Did Disney's (DIS) 'Black Widow' Release Strategy Misfire? - Investopedia

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The Walt Disney Company's (DIS) latest release "Black Widow" was a box office hit – until it wasn't.  The movie had the highest opening of the year among all theatrical releases in its first weekend and raked in $60 million from Disney Plus, the company's streaming platform where viewers could rent the movie for $30 through its Premier Access tier.

But the box office arc of "Black Widow" changed dramatically in its second weekend. Theatre collections fell by 70%, the second biggest such decline for a movie from the Marvel Cinematic Universe (MCU) after 2018's "Ant Man and the Wasp."

Unlike the first weekend, when the company touted the movie's earnings from its streaming division, Disney also did not release figures relating to its performance on the streaming service. This led some to speculate that a "similar sharp fall" in collections had occurred there as well.

Key Takeaways

• Disney's "Black Widow" witnessed a steep decline in box collections in its second week, both from theatres and streaming services.
• Analysts are blaming the entertainment conglomerate's dual platform release strategy for the drop.
• Disney may be playing a long game of testing out streaming's ability to create and contribute to franchises.

Disney's stock also gyrated with the movie’s box office collections. It jumped by 7.5% to touch a peak of $185.31 after the company released first weekend box office collection figures. But it  retrenched those gains and fell by 6.3% to touch a low of $172.42 on July 19 after the movie's second weekend. At the close of trading on July 22, Disney stock was changing hands at $175.13.

The turnaround in the box office collections for "Black Widow" is not merely a case of disappointing expectations. It may also turn out to be an important marker in the test of a shift in Disney's approach to releasing movies and creating umbrella franchises.

Theatre or Streaming?  

Revenues at movie theatres have already been hammered due to pandemic restrictions. A hybrid release strategy that embraces streaming and theatre openings on the same day has the potential to further decimate those numbers.

Not surprisingly, the box office performance of "Black Widow" has raised hackles among theater owners. The National Association of Theatre Owners (NATO) released a long and strongly worded statement criticizing the Burbank, California-based company for displaying the movie in theatres and its streaming platform at the same time. "Simultaneous release is a pandemic-era artifact that should be left to history with the pandemic itself," NATO stated.

Analysts and commentators are blaming the company for losing out on valuable intellectual property revenues by choosing a simultaneous release date for its content, instead of a staggered one that might double revenues from the same film.

"I think what this shows is that if you're making a movie available quickly for free on streaming, people will just wait [to own or watch it at a streaming provider]," Alicia Reese, an equity research analyst at investment firm Wedbush Securities, told The Washington Post. According to her, viewers will flock back to theatres if Disney goes back to the traditional model.

A Long Game 

But it might be a while before the company does that. During its May earnings call, the company's CEO Bob Chapek explained Disney's dual release strategy as a response to declining box office collections due to pandemic shutdowns. "The Disney Premier Access strategy gives us the ability to go ahead and try to release things into the market and try to reprime the pump [of collections for opening box office weekend]," he said.

Other studios are also experimenting with a similar approach. For example, this past weekend's box office winner "Space Jam 2" was made available to HBO Max subscribers for free by Warner Media, owned by AT&T Inc. (T). The company intends to continue with this mode of release until the end of this year.

But Disney has refused to commit to a similar timeframe for its hybrid release strategy. "We'll continue to watch the evolution of the recovery of the theatrical marketplace [from pandemic restrictions], and we'll use that flexibility to make the right call at the right time," Disney CEO Bob Chapek told analysts in the earnings call.

Experiments With Streaming 

Part of the reason for Disney's hesitation to commit to a timeframe may be because it needs more time to experiment. Disney Plus, the company's streaming platform, has grown at a frenetic pace since it was launched, becoming a formidable challenger to current leader Netflix, Inc. (NFLX). It has become critical to Disney's future, and some analysts have said that it will become the main driver of top-line growth at the company.

But the service's potential to generate revenue from other sources remains untested. Franchises are important to Disney's bottom line. According to some estimates, Marvel characters have contributed as much as $22.59 billion to Disney's revenues. The shared experience of theatres has been a critical component in the crafting and burnishing of their appeal. Merchandise sales, collectibles, and posters bring in additional dollars and enhance recall value for franchises, strengthening their box office collections.

Whether the relatively personal experience of a streaming service can bring in similar revenues is not proven. The House of Mouse is already gathering data on contributions to franchises from Disney Plus. Initial results are encouraging.

"...Our merchandise sales on 'Mandalorian' [which is part of the Star Wars franchise] that never had a theatrical release is certainly one extraordinary marker in terms of the fact that, while theatrical continues to be a great way for us to build franchises, our first big data point using our Disney+ platform to sell merchandise has been extraordinarily successful for us as well," Chapek told analysts during the May earnings call.

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Did Disney's (DIS) 'Black Widow' Release Strategy Misfire? - Investopedia
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