© Reuters. FILE PHOTO: Cleaner walks past screens promoting Disney's film "Mulan" as the film opens in China at a Beijing cinema
By Lisa Richwine and Helen Coster
(Reuters) – Walt Disney (NYSE 🙂 Co's overhaul of its media and entertainment business is Hollywood's latest move in prioritizing streaming media and raises questions about how much big media companies will continue to support movie theaters.
On Monday, Disney announced it had restructured its media and entertainment business to accelerate the growth of Disney + and other streaming services as consumers become increasingly interested in digital television. AT&T Inc and Comcast Corp (NASDAQ 🙂 have taken similar steps.
Disney is under pressure from activist Daniel Loeb, founder of Third Point (NYSE 🙂 hedge fund, to raise funds for Disney + and the rest of its streaming business.
While Loeb welcomed Disney's restructuring on Monday, a person familiar with the thinking of the hedge fund called for Third Point to urge Disney to bring more feature films directly to streaming platforms or to bring them to theaters and Disney + the same day.
Disney, the company behind blockbuster film franchises such as Avengers and Star Wars, said it was committed to theaters when it announced its restructuring. The changes separate the creative departments from the distribution unit that sends programs to theaters, streaming or other platforms, despite Disney saying they work in "close collaboration".
In an interview with CNBC television, CEO Bob Chapek described the shift as "a pretty dramatic slant on the scale" towards streaming.
The coronavirus pandemic has changed consumer habits, drawing more viewers to Netflix Inc (NASDAQ 🙂 and other digital video services. Cinemas have been closed and experimentation with release patterns has been forced, turning the traditional practice of holding a movie in theaters exclusively for about 90 days before broadcasting it to other platforms.
In order to meet the need for fresh streaming content during a worldwide production freeze, Disney has made its remake of the animated classic "Mulan" available for purchase in the US on Disney + on Labor Day weekend and in a few other theaters countries. The Pixar animated film "Soul" will be shown in cinemas on Christmas Day on Disney + and not in November as originally planned.
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Part of the calculation will depend on how the cinema business emerges from the pandemic. There are now concerns about how many movie theaters will survive. Theater chain AMC Entertainment (NYSE 🙂 Holdings Inc said Tuesday that it would run out of money by the end of this year if conditions didn't improve.
Wonder Woman director Patty Jenkins is among the dozen of top Hollywood names calling on US Congress to provide financial aid to help cinemas halt pandemics.
"Everyone is utterly paralyzed and trying to read what is going on at every level and how that affects the way people watch movies," Jenkins said in a recent interview.
The total number of films released each year has already decreased. According to the Motion Picture Association of America, major studios released 124 films in theaters in 2019, up from 147 in 2015.
But even when investors rewarded Netflix with high ratings for its single-minded focus on creating content exclusively for subscribers, Wall Street analysts questioned the financial viability of traditional studios that do the same.
A premium video-on-demand model like Disney's for "Mulan" isn't going to work for a studio's biggest and most ambitious films, LightShed Partners analyst Rich Greenfield said in September, noting a box office movie in the $ 2 billion worth more can generate $ 800 million in profit for a studio.
"While we remain confident that the overall streaming economy is far superior to the traditional film / TV economy in the long run … nothing can match the pro-image economy that Disney can achieve with a global theatrical release," wrote Greenfield on Tuesday.
That "makes it very difficult economically for Disney to move away from the current box office windows," he said.
The release of more films intended for direct streaming to cinemas "would represent a significant decrease in content revenue from the level of their current business structure, but likely an even larger decrease in profits," wrote Michael Nathanson, analyst at MoffettNathanson, on Jan. October.
Chapek hinted during a CNBC interview Monday that changes to his theater model could come. He said details would be revealed at an investor presentation on December 10th.