Disney+ Paid Subscribers Goal Met Four Years Earlier Than Planned

By most measures, 2020 has been less than magical for The Walt Disney Company.

Disney’s Q2 earnings looked dismal nearly across the board when they came out on Tuesday (Aug. 4) after the bell, and yet the company’s stock is soaring on Wednesday (Aug. 5). It turns out that entirely apocalyptic figures and not-quite-entirely apocalyptic figures are very different things.

Yes, Disney’s revenue came in at $11.78 billion, down from $20.26 billion a year ago. And yes, the company furloughed an estimated 100,000 employees, cut executive pay by up to 50 percent and took a $5 billion line of credit to bolster liquidity on top of the $8.25 billion previously drawn. Disney also suspended its quarterly dividend and slashed $700 million in expansion spending at domestic theme parks as it sought to offset some of the massive net quarterly loss, which came in $4.72 billion.

But while Disney’s theme parks remain closed and its movie production is shut down, the company’s streaming services are booming so hard that they might just cement the digital shift in how people consume entertainment going forward.

Disney announced that its streaming empire – Disney+, Hulu and ESPN+ — has grown to about 100 million subscribers worldwide. The bulk of that membership comes from the recently launched Disney+, which alone has about 60.5 million subscribers — a goal that it met four years earlier than first expected.

“The tremendous success of Disney+ in less than a year clearly establishes us as a major force in the global direct-to-consumer space,” Disney CEO Bob Chapek said during an analysts’ earnings call.

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Disney appears ready to leverage Disney+ to reach directly into customers’ homes in a way that addresses how people want to consume media in a post-COVID world.

The company also announced on its analysts’ call that it will bypass theaters entirely in the U.S. release of its $200 million live-action remake of “Mulan.” Instead, the film will go directly to Disney+ subscribers for an additional $30 fee beginning Sept. 4.

“Mulan” had been scheduled for release in theaters worldwide in March, but that was pushed back when COVID-19 shut down cinemas across the globe. That film and Christopher Nolan’s “Tenet” were widely seen as likely bellwethers of movie theaters’ viability in the second half of the year.

But last week, both films delayed their release. Hollywood saw that as an ill omen, although Disney’s opt-out of releasing “Mulan” in theaters at all is almost certainly the worst sign.

That’s true despite CEO Chapek’s assurances that Disney won’t supplant theatrical releases with direct releases on Disney+ in the future. “We are looking at ‘Mulan’ as a one-off as opposed to a new windowing model,” he said.

Disney said it will also release “Mulan” in theaters in nations like China, where Disney+ isn’t available but theaters are open.

The Bigger Picture

However, Chapek went on to note how excited Disney is to see how a major film performs in an online release.

If Disney ends up making more money than it would have from a theatrical release, cinema operators ought to be worried. They might also consider negotiating a new deal with Disney along the lines of AMC Entertainment’s new arrangement with NBCUniversal, which will at least give the cinema chain a small cut of streaming revenue.

Under that deal, AMC – the world’s largest cinema chain – reversed its longstanding policy of opposing streaming within a film’s theatrical release window, which was typically three months. Instead, AMC agreed to let Universal release films to streaming just 17 days after they hit theaters.

“The company 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,” AMC CEO Adam Aron said at the time. “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.”

Of course, there are no reports yet on how enthusiastic AMC is about a crowd-generator like “Mulan” skipping theaters altogether without Disney giving cinemas a cut. But we imagine the enthusiasm level isn’t high. Or that might be something cinemas just have to get used to, given consumers’ worries about returning to theaters until a COVID-19 vaccine becomes available.

PYMNTS’ consumer surveys taken throughout the pandemic show that Americans would like to do things like go to the movies: 54. 2 percent of those we spoke to said they missed attending leisure events. That trailed only wanting to see friends and family and eating out in restaurants as the top activities that Americans miss.

But the data also showed that consumers remain nervous about the health consequences of getting back to the physical world. A notable share of those we surveyed are uninterested in giving up their digitized lifestyles in favor of getting back to their physical ones.

That’s a long way of saying that even when theaters reopen and studios resume releasing films to them, a large share of consumers simply won’t be willing to sit in cinemas. Instead, they’ll wait for movies to stream online. And now, it seems that those customers won’t have to wait all that long – if at all, depending on how Disney’s one-off release of “Mulan” goes.

Besides, paying $30 for an entire family to see “Mulan” is a lot less than paying for theater tickets alone. And popping one’s own popcorn is certainly cheaper than buying a bucket at the cinema.

But beyond being a more cost-effective option, streaming movies at home is also a safer one. How many newly released movies will consumers get a chance to stream from their couches between now and the pandemic’s end? Enough that theater operators clearly have a lot to be worried about.