Disney Just Got Some Good News and Some REALLY Bad News
The future is digital.
Hollywood knows that and old-school media companies have grudgingly accepted that truth.
Photo: English Jargon
As businesses like Warner Bros. Discover, Paramount Global, and AMC Entertainment Holdings, Inc. teeter on the brink, Disney reevaluates.
How should a century-old company adapt to industry-wide disruption in one business that was previously a pillar of Disney’s revenue stream?
Photo: Getty Images/Ringer illustration
Despite what people say, nobody knows the answer for sure, forcing Disney to feel its way through a new process.
Even a seemingly positive report can come with remarkable downside.
Image: The Wall Street Journal
Let’s discuss a poll that just gave Disney some good news…and some really bad news.
The Topic at Hand: Movie Consumption
Photo: The New York Post
How do you watch most movies? If you’re a typical consumer, you view them in your home.
One of Hollywood’s dirtiest secrets is that going to the movie theater was always the exception, not the rule.
Photo:Source: Ivan Marc / Shutterstock.com
From a young age, film lovers learned to watch their favorites at home.
Maybe you rented movies or bought DVDs or watched on network/cable television.
Photo: eBay
Then again, you might be young enough that you’ve primarily streamed films for most of your life.
Across generations, Hollywood has always uncovered new ways to sell its products to people in their homes.
There’s a good business reason for that tactic. You spend most of your free time at home!
However, Hollywood has also indoctrinated countless generations of fans into the more profitable method of film consumption.
Movie Theater
When you want to watch new releases, you must pay the price to see a movie in theaters.
That’s been the norm for as long as Disney has existed…and even a few years before then.
Photo: Netflix
Alas, a generation raised on Netflix has fundamentally altered the nature of media consumption, which is a problem for Disney.
Currently, your favorite company faces a crossroads. On the one hand, Disney is strengthening its digital content.
Photo: Hulu
The Direct-to-Consumer division should eventually become Disney’s most significant revenue pillar.
So, Disney must turn Hulu, ESPN, and Disney+ into viable digital brands accessible via any internet connection.
Photo: Disney
However, to survive in the short-term, Disney needs its loyal fans to watch movies in theaters.
Disney’s entire business model relies on the box office profits from releases to pay for the expense of making the films.
Photo: THIERRY CHESNOT/GETTY IMAGES
Then, all other phases of media consumption such as Disney+/Hulu viewing become pure profit.
When that process fails, Disney’s financial outlook weakens.
A Poll about Consumer Behavior
Photo: Voxco
IndieWire and HarrisX just performed a joint survey to take the current temperature of movie-goers.
The goal was to determine how people actually consume movies and perceive the theatrical experience.
Photo: Voxco
At the risk of editorializing, I suspect the purpose of this poll was to prove that people still preferred going to movie theaters.
Therefore, the results of the poll were likely shocking to the very people who commissioned it.
Photo: theindependent.sg
I say this because the results couldn’t have been clearer.
According to the people surveyed, home movie viewing is superior.
Photo: Disneypluspress
To wit, the poll shows that “34 percent of U.S. adults prefer to watch movies in theaters.”
By inference, 66 percent or two-thirds of potential consumers would rather watch a movie at home.
PHOTO ILLUSTRATION BY MARIA-JULIANA ROJAS. IMAGES IN ILLUSTRATION BY WALT DISNEY/ EVERETT COLLECTION, 6; BUENA VISTA PICTURES/EVERETT COLLECTION, 2; EVERETT COLLECTION, 1; ADOBE STOCK, 2.
If you work at a movie theater, that data is like a dagger to the heart, but film lovers have ample reason to feel that way.
As the survey notes, it gave respondents several opportunities to explain their thought processes.
Disney
You can think of this section as Hollywood loyalists asking consumers to explain why they feel a way Hollywood doesn’t want.
Movie theaters will cling to the explanations of why people still go there.
thinkmonsters.com
The popular responses in this poll were: “the experience of watching a movie on the big screen” and “the quality of surround-sound systems.”
Perhaps the most telling response among theatrical fans was that they wanted to escape “distractions” at home.
Disney
The problem with that explanation is that people possess many more external entertainment distraction choices now than 20 years ago.
So, Hollywood no longer claims a monopoly on these customers and, in fact, must compete for their attention.
Photo: Marvel
The drop in box office performance suggests that movie theaters and studios are failing in this attempt.
The Reasons Why People Prefer Streaming
Bluntly, the explanations for preferring the movie theater were nondescript.
Yes, watching something on the big screen still comes with a certain cachet for many consumers.
Photo: ESPN
However, home audio systems are plenty good enough for most fans, and getting out of the house as an escape is relatively easy.
Among the only justifiable reasons to go to the theater were the quality of high-quality cinematic displays like IMAX and…exclusivity.
Photo: IMAX
You may recall that Max and Disney+ provided simultaneous home viewing of many releases throughout the pandemic.
That strategy never went away, as recently demonstrated by Five Nights at Freddie’s, which was available on Peacock but still opened to $80 million.
Photo: Washington Post
Companies like Disney enforce exclusivity because their revenue models work best that way.
So, listing that as a benefit of theatrical isn’t a positive but rather a necessity.
Photo:cnet.com
Conversely, the advantages of watching movies at home are real and plentiful.
Fans pointed to the high cost of movie tickets, a valid complaint. You can often purchase multiple streaming services for the cost of a single ticket.
Photo: skillastics.com
Similarly, fans lamented the high cost of concessions, which is requisite.
Movie theaters only turn a profit via concession sales. So, they need high profit margins to remain in business. Ergo, that one’s not going away.
Photo: Samsung
Obviously, people also preferred the comfort of watching at home, a factor that vastly outweighed the “escaping distractions” crowd.
Then, we had factors like hygiene, bathroom breaks, and the inability to pause films in theaters.
Photo: El Capitan
Also, film lovers prefer starting movies whenever they want rather than finding a movie schedule listing that fits their needs.
In short, consumers know all the advantages of consuming films at home and the aggravations of going to the theater.
The Good News and Bad News for Disney
Photo: Disney
Absolutely none of this data should surprise anyone, least of all Disney.
Unfortunately, the poll underscores the challenge that Disney CEO Bob Iger currently faces in rebuilding his theatrical film schedule.
(Charley Gallay / Getty Images for Disney)
Disney needs blockbuster hits that pay for themselves in theaters.
That’s basically the free marketing phase when done right. You buy commercials to persuade customers to watch your movie.
Image: Disney
Then, the box office receipts pay for the cost of production and the marketing costs.
Later, everything a movie earns in secondary markets counts as pure profit…when everything goes right.
Photo: Disney
When movies disappoint/bomb, like what happened in 2023, Disney faces multiple financial shortfalls.
To wit, The Marvels is already in danger of falling off the Nielsen streaming charts after just two weeks. Wish had a short run, too.
Photo: Taylor Swift
For this reason, Disney+ needed to pay $75 million for the rights to Taylor Swift: The Eras Tour.
Otherwise, the streaming service would have lost subscribers due to a lack of high-quality content.
According to this poll, 30 percent say they stream one or two movies a week, while the same respondents go to the theaters “a few times a year.”
Photo: Taylor Swift
People are still watching movies, though. In fact, “nearly half of consumers say they stream movies weekly, more than 7x as frequently as those who do so in theaters.”
The Walt Disney Company
That’s the crossroads where Disney finds itself. People want more content, but they want to watch it at home, which is more challenging to monetize.
So, this poll is good news for Disney as it transitions into being a digital company, but it’s terrible from a financial perspective.
The Walt Disney Company
Right as Disney tries to lure consumers back to the theater, they’ve just clearly stated they don’t want to go.
The challenge becomes persuading these streaming evangelists to come back to the theater for Disney releases.
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