Disney’s “Black Widow” fails to keep up. What this means for movie theaters

The opening weekend of Walt disney‘s (NYSE: DIS) new superhero action movie Black Widow perhaps impressive given the lingering echoes of the pandemic. But her second weekend was strangely sweet. Domestic box office ticket sales of $ 25.6 million between last Friday and Sunday were nearly 70% lower than the previous weekend’s revenue, according to figures from Box Office Mojo, marking the biggest drop in second weekend income for a Marvel movie directed by Disney. 2018 Ant-Man and the Wasp previously held that dubious honor with a 62% drop in the weekend after his big screen debut.

What is the problem? It depends on who you ask. Some claim that the death of the main character in Avengers: Endgame now makes a story movie a little less marketable. Others suggest that a resurgence of COVID-19 cases has reduced consumers’ willingness to visit a theater. Both are probably contributing factors. Given the kind of criticism the National Association of Theater Owners (NATO) has leveled at Disney since last weekend’s box office data was tallied, there is every reason to believe that the availability of the movie as a home streaming title is the main culprit. the sharp drop in the box office.

However, the nature of this complaint is exactly why movie theater investors should be concerned about Black Widowbox office data from – not Disney shareholders.

An incomplete argument

NATO’s official Sunday statement reads a bit like a list of talking points assembled by a high school debate club, estimating that if Disney had failed to offer the movie to stream, the $ 80 million takeover would take national box office could have entered anywhere. between $ 97 million and $ 130 million. Additionally, the organization’s response points out that pirated copies of the film were readily available the day after its online premiere for home viewing, seriously reducing the potential for the past weekend. In view of all this, the NATO theater-owning members concluded: “the simultaneous release [of new feature films] is a pandemic era artifact that should be left to history with the pandemic itself. “

And given the sharp slowdown in Black Widowof box office ticket sales compared to comparable films, NATO seems to be right.

Data source: Box Office Mojo. Chart by author.

But as the Shakespearean saying goes, I think he protests too much.

Of course, the illegal and unlicensed copies of the film – digital as well as physical – are a revenue reduction issue. This is not a new problem, however. Bootlegging and illegally exploited websites have long been hijacking revenue from legitimate sites. It is likely that Black WidowThe notoriety of ‘s made it more likely to be distributed in a nefarious manner. Still, it’s impossible to say for sure how much this hampered the film’s full theatrical income potential.

The organization’s statement also fails to acknowledge that COVID-19 cases in the country have been on the rise again since last week, reducing the total number of potential moviegoers last weekend. A fair review would have included such a discussion, if only to explain why it wouldn’t have been an obstacle.

Perhaps the most wonky of NATO pushbacks, however, is the suggested calculation that $ 60 million in streaming sales doesn’t actually translate into $ 60 million in revenue for Disney. The platforms through which Disney + is accessible collect around 15% of that fee for themselves, bringing the company’s full weekend subscription video-on-demand revenue down to around $ 50 million.

Scarlett Johansson as Black Widow.

Image source: Walt Disney.

But the argument misses a major point about the double-release approach. That is, the company does not just monetize Black Widow by selling it directly to Disney + subscribers. The offer itself is a way to acquire new Disney + subscribers, who pay an average of $ 4.55 per month for the service, month after month, and are ready to purchase future new releases via streaming. Although details are not available, Disney has garnered a large number of Disney + listings by selling Mulan via the Disney + platform.

The NATO complaint also fails to point out that cinemas and studios share box office sales in a similar proportion to revenue sharing deals typical of digital platforms. Also, keep in mind that (at least for the first weekend of its availability) Black Widow in fact did generate blockbuster-like revenue in the order of $ 130 million including the roughly $ 50 million in streaming sales that it has racked up.

Read between the lines

Media companies and consumers are slowly realizing that movie theaters are not the only viable distribution option for new films. The direct broadcast model also works for studios. Ergo, movie channels like AMC Entertainment (NYSE: AMC) and Cinemark Holdings (NYSE: CNK) denounce it not because they are concerned about the tax results of the studios, but because they are concerned about their own survival.

Indeed, NATO’s unprecedented public criticism of Disney’s content release decision completely fails to recognize the strategic benefits and commercialization of streaming, and simply lists the selfish reasons that Disney should abandon this approach. of double diffusion. As a result, it ultimately seems hopeless, which – like a potential boyfriend or girlfriend – makes investment theaters less attractive.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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About Selena J. Killeen

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