Yet one seasoned Wall Street analyst says the latest day-and-date movie release by Disney highlights an existential dilemma for the movie business that goes far beyond talent relations.
“We think we are at the cusp of a new non-virtuous circle emerging for moviegoing, similar to the cord-cutting cycle” in pay-TV, Robert Fishman of MoffettNathanson wrote in a note to clients today. Jungle Cruise, like Black Widow, is opening in theaters but is also available for a $30 extra charge to Disney+ subscribers and the results should only add to the swirl of strategic questions.
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The Delta variant and rising Covid-19 infections are certainly putting a damper on box office, Fishman acknowledged. But soft theatrical results for a range of wide releases in July can be directly linked to streaming. “The availability of many movies outside the exclusive traditional theatrical window provides traditional moviegoers a new option that is likely cannibalizing movie theater attendance,” the analyst wrote. “Consumer habits have changed as a result of the pandemic due to more streaming content in the home (most of which are included already in the monthly subscription price).”
The more common day-and-date release patterns get, Fishman argues, the greater the pressure on theatrical grosses. Distributors then hesitate based on the weaker returns, and decide to feed their streaming services, and the cycle continues. Streaming subscriber growth is, of course, the alpha and omega for all media companies as they race to catch up with Netflix, making executives more willing to sacrifice theatrical revenue. And that makes it less and less likely, in Fishman’s view, that theatrical box office will ever return to its previous levels.
Disney isn’t the only studio shaking up traditional windows approaches. Warner Bros took the first dramatic shot at disrupting things at the end of 2020, declaring that its entire 2021 slate would stream on HBO Max at the same time it hit theaters. But Fishman, who specializes in the exhibition sector, notes that Universal also went day-and-date with its Boss Baby sequel and Paramount is doing so with its Paw Patrol movie next month. In all, dozens of releases in a recovering marketplace have been widely available in the home without any delay.
Fishman attempts to take stock of where things might settle out in 2022 and beyond, in an environment with fewer Covid issues. The 68% second-week drop by Black Widow, while more severe than most Marvel releases by Disney, is not all that much greater than two poster-child hits with exclusive theatrical windows, he points out. Universal’s F9 fell 67%, while A Quiet Place, Part II dropped 59% in Week 2.
Still, Disney has been “one of the most aggressive studios” in terms of experimenting with windows, he notes. Even after Covid subsides, the studio will likely restore theatrical exclusivity for Marvel films while preserving it for family fare. Those titles accounted for about one-third of the company’s industry-leading box office haul in 2019. Exactly how many theatrical windows are restored (even if they’re far shorter than the traditional three month duration) will determine the fate of the theatrical business.
As the National Association of Theatre Owners recognized when it blasted Disney’s Black Widow strategy this month, Disney wields huge influence, controlling roughly half of the domestic box office. “While the Delta variant could be cooling the anticipated pent-up demand to return to the movies in the near term, it is possible we are already seeing changing consumer behavior limit the likelihood of ever returning to pre-pandemic box office levels,” Fishman wrote. “To us, one thing is clear: Disney holds the fate of the box office in its hands.”