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Oddly, Disney Tentpoles Are More Important for Theaters Than They Are for Disney

It may own 40 percent of the US box office, but Disney's films only account for one-sixth of its profits.

Person leans against the railing of the docked Disney Magic cruise ship at PortMiami amid the virus outbreak, in Miami. President Donald Trump tweeted yesterday that at his request Carnival, Royal Caribbean, Norwegian, and MSC have all agreed to suspend outbound cruises as the world tries to contain the COVID-19 outbreak. A on Saturday, March 14, 2020, in MiamiVirus Outbreak Florida, Miami, United States - 14 Mar 2020

The docked Disney Magic cruise ship at PortMiami amid the coronavirus outbreak.

Brynn Anderson/AP/Shutterstock

On the eve of the Walt Disney Co.’s first quarterly earnings call since the coronavirus pandemic began wreaking havoc on its bottom line, a comprehensive overview of the company’s financial picture by the New York Times highlights a stark reality: Though it owned more than 40 percent of the domestic box office share in 2019, less than 16 percent of Disney’s earnings came from its studio unit. (And, fittingly, Disney’s film division received just two paragraphs totaling 100 words, footnote-like, at the end of the piece.)

Technically, film is not the company’s smallest unit by revenue; Direct to Consumer and International contributes 13 percent, but it’s also Disney’s fastest-growing sector. And film is dwarfed by what really drives the conglomerate: Parks, Experiences and Products (37 percent) and Media Networks (35 percent). The fact is its multi-billion-dollar tentpoles do more to prop up exhibitors than they do the company itself. But as Disney and theaters chart their paths to recovery, the issues that impact the other, larger Disney sectors could also have an outsized impact on theaters.

Parks, Experiences, and Products may be its hardest hit in a time when experiences are relegated to ones inside the home. Its 14 theme parks sit empty and its four cruise ships are docked. There’s hope: Shanghai Disneyland, which has been closed since January, is expected to start to reopen within the next month, while Florida — home to Disney’s most popular US park — is beginning to ease restrictions.

A bright spot is its Media Networks segment, its most profitable. ABC has outperformed its rivals in recent weeks thanks to the long-running “Grey’s Anatomy” and “American Idol,” one of the few series still in production. And it demonstrated the power of its brand with “The Disney Family Singalong,” which attracted 13 million viewers for what was essentially an hour of celebrities singing Disney favorites on a Zoom call. A second installment, which will feature songs from “Aladdin,” “The Little Mermaid,” and “The Lion King,” is in the works for Mother’s Day.

Comparatively, film may look like an also-ran from a revenue perspective — but Disney’s movies create the brand-glue that holds the company together. There would be no kids lining up for photos with Mickey Mouse if he wasn’t a film star, and no reservations required for “Star Wars: Galaxy’s Edge” if it wasn’t a hugely popular franchise. The same logic rules Disney+, which is expected to lose billions this year as part of a loss-leading strategy — despite the demand for streaming.

As IndieWire reported after the February appointment of CEO Bob Chapek, his directive is to use streaming platforms to continue Disney’s dominance at the box office, drive consumer demand for products and vacations, and cement the company as one of the most formidable competitors in the streaming wars.

The power of Disney’s brand will surely be enough to lure people back to the company’s money-making cruises and parks. So although the next round of films — “Mulan,” Marvel’s “Black Widow,” and Pixar’s “Soul” — will surely generate hundreds of millions, they’re still more important to the immediate profit interests of theaters than they are to Disney.

Disney has already signaled it doesn’t want to take the gamble on some of its biggest titles. “Jungle Cruise,” moved to July 31, 2021; the next Marvel installment, “Black Widow,” won’t be released until November 6, 2020. But “Mulan” currently remains in place for July 24. For theaters, keeping that date could be a life-or-death decision over which they have little control.

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