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‘Mulan’ Math Ranges From Financial Bomb to Modest Moneymaker

Mulan is coming to Disney+ on September 4.

‘Mulan’ Math Ranges From Financial Bomb to Modest Moneymaker
Visitors look on as an actress dressed as the title character from “Mulan” rides past in a parade in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

Depending on who you ask, Walt Disney Co.’s decision to release its next big film “Mulan” online either guarantees the movie will lose money or could be a smart way to potentially break even on a $300 million investment.

With theaters in the U.S. still largely shuttered due to the coronavirus, Disney will make the live-action redo of its 1998 animated hit available for purchase by Disney+ subscribers for an extra $30 starting Sept. 4.

‘Mulan’ Math Ranges From Financial Bomb to Modest Moneymaker

Just how much money that produces is up for debate. The company is limiting the offer to subscribers of the company’s new streaming service, which numbered 60.5 million globally at last count. It will also release “Mulan” in the small number of theaters that are open.

Direct-to-consumer releases have been percolating in the film industry for years -- and used to be a way for studios to ditch movies they thought would fail. But Covid-19 has changed that. Universal Studios, owned by Comcast Corp., gave families fresh fare at the peak of the pandemic with its April online release of the animated sequel “Trolls World Tour.” It produced more than 6 million downloads at $20 each, less than the first film did in theaters but a respectable amount just the same.

Bloomberg Intelligence analyst Geetha Ranganathan thinks Disney will have no problem getting 10 million fans to pay for the picture, generating $300 million. That’s at least enough to break even on the $200 million production cost and $100 million in marketing. Anything beyond that, including theater revenue and new Disney+ subscriptions, would make “Mulan” a winner.

What Bloomberg Intelligence Says

“The family-focused ‘Mulan’ will be an instant hit, in our view, with prior live-action movies pulling in over 30 million domestic moviegoers.”

--Geetha Ranganathan, media analyst

Click here to read the research.

Investors seemed to agree. They bid shares of Disney up 8.8% to $127.61 Tuesday in New York following the announcement and the company’s report of better-than-expected quarterly earnings.

But Michael Pachter, an analyst with Wedbush Securities, is more circumspect, suggesting no more than 3 million Disney+ subscribers will shell out that extra $30. That $90 million in revenue pales in comparison to what a successful Disney film does in theaters.

“Not good enough to offset a theatrical release, but good enough to offset zero in ticket sales,” Pachter said.

Variety, the Hollywood trade publication, asked people on Twitter if they would pay for the film. And 85% said no.

Last year, Disney had seven films top $1 billion at the box office, including the live-action remakes of “Aladdin” and “The Lion King.” Unlike digital downloads, ticket sales are split with theater owners.

Major theater chains declined to comment on the “Mulan” move, but it’s likely Disney briefed them ahead of time. When the chief executive officer of Cinemark Holdings Inc.’s shared a list of upcoming movies with investors on Tuesday, “Mulan” wasn’t even mentioned.

Financial Bind

Theater operators are in a bind. They have suffered huge financial losses as a result of the Covid-19 closings. AMC Entertainment Holdings Inc., the largest U.S. cinema owner, completed a restructuring of about $2.6 billion of debt this week.

The chain surprised the industry when it agreed last month to let Universal release movies online after just 17 days in theaters in exchange for a cut of the online revenue. The studio made it clear at the time it won’t be using that arrangement for all of its films.

Executives at Cinemark and Marcus Corp., another large exhibitor, said Tuesday that sharply curtailing the exclusive period for theaters isn’t a good idea.

Disney CEO Bob Chapek reassured some in the theater industry on his earnings call, saying the “Mulan” digital release would be a “one-off” and a learning experience. He made it clear he was as interested in the number of new streaming subscribers the film produces as the revenue from the downloads.

Recent Experience

There, Disney has had some recent experience. It’s been offering pay-per-view boxing and Ultimate Fighting Championship matches through its ESPN+ streaming service and indeed cited the latter Tuesday for an uptick in streaming revenue.

Another wild card for the studio is a theatrical release in China, where Disney+ isn’t offered. “Mulan,” given its Asian storyline and cast, was always considered a likely hit in that country, the world’s second-largest movie market.

But the film has some other baggage. Liu Yifei, the China-born actress starring in the film, caused an uproar and ongoing fodder for a #BoycottMulan hashtag after stating her support for Hong Kong police during pro-democracy protests. President Trump’s escalating trade war with the country could also affect its theatrical release there.

©2020 Bloomberg L.P.