Mulan’s Big Win Shows Disney+ Has Potential As An eCommerce Ecosystem

We saw a tale of two big Labor Day weekend releases this year: Disney’s Mulan and Christopher Nolan’s time travel-thriller Tenant. Both were billed as 2020’s big summer blockbusters, both had budgets in the hundreds of millions, both enjoyed extensive marketing campaigns, and both came to their release dates actively anticipated by audiences.

But where they were released? Therein lies the divergence.

Warner Brothers released Tenet to movie theaters, while Mulan went directly to the new Disney+ streaming service. And based on the data so far, it seems Disney ended up with the better end of the deal.

Tenet’s release to theaters generated a lot of buzz (Tom Cruise sure liked it), but its box-office performance has been “meh” so far at best. The film brought in $29.5 million after two weeks in America and about $177.5 million overseas.

Given that Tenet cost over $200 million to make, such a barely break-even result isn’t exactly going to inspire other studios to rush films back onto the big screen.

“You can’t do it,” an executive at one major studio told The Wall Street Journal. “The economics won’t allow you to do it. We can’t give [theaters] a $200 million movie if people aren’t going to come.”

But give consumers a $200 million+ film to watch on their couches at home, and they’ll be motivated to see it.

Mulan’s Better-than-Expected Take

Disney hasn’t yet released specific performance numbers for Mulan’s Labor Day weekend release, but third-party sources make a pretty compelling case that it went very, very well.

Disney+ downloads spiked by roughly 68 percent on Labor Day weekend, according to Sensor Tower. That almost matches the 74 percent download jump the app got when Hamilton was released to Disney+ over the July 4th weekend.

However, Hamilton was a free film within the app. Mulan cost an additional roughly $30 to stream – a payment it seems consumers were more than happy to make, as consumer spending with the Disney+ app skyrocketed by 193 percent.

According to 7Park Data, about 30 percent of all Disney+ subscribing households – 18 million customers in total – purchased Mulan during the first two weeks of September.

Disney doesn’t break out its subscriber base by country, but the Motley Fool reports that most estimates assume that about half of those 60 million subscribers are in the United States. Assuming there are about 30 million U.S. Disney+ subscribers, if 30 percent of them paid $30 for the download, then Mulan’s domestic “box office” so far is around $270 million.

And that’s revenue that Disney keeps all to itself, as it owns Disney+. That beats the 50/50 split with theater operators that Warner Brothers is facing for the roughly $30 million that Tenet made domestically so far.

Disney Chief Financial Officer Christine McCarthy has said the company was “very pleased” with Mulan’s results so far, although she didn’t report any numbers.

What Happens Now?

Mulan’s blockbuster success on Disney+ is more bad news for theater operators already struggling with COVID-19 closures and consumer fears of crowded indoor spaces. The film’s success demonstrates that blockbusters with heavy special effects and mass-market appeal don’t really need theatrical releases to bring in big money from consumers.

AMC theaters has already had to reverse its position on the three-month theatrical release window that until COVID-19 had been the industry standard for how long studios had to keep films off streaming services after releasing them in theaters. When NBC Universal said it might someday release films to streaming and theaters at the same time, AMC initially reacted by banning the studio’s films, then relented.

The chain instead agreed to a new arrangement that allows NBC Universal to release films to premium video-streaming services after just 17 days of play in cinemas. In return, AMC negotiated about a 10 percent cut of on-demand revenues, apparently having accepted the idea that collecting something from digital-only consumers is better than nothing.

AMC CEO Adam Aron said at the time that his company “enthusiastically embraces this new industry model, both because we are participating in the entirety of the economics of the new structure and because premium video on demand creates the added potential for increased movie studio profitability, which should, in turn, lead to the green-lighting of more theatrical movies. This multi-year agreement preserves exclusivity for theatrical viewing for at least the first three weekends of a film’s release, during which time a considerable majority of a movie’s theatrical box-office revenue typically is generated.”

But with Mulan now a certified hit for Disney that wholly bypassed movie theaters, the pressure is on theater operators more than ever. Their leverage over studios will evaporate the longer the pandemic wears on, as consumers become more and more accustomed to watching movies on their couches instead of in cinemas.

A Potential eCommerce Play

But for Disney, the scope of the opportunity is perhaps bigger than merely gaining more power in negotiations with movie theaters.

After all, Disney+ has gotten quite big quite fast, thanks to a big assist from COVID-19. The service was already boasting 60 million users as of June, and that was before the big download spike that Mulan’s release brought on.

In fact, it seems very possible that by Disney’s next earnings report, Disney+ could claim 100 million subscribers willing to do more than just pay $6.99 a month if the estimated extra $270 million that Mulan brought in is any indication.

Buying Mulan was pretty easy and intuitive. Customers saw a “buy” button where the “play” button would normally be placed, and their stored payment method for monthly subscription fees was automatically charged an extra $30.

That could be just the start of new revenue streams for Disney, which is known for three things: magic, whimsy and finding ways to merchandise both. Google the phrase “Baby Yoda” and you’ll get thousands of articles not about a character on the Disney+ show ”The Mandalorian,” but about Lego sets, plush toys and Baby Yoda-themed apparel that’s on sale just in time for the holidays.

Would Star Wars fans watching Baby Yoda on “The Mandalorian” be ideally placed to choose to hit that “buy” button for a plushie or a Lego set if given the opportunity? Would a documentary on “imagineering” in the Magic Kingdom be a good place to book a Disney vacation of one’s own?

Disney+ is a platform that already had tens of millions of subscribers and counting – and one where members can clearly be persuaded to buy extra items. So, the question going forward might not just be if Disney can win the streaming wars, but whether the company has found a new way to compete in the eCommerce wars.