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"Mulan" Looks Like a Big Win for Disney+

If you were wondering if Disney's (NYSE: DIS) decision to take Mulan straight to at-home audiences would pay off, the answer looks like a resounding yes. While Disney has not released specific data about the performance of the live-action remake of the animated hit on Disney+, a number of third-party metrics indicate that the move was an overwhelming success.

Several delays after releasing the film in theaters, Disney decided to make it available directly to Disney+ subscribers, for an additional fee of $29.99, starting on Sept. 4.

Downloads for Disney+ spiked 68% on Labor Day weekend compared to the prior weekend, according to Sensor Tower, nearly as good as the 74% jump the app got when Hamilton was released over the July 4 weekend. Even better, consumer spending in the app jumped 193%, showing consumers were eager to fork over $30 for some new family entertainment.

Additionally, nearly 29% of U.S. households that subscribe to Disney+ purchased Mulan through Sept. 12, according to 7Park Data. Disney has about 60 million subscribers on Disney+, though it hasn't broken out the percentage of those coming from the U.S. Still, if about half of the subscribers are in the U.S., and 29% of those paid for Mulan, which had an estimated production budget of $200 million, that would be equal to roughly 9 million accounts, or $270 million in revenue in just nine days. Since Disney owns Disney+, it keeps all of that revenue -- as opposed to splitting it 50/50 with a theater operator, as is the usual protocol with box office receipts. That would represent a huge windfall for Disney, and make Mulan profitable on the basis of Disney+ U.S. sales alone. Disney CFO Christine McCarthy also said the company was "very pleased" with the result so far, though she didn't report any numbers.

The decision to bypass U.S. theaters and go straight-to-consumers also looks validated by the relatively weak performance of Tenet in U.S. theaters. Tenet, the Christopher Nolan-directed spy thriller from Warner Bros., was the other big tentpole production that theaters like AMC Entertainment were staking their reopenings on, but has brought in less than $30 million in the box office since its Sept. 3 debut.

Disney's "Mulan". Image source: Disney.

A changing of the guard

Tenet's poor performance and Mulan's seeming success are causing Hollywood to rethink its upcoming releases, as movies like "Wonder Woman 1984" and "Candyman" have been delayed in the last two weeks and more postponements are expected. Pressure had already been building on theater operators before their August reopening -- Comcast's Universal Studios had negotiated with AMC to reduce the traditional window, or the period of time when a movie is exclusively in theaters, from 75 days to just 17.

For Disney, Mulan's success, which also launched on Disney+ in Canada, Australia, New Zealand and several markets in Western Europe, also seems to justify a number of risks the company took, and will add to pressure on theaters, shifting the power balance more toward studios, which will only benefit Disney in the future.

What's next for Disney

Disney CEO Bob Chapek called the Mulan release a one-off for the company, but also said it was a valuable experiment: "We find it very interesting to be able to take a new offering, our premier access offering, to consumers at that $29.99 price and learn from it and see what happens not only in terms of the uptake of the number of subscribers that we get on the platform but the actual number of transactions on the Disney+ platform that we get on that PVOD (premium video on demand) offering." Chapek also explained later on the earnings call that Mulan was an incentive to sign up for the service, saying, "All I'll say about our research is that it shows that such an offering under a premier access offering not only gets us revenue from the original transaction from the PVOD but also acts as a fairly large stimulus to sign up for Disney+."

Based on the data showing that Disney+ app downloads rose 68% in the premier weekend, it appears that Mulan did indeed spark a wave of sign-ups for the streaming subscription, as well as generate revenue from sales of the movie.

Disney hasn't updated investors on its long-term strategy here or whether there may be more similar PVOD launches, but the combination of Disney+, a streaming service with more than 60 million paying subscribers, with a hit factory studio that owns Disney, Pixar, and Marvel, is unmatched in the entertainment industry, and is a competitive advantage waiting to be tapped.

While Disney still recognizes that some movies, like Marvel releases, may be best shown in the theater, the success of Mulan opens the door to a number of possibilities, including premium tiers for Disney+ and more PVOD releases, and strengthens its hand in negotiations with theaters.

One thing is clear: There's plenty of demand from Disney+ subscribers for premium content.

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Jeremy Bowman owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.


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