(Bloomberg) — It seemed just like any big movie event when Walt Disney Co. closed off Hollywood Boulevard in Los Angeles on March 1 so stars such as Sandra Oh and singer Billie Eilish could walk the red carpet for the premiere of “Turning Red.”
But the new animated feature from Disney’s Pixar unit isn’t heading to theaters next. It’s going straight to the company’s $8-a-month Disney+ streaming service on Friday, bypassing cinemas for the business that’s become the No. 1 priority for the company’s future.
Two years into the pandemic Hollywood is still trying to figure out the best way to distribute its signature product. Sluggish theatergoing, coupled with the dramatic growth of streaming, is forcing companies like Disney to weigh the risk of a poor cinema run against the potential for subscriber growth when big movies appear exclusively online.
“While theaters have generally reopened, we are still experiencing a prolonged recovery in theatrical exhibition, particularly for certain genres of films, including nonbranded general entertainment and family-focused animation,” Chief Financial Officer Christine McCarthy told investors last month.
Some studios, such as AT&T Inc.’s Warner Bros. have recommitted to theaters, releasing pictures like last week’s “The Batman” only in cinemas for an exclusive 45 days or so.
Sony Group, which made the pandemic era’s biggest blockbuster with “Spider-Man: No Way Home,” took a truly old-school approach.
What’s Streaming?
The company didn’t identify when “Spider-Man” would be available for home video until two months after its December release in theaters. It will be available for online purchase or rental starting March 22 and on DVD in April, but Sony still hasn’t said when it will come to streaming.
Disney’s decision with “Turning Red” was born from experimentation. The company released its last big animated film, “Encanto,” over Thanksgiving weekend to disappointing ticket sales.
The film ended up taking in $249 million in worldwide box-office receipts, which the studios share roughly 50-50 with cinemas. Since Disney likely spent $300 million to make, market and distribute the film, the company lost money based on the theatrical revenue alone, according to Doug Creutz, an analyst with Cowen.
Disney reported a $98 million loss in the unit that includes its film business last quarter.
“Encanto” went on to be a huge hit online, however. More than a month after its release on Disney+, it was still the most-watched movie on streaming services, according to Nielsen. The soundtrack has also been No. 1 on the Billboard charts.
While Disney hasn’t said specifically how many subscribers “Encanto” brought in, the number was likely substantial, according to Geetha Ranganathan, an analyst with Bloomberg Intelligence.
Thin Slate
“Turning Red,” meanwhile, is coming out at time when Disney+ has a fairly light lineup of new programing. The film, about a 13-year-old girl in Toronto who turns into a giant panda when she gets excited, has gotten a 94% approval score on Rotten Tomatoes.
An online release means Disney will enjoy cost savings in marketing versus a theatrical debut, according to Wade Holden, a senior research analyst with S&P Global Market Intelligence.
“If they advertise it more like a home-video release, then total ad costs could be much smaller than what is spent on a worldwide theatrical release and later video release combined,” he said.
The streaming option isn’t a crowd pleaser with the creative set. “It kind of sucks,” director Domee Shi told TechRadar, adding that she and others made the movie “to be seen on the big screen.”
As the streaming option continues to be deployed, traditional box-office receipts could become permanently reduced, notes Cowen’s Creutz.
“They are training their audiences really effectively not to go to the theater,” he said.
Disney has said it still believes in cinemas, though it hasn’t promised them an exclusive run for its movies, as some studios have.
“We’d love for theatrical to come back for family movies,” Disney Chief Executive Officer Bob Chapek said in an interview on Bloomberg TV last month. “We hope it does, but if it doesn’t we know that we’re very secure in being able to use our own platform Disney+ to help do that.”
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