disney+ already had a streaming blockbuster hit with the release of Hamilton bringing the theater to home audiences. Apple TV had a similar hit with Greyhound, and Hulu enjoyed success with Palm Springs. As such, it makes sense that Disney+ is an important revenue stream for the company, so it’s no surprise that the studio considers the MCU streaming shows like WandaVision and Loki to be “such a priority.”
The third is that foreign markets are reopening. The success of Peninsula at the Asian box office demonstrated international cinemas can support new releases. Streaming successes like Hamilton are great for studios trying to build a subscription base, but they cannot compete with an actual theatrical run. (Hamilton “only” cost Disney $75M, a bargain.) The international box office is more important than ever. Mulan was built for the Chinese box office, which is just coming back online.
The fourth is that both studios and cinemas seem to have accepted that the American theatrical market is in a different place than it was five months ago. As Universal prepared to release Trolls World Tour online in April, the chief of the National Association of Theatre Owners vowed that “exhibitors will not forget this.” AMC vowed not to show any future Universal movies. Four months after those initial remarks, AMC and Universal signed a deal allowing a VOD release within three weeks of theatrical release.
Of course, it’s tempting to overstate just how big a deal this is. Disney’s Chief Executive Officer Bob Chapek described the decision to make Mulan available on Disney+ for an additional fee of about $30 as a “one-off” event. Certainly, there are factors that make a streaming release of Mulan more palatable to Disney than an equivalent release of Black Widow. Most notably, Mulan is intended to be a large-enough blockbuster in China to offset skipping a domestic release.
China is not always receptive to American blockbusters, and Disney is understandably cautious about that. While the Chinese market was essential to Avengers: Endgame becoming the highest-grossing film of all time, the Chinese box office’s lack of interest in The Rise of Skywalker was a contributing factor in that movie’s (relatively) underwhelming box office performance. It is not something that merits a roll of the dice on the release of Black Widow, especially in these precarious times.
When Disney makes a play for the Chinese market, it doesn’t take chances. The studio added an entire subplot to Iron Man 3 involving the actors Wang Xueqi and Fan Bingbing. (Chinese audiences were reportedly unimpressed with such pandering.) More recently, the decision to build a blockbuster around the character Shang-Chi, co-starring Hong Kong cinema legend Tony Leung, seems like a play to the Chinese market.
As international markets open, studios will face tough choices. At present, Tenet is scheduled to open around the world in late August and arrive in American cinemas in select locations for Labor Day. However, this is based on the assumption that American cinemas will be ready to open on Labor Day. At the moment, the nearest movie that has any chance of holding to a traditional synchronized international rollout is Patty Jenkins’ Wonder Woman 1984 in October.
Assuming (and it might be a generous assumption) that American cinemas can reopen in October, that leaves studios with about five weeks between Tenet and Wonder Woman to decide what movies will receive early international releases – and whether those international releases will be paired with streaming releases within the United States. It will be interesting to see what types of movies merit this release strategy.
In the early days of the pandemic, when the studios began sending high-profile films directly to streaming, it quickly became clear that a certain kind of film was favored. Films like Trolls World Tour, Scoob!, and Artemis Fowl were perfect candidates. They were family films, making them an easy sale to parents trapped in the house with their kids, eager for distraction. They were unlikely to garner strong positive reviews. They were also unlikely to set the theatrical box office aflame.
With that in mind, perhaps there’s an equivalent logic to be applied to this case. Much has been made of the fact that Mulan will go direct to Disney+ for American audiences, but it is more important that it will be a theatrical release for other markets. A big-budget film likely to see any form of release – whether theatrical or streaming, domestic or international – between now and the opening of American cinemas will have to be a film that can thrive in the international marketplace.
Tenet is a prime example. Christopher Nolan’s high-concept science fiction films like Inception and Interstellar have traditionally performed well in the Chinese market, and the recent re-release of Interstellar in China had the biggest opening of any film since the cinemas officially reopened. This demonstrates why an international release of Tenet is viable. Disney is banking on the same being true of Mulan, which was always aimed at Chinese audiences.
American families will be able to stream a blockbuster like Mulan from the comfort of their home for about $30 and the price of a Disney+ subscription. This is a big deal, and it represents a major shift in the market. Despite what Bob Chapek says, things are only “one-off” events until they are successful enough to warrant a repeat performance. However, it seems unlikely that American audiences will be the deciding factor.
It’s worth doing the calculations on the back of a napkin: It has been suggested that a film needs to make “two and a half times its budget to break even.” The reported budget on Mulan is somewhere between $200M and $290M. It’s possible to argue that the pandemic cut down on costs, but it happened quite late in the rollout – after the gala premiere. However, as Disney won’t have to split profits with cinemas, even on favorable terms, let’s propose a box office target of $500M. That’s about what the Beauty and the Beast and The Lion King remakes made domestically. Assuming a charge of $30 per household, the studio would need about 16.5 million households to pay for Mulan to turn a profit. That would require just over a quarter of its existing 60 million subscribers to pay for Mulan.
Ultimately though, the real story here is the reality that major studios like Disney and Warner Bros. have had to look beyond the American market. Even if this is just a temporary state of affairs until the pandemic is under control, it represents a seismic shift. Mulan will undoubtedly lead to a surge in subscriptions for Disney+ and earn an impressive amount of money for a direct-to-streaming release in the United States, but it will be the foreign box office results that carry the movie over the line to profitability.
In the short term at least, Hollywood’s future lies beyond American cinemas.