Late on Tuesday afternoon, huge news broke: Disney, in their quarterly earnings call with shareholders, announced that they would be putting the now-perpetually delayed Mulan on Disney+ as a premium VOD title and subscribers could purchase the film for $30 starting on September 4.
This is an Earth-shattering announcement, one that, had it happened back in April, would have probably resulted in bitchy letters from CEOs and would have led to pants-shitting terror on the part of people who value the theatrical experience. Now, this decision seems just a bit more muted, a pragmatic compromise to not endanger the company’s biggest fall titles — Black Widow and Soul — and their respective windows while not forcing Mulan to compete with a genuine theatrical-only juggernaut like Christopher Nolan’s Tenet in the early weeks of theaters reopening.
Understandably, this decision still has pissed off a whole lot of exhibitors who were banking on drawing in families with Mulan, even in a socially-distanced and capacity-limited setting, but there are a few good reasons as to why this state of affairs, with what would have been first-run titles heading to streaming, probably won’t become permanent or dramatically endanger theaters. For one, Disney really, really needs money: Their revenue has collapsed thanks to the closure of theme parks and theaters, and Disney+ has been practically the only bright spot in an otherwise quarterly earnings report (subscriber numbers, as well as the Mulan announcement, have already contributed to Disney’s stock shooting up following the reveal). So, Disney probably sees this as a quick revenue grab, which, beyond the initial cash infusion, is meant to pull people into their digital ecosystem with a big title and keep them there, especially if they wall it off behind a subscription.
But, given that they are still releasing the film theatrically in countries that don’t have Disney+, they’re placing a pretty large bet on audiences turning out in places like the EU and in China — a bet that may not pay off if piracy turns out to be as much of an issue as some are thinking. Remember, one of the best things theaters offer for studios is built-in anti-privacy measures — as anyone who has ever bought a disc off of a New York street vendor knows, watching a pirated movie that was filmed from a hidden cellphone in a theater blows. But with this, Disney’s putting a full 4K release on their service, and they have few protections in the way to prevent people from just ripping the copy off and putting it on the Pirate Bay. This was the case with The Mandalorian, which was pirated in insane numbers by people in countries without Disney+ last winter, and it should be similar for Mulan, even if the theatrical option is available to them.
Now, the average family of four probably isn’t going to head to their favorite torrent site and download Mulan unless they absolutely have to. But it wouldn’t take much for their behavior to be changed, say, on their Apple TV. What we could also be seeing here is the collapse of the all-in-one VOD release platform, like the iTunes store or the Google Play store, in favor of the in-app purchase. We’ll use Apple as an example from here on out, because we have concrete data on their pricing structures and because the spotlight has been largest on them in recent weeks.
First, the iTunes Store’s market share has been in freefall in recent years, and the landscape is only becoming more and more competitive. The revenue split for an “in-app purchase” is slightly more generous than that of a rental through a digital storefront — for example, Apple takes a 40 percent cut on every rental as opposed to the 30 percent one applied to an in-app purchase — which means that, roughly, Disney would be eking out an additional $3 per rental. That may not seem like much, but when scaled up to the levels that some are assuming — i.e., if a fourth of Disney+ subscribers rent a copy of the movie — that becomes exponentially larger. And with in-app purchases being a central issue of the ongoing anti-trust investigations by Congress and their international equivalents, it seems clearer and clearer that this cut might be substantially increased in the future, especially under a potential Biden administration. That $30 price point seems to have the cut baked into it as well, perhaps as a way to placate Apple with the promise of great revenue until they’re forced just to accept a lower price for in-app purchases.
So, if this isn’t a one-off, as reporting by Julia Alexander of Polygon stressed on Tuesday (and who follows a similar line of thought in her subsequent tweets), but Disney still wants those billion-dollar grosses from theaters, what could this possibly mean? Perhaps it’ll mean that Disney will pull their VOD titles from iTunes and Google Play and put them in a Disney+ storefront, where one can buy titles if they don’t have a subscription and subscribers can purchase early rentals of new titles before they hit the service, and they’ll pay a premium for access after a somewhat shortened theatrical window. Blu-Ray will still exist if you want to own your copy, but Disney+ may be the only way to get your fix.
This theory passes the smell test, somewhat — Disney is one of the most careful companies on the planet when it comes to managing their brand assets, and total control of the digital home distribution feels just in line with other anti-competitive practices that they’ve had over the years. This also means, of course, that the vaunted Disney Vault can return, and expired license agreements with other providers that normally would have resulted in a title like Black Panther being removed from the subscription-based service for months at a time have an in-app solution — you can just rent it, right in the same spot.
It’s worth cautioning that this strategy may not be a slam-dunk: In addition to rampant piracy, another issue is the price, which most have balked at. A $20 rental was too much for many households early on, even in comparison to what a normal family would pay for the theatrical experience, and the relative success of Trolls World Tour doesn’t inspire much confidence in the model, all things considered. So, a $30 price point might push away more families, who will just wind up waiting until the movie appears as a Disney+ exclusive within the next six months or so. And who knows if China really will pick up the slack here and push this film over the line into profitability without the stability of North American grosses. Remember: Mulan cost over $200 million, and combined with the two rounds of marketing that this will have to have thanks to the pandemic, the cost is even higher. There is a lot that could go wrong, and Disney’s experiment has a surprisingly high bar to clear, but, like most things in this age of COVID, we’ll have to wait and see what happens.
Mulan will hit Disney+ on September 4.