Summary
- Early estimates of Mulan had Disney hitting a walk-off grand slam, with revenues that would have been near Endgame levels.
- The data itself was accurate, though how many people interpreted it was not.
- My analysis shows that Disney's Mulan gamble has almost certainly failed, at substantial cost.
- Initial "box office equivalent" estimates failed to account for several qualifying factors, including mix shift, TVOD cannibalization, and marginal costs.
- Disney may have lost as much as over $100 million. The company has already made it clear it won't be returning to PVOD with another blockbuster anytime soon.
As Disney (DIS), like every other company, continues to wrestle with the effects of COVID-19, there is broad agreement among bears and bulls - of which there continues to be far more of the latter than the former - that Disney is wrestling with it a little more than most, owing to its overexposure to parks and theaters, some of the riskiest and most restricted activities during a pandemic.
Recently, the release of Disney’s Mulan offered a bit of a ray of sunshine, as the film seemed to trounce the competition and outperform the COVID-adjusted expectations. While I do not doubt Mulan has generated considerable revenue - I mean, it’s a blockbuster Disney movie - I am extremely skeptical of the reports that the film has generated a monstrous revenue windfall and large profit for the company.
I will explain why, but because part of the problem here lies in inaccurate facts, not just analysis, I will need to clarify the record on Mulan a bit first.
What Happened?
This whole thing started a few months ago. At one point, it looked like theaters were reopening in July. Major chains like AMC (AMC) and Cinemark (CNK) were already penciling in a resumption of business around Independence Day before the “second wave” of coronavirus - which some insist is merely a continuation of a first wave that never ended - pushed things back.
Then, it all went downhill. Warner Brothers' announcement that it was once again delaying Tenet was shortly followed by Disney’s announcement that it was delaying Mulan, which, in turn, was promptly followed by announcements of wide-scale movie delays from Sony (SNE) and ViacomCBS’s (VIAC) Paramount. Worse still, at least some of these delayed films are open-ended delays, with no new release date set.
Tenet and Mulan, however, were only pausing for a breath. AT&T (T) announced that its Warner Brothers subsidiary would be putting Tenet out after all, through a typical theater release with the standard windowing. But Disney went a very different track, announcing that Mulan would not be going into US theaters at all. Instead, Disney was going to put it into the PVOD (Premium Video on Demand) window, Disney’s first foray there, for a price of $30. This would be accompanied by a scaled-back theater launch in those territories where the virus is sufficiently under control to allow it, of which the principal market focus was China.
