To stream or not to stream? That was a question for the Walt Disney Company (DIS) after it drew fire from stakeholders for its last release. The Burbank company's latest movie, which was released in theaters only, set the box office on fire this past weekend. But it may still fail to provide an answer to the dilemma facing Disney.
A Record Labor Day Weekend Box Office
The latest release from Disney's Marvel Cinematic Universe (MCU), Shang-Chi and the Legend of Ten Rings, grossed $90 million over a four-day Labor Day Weekend, becoming the highest-grossing film for that period. Analytics company Comscore estimated that the movie collected $75.5 million from Friday to Sunday, making it the second-biggest opening weekend film this year. It will be released on Disney Plus—the company’s streaming platform—45 days after its theatrical release.
The biggest opening weekend also belongs to a Disney MCU film—Black Widow—released in July this year. But Disney adopted a controversial distribution strategy for the movie by releasing it simultaneously in theaters and on Disney Plus. That move generated criticism after the earnings tanked during the second weekend for Black Widow.
Theater owners blamed the studio's streaming service for a steep fall in the film's collections and a hit to their revenues. Meanwhile, Scarlett Johansson, the film's lead actress, filed a lawsuit against the entertainment behemoth, claiming that Disney’s distribution strategy cut into her overall earnings because it "lured" audiences away from the box office, which constituted a percentage of her overall salary, to Disney Plus. The case is in private arbitration currently. According to reports, her suit has galvanized other actors to demand increased upfront payment for movies that are released on streaming platforms.
How 'Shang-Chi' Box Office Performance Affects Disney
During an earnings call earlier this year, Disney CEO Bob Chapek called Shang-Chi an "interesting experiment." While the movie is part of the MCU franchise, it features characters that are not as well established in audience consciousness as those from other releases of the same franchise. Examples of the latter are The Avengers and Iron Man.
As such, Disney may have played it safe by releasing it in theaters only. For all its impressive subscription numbers, Disney Plus is still a growing platform that does not have the same payback and opportunities to build franchises as theatrical releases, according to CEO Chapek. The House of Mouse's Shang-Chi strategy ensures that downstream revenue for the movie—from on-demand rentals and merchandise—remains intact and helps commit the franchise to public memory through promotions at venues exhibiting the movie.
In contrast to this approach, the studio was not afraid to experiment with releasing The Mandalorian, a spinoff from the established Star Wars franchise, on its streaming platform. The series and its Baby Yoda merchandise both proved to be a success.
Eric Handler, analyst with MKM partners, told entertainment publication Variety that studios are "very concerned" about profits for big budget films in their stable. (Shang-Chi had production costs of $200 million.) "How many new subscribers are these movies each bringing in? Right now, from an investor standpoint, subscriber growth is important but you have to look at the bottom line," he said. This means that it is more important for such films to contribute to the studio's bottom line as opposed to bumping up overall subscription numbers for Disney Plus.
According to Handler, Shang-Chi had to make an estimated $70 million in the first four days for Disney to consider a theatrical-only release for Disney's next movie—Eternals—which features similarly unknown characters from the MCU universe and a large budget.
Since Shang-Chi surpassed that figure, analysts are predicting that Disney might lay off the hybrid release strategy it experimented with earlier this year. "I think the days of the hybrid release are fast coming to an end," Michael Pachter of Wedbush Securities told Variety. "It impacts theatrical revenues by some portion, and it cannibalizes future [premium video-on-demand] rentals." But the second weekend collections for Shang-Chi could play a decisive role in determining its overall box-office haul and Disney's future course of action.
Disney CEO Chapek might disagree with Pachter. "We will continue to utilize all available options going forward, learn from insights gained with each release and innovate accordingly while always doing what we believe is in the best interest of the film and the best interest of our constituents," he told analysts in an earnings call.