Cinema group sues Disney for releasing ‘Black Widow’ in theaters and streaming at the same time

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Temperatures are soaring in the entertainment industry after the second week of “Black Widow’s” in theaters.

The Marvel film, which grossed $80 million domestically on its debut weekend — the highest box office opening of the pandemic — saw a significant drop in ticket sales over the weekend.

With a 67% drop, “Black Widow” had the worst second weekend performance of all Marvel Cinematic Universe movies, just behind “Spider-Man: Homecoming”, which dropped 62% from its $117 million debut and “Ant-Man and the Wasp”, which fell 62% from $76 million.

The misstep prompted the National Association of Theater Owners to quash Disney’s decision to make the film available in theaters the same day and through Disney Premier Access (a $30 price tag). The studio reported over the weekend that it had made $60 million from the sale of Disney+.

“Why did such a well-made, well-received and highly anticipated film underperform?” The organization wrote this in an extensive press release on Sunday. “Despite claims that this pandemic-era makeshift release strategy was a success for Disney and the simultaneous release model, it shows that an exclusive theatrical release means more revenue for all stakeholders in every cycle of the film’s life.”

The group, which represents more than 30,000 screens in 50 states, dubbed “Black Widow’s” ticket sales, shows a “stunning second weekend theatrical collapse.”

NATO’s concerns are not new, but come at a time when the coronavirus pandemic is resurfacing, even in heavily vaccinated areas. Some local governments have begun to reinstate social distancing and masked security measures.

The entertainment industry is in a precarious situation, with studios and cinema operators at odds over how and when to release movies in theaters and via streaming services. Many studios have already said that these hybrid release models are just temporary pandemic precautions and have plans to release movies exclusively in theaters in the late summer and early fall.

The case for a hybrid release

The pandemic turned the cinema industry upside down as chains large and small were forced to close locations due to nationwide security measures. While studios were able to postpone much of the content destined for theaters, the lengthy shutdowns and the rise in coronavirus cases led some to release movies on streaming platforms or create a hybrid model.

Disney delayed “Black Widow” for more than a year to ensure it would hit theaters. However, with a huge amount of other MCU movies waiting in the wings, the studio had to make a decision about how to market the film.

Disney eventually chose to run the film in theaters and on Disney+ for a fee so that fans could watch “Black Widow” on the big screen or, if they were more comfortable, from their couch. The decision was made long before vaccination rates rose and before the delta variant was rampant in the US

“There are currently two camps: the camps that feel comfortable going back to the movies and the camps that don’t,” said Jeff Bock, Exhibitor Relations senior box office analyst. “Blaming NATO for streaming is a knee-jerk reaction that is completely self-centered. It’s almost like they don’t understand the current market.”

“In addition, ‘Black Widow’ would never become the strongest Marvel movie because of its place within the MCU timeline,” Bock said. “The statement that NATO has released will not age well. In fact, it seemed dated at the time it was released.”

Disney is no stranger to box office success, in 2019 it had seven movies that topped $1 billion worldwide. Executives at the company have indicated that they plan to continue releasing movies in theaters, especially those with big budgets tied to major franchises.

Although receipts have risen in recent months, the pandemic is not over. Outside the US, vaccine rates have lagged, leading to delays in introduction in other countries and smaller returns in open regions.

Not to mention, there is a significant portion of Americans who are unvaccinated, including children.

“It’s probably reasonable to write off ‘Black Widow’ as an experiment at a time of great uncertainty, where no one has the perfect answer for how to strategize global property during the late stages of a pandemic,” chief analyst at Shawn Robbins. said.

The pitfalls of day-and-date

There’s no denying that Disney has put money on the table because of this release model. The $60 million sale to Disney+ is not box office revenue. It’s selling home videos. This money would traditionally have been earned after “Black Widow” completed his time in theaters.

“I don’t think it’s much of a surprise that week two box office dropped significantly, because there was always the possibility that first-time viewers to the theater and repeat viewings would be on Disney+,” Wedbush senior associate of stock research Alicia Reese said.

Reese noted that Disney hasn’t shared Disney+ sales data for the second weekend, so it’s unclear what kind of drop streaming saw compared to theatrical.

“The point NATO is making is a good one; it’s not just about lost theater revenue with this day-and-date model, but cannibalized revenue from the second window (normal PVOD) that will harm Disney in the longer run,” they said. said. “Since Disney+ subscribers who pay for premium access to ‘Black Widow’ can watch the movie as many times as they want, and as long as they have their Disney+ subscription, they have no incentive to buy or rent the movie in the next window. “

The two highest-grossing films of the year domestically are currently “A Quiet Place Part II” and “F9”, both of which had an exclusive cinema window. It should be noted that “F9” also saw receipts drop by 67% between the debut weekend and the second weekend, according to data from Comscore.

“The entire industry is still trying to carefully navigate this staggered global recovery,” said Robbins of “Disney has taken a remarkable step by notifying streaming songs during opening weekend, but so far they have negated that perceived transparency by not talking about leading access numbers the following week.”

“We know how much the second weekend drop was at the box office, so why don’t we know how much revenue dropped on Disney+?” he said. “The answer seems almost obvious, but we shouldn’t have to read between the lines. Whether it’s being screened temporarily or never going to be revealed at all, the optic of withholding that information just isn’t right.”

Prior to the release of “Black Widow”, Disney had already stated that “Free Guy”, “Shang-Chi and the Ten Rings” and the rest of the 2021 series, including “Encanto”, “Eternals” and “West Side Story “, they would all be released exclusively in theaters for at least 45 days.

Disney CEO Bob Chapek reiterated the company’s commitment to movie theaters during its earnings call in May, but acknowledged the “fluid nature” of the recovery of exhibits and the possibility of another major outbreak.

The company is well aware of how powerful the cash register can be and how devastating piracy can be to potential revenue. After all, in 2019, Disney planned for the release of “Avengers: Endgame” to coincide on the same date in China and North America to ensure the majority of potential audiences could see the film in theaters before it was pirated online. .

That strategy also led “Endgame” to bring in a record-breaking $1.2 billion during its opening weekend, including more than $350 million in the US and Canada.

“Clearly, in this digital age, the ability of a pirated copy of a high-quality movie to go around the world in the blink of an eye is a risk that any studio should consider when releasing a movie on streaming platforms prior to release. at or concurrent with a theatrical release,” said senior analyst Eric Wold of B. Riley Securities.

“I believe we have seen the impact this had on the domestic box office results for ‘Black Widow’ over its opening weekend and the following weekend, as well as the fact that Disney has announced another theatrical release date in China, although the film was only green lit a while ago,” he said.

An uncertain future for cinemas

Domestic and international box offices have made great strides in recent months, with ticket sales surpassing 2020 levels. However, a return to normal is not expected until at least mid-2022, with some analysts predicting 2023 as the recovery deadline.

“I believe the industry has entered uncharted territory where content creators are trying to find the most profitable ways to monetize their product,” said Doug Stone, a cashier consultant and former theater operator. “We’re not there yet and even if all the theaters were running at full capacity, I don’t believe the mystery has been solved.”

According to Comscore data, about 82% of movie theaters were open last weekend.

And the threat of Covid on the industry is not over yet.

“The country has made great strides in this area, but there is still a hill to climb,” Stone said. “When that happens certainly depends on vaccination coverage and transition to herd immunity. … Given all of this, I wouldn’t expect to reach the new normal until at least mid-2022 and possibly later, depending on all of the above.”

Over the weekend, Los Angeles, the largest movie theater market, reinstated its mandatory mask policy due to a surge in Covid cases in the county.

Studios haven’t pulled back on movie releases because of this recent rise in cases, but audiences may feel less comfortable visiting movie theaters if these outbreaks continue.

“This undoubtedly remains a very unusual theater market, with the effects of the pandemic continuing to affect the number of theaters open, consumer behavior and, of course, box office results,” said Comscore senior media analyst Paul Dergarabedian.

“While it’s understandable that some studios are opting for a hybrid release strategy to deal with this challenging environment, the data clearly shows that long-term playability and ultimate gross revenue are improved for films that have a ‘theatrical first’ appearance. model,” he said. . “But of course there are so many variables at play that it might be wise to let the dust settle before we can properly assess which of these release models (or combination thereof) is the most beneficial in the long run.”

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