The Walt Disney Company announced last week that Mulan, its live-action movie about a Chinese warrior Princess, is releasing direct to streaming video on Disney+. It is a significant moment for the Walt Disney Company and its licensees particularly so because the rental price tag is a whopping $30.
The Walt Disney Company has a lot of money tied up in making this film, and they need to make it up, particularly in a year where they are struggling so badly. Direct to video has some definite benefits. It cuts out the theaters and adds to Disney’s profitability at a time when its theme parks are closed or struggling.
The risk for Disney is whether people will be willing to pay that much for a rental property after they are already subscribing to Disney+. Particularly at a time when families are getting their fill of content from Netflix, Amazon, HBO Now, YouTube, Sling TV, Acorn, Hulu, Showtime, CBS All Access, Apple TV+, BritBox, Peacock, Quibi and more.
So why is the Walt Disney Company taking on the risk of charging $30? I think the Walt Disney Company is concerned that there will be a major drop-off in licensing revenues for Mulan due to the at-home release. Here is how I described the impact of theater versus at home movie releases in my article, “Big Changes for the Movie Industry: The Impact on Toys:”
A theater movie release is very different than a family room premier. When a family goes to the movies, they are making a much larger financial investment (multiple tickets, snacks, parking, gasoline, and more than likely dinner out). It is also a time investment as it is typically an evening or afternoon wholly focused around the movie. When families invest that heavily they typically also invest in toys or other memorabilia. When you watch a movie at home, not so much, you rent or buy a video, watch it once or even several times, and then you are on with your life. Movies that release at home, therefore, compete with and on the same level as television shows.
If your investment is low, your desire for movie-related products is not as strong. An indication of this may be seen in Hasbro’s last quarterly report and press conference. Hasbro did not comment on toy sales related to the Trolls movie that bypassed theaters and released direct to video in the Spring. If sales were great, you can be sure they would have said something.
I, therefore, think the Walt Disney Company is charging $30 for one or all of three primary reasons:
1. It thinks families will pay the price.
2. The company is concerned the movie will not drive sufficient product tie-in sales and needs to make up for the drop-off in rental fees.
3. They want to create a bigger investment for families so that they embrace and commit to the movie and its characters. The hoped-for result is a significant increase in licensed product sales.
It’s a major test for what could be a new paradigm in how movies are released and priced. The results could have sweeping implications for licensors and licensees.