ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Media & Entertainment

Disney shift to online premieres is a spoiler for Japanese cinemas

Business model threatens to dent box office revenues at home and abroad

The Disney+ online platform is where movie fans will catch the premiere of "Soul," an animated film initially slated for theatrical release. (Photo by Emi Sato)

PALO ALTO, U.S./TOKYO -- As Japanese cinemas enjoy the box office windfall of a Demon Slayer franchise smash hit, a certain cartoon mouse threatens to play villain and spoil the fun.

Under pressure from investors, Walt Disney is preparing to release new films online as a majority of theaters in the U.S. remain shuttered or at lower capacity due to coronavirus restrictions. Such a business model, however, would harm cinemas in Japan, which are very much open to audiences.

The animated film "Demon Slayer: Mugen Train" has smashed Japanese box office records, grossing over 20 billion yen ($190 million) in the three weeks since it was first released. That the movie was based off a popular franchise is a major factor explaining the draw. But the other is a complete lack of competition from Disney or other Hollywood studios.

"There are no Western-made movies, so the circumstances are that there is nothing else to watch," said a Japanese industry source.

Also driving Demon Slayer's big numbers is the fact that some theaters play the movie dozens of times a day.

The newest Disney animated movie "Soul" was originally meant to premiere in June. The company pushed back the theatrical opening to November, but then decided instead to debut the film on Christmas on its streaming platform, Disney+.

"We thought it was a really nice gesture to our subscribers to take 'Soul' during the holiday period and provide that as part of the service," Disney CEO Bob Chapek said during Thursday's quarterly earning call.

"Soul" will be the second high-profile Disney movie to premiere on Disney+ after the live-action film "Mulan" did so in September. Although subscribers had to pay an extra fee to watch "Mulan," there will be no extra charge for "Soul."

Disney+ launched just over a year ago. When the coronavirus hit shortly afterward, the platform has been looked at as a viable outlet for new big-budget movies -- and as a vehicle to rehabilitate earnings.

Disney's theatrical revenue for the fourth fiscal quarter through Oct. 3 plummeted 52% from a year earlier to $1.59 billion, the company announced Thursday. The segment's operating profit plunged 61% to $419 million.

However, Disney's streaming arm drew the audience its movie theaters lost. The segment boosted revenue 41% to $4.85 billion in the fourth quarter. Although the segment was not profitable due to investments, it is clear that streaming is a growth business.

Disney+ is available in more than 20 countries with a user base of 73.7 million subscribers as of the end of September. When other platforms such as Hulu are included in a package, the audience grows to 120 million subscribers.

Activist investor Daniel Loeb urged Disney in a letter last month to suspend dividends and invest the money in streaming and original content.

The U.S. cinema industry will find itself left in the cold if Disney commits to a hard pivot toward streaming. The company went on a tear of acquisitions over the past decade or so, including that of Marvel Entertainment and Lucas Films, studios that have loyal followers who pack theaters.

The Marvel Universe and the Star Wars franchise have been cash cows for cinemas. Last year, Disney productions accounted for roughly 40% of box office revenue.

Now that the virus has driven away audiences, movie theaters have taken to renting out venues for private parties to stay afloat. If Disney pivots stronger toward streaming-first releases, that would be a matter of life or death for U.S. cinemas.

Across the Pacific, Japanese cinemas do not face such dire straits since they can count on domestically produced films. But the pandemic has stalled imports of foreign films, and the industry faces the risk of declining box office revenue. The Disney movie "Frozen" is the third highest-grossing film in Japan of all time.

If Disney does indeed prioritize streaming over theatrical debuts "the domestic lineup will become increasingly biased toward Japanese films," said the Japanese movie industry insider.

In his letter to Disney, Loeb likened cinemas to "horse-drawn carriages," and streaming services to automobiles. But Netflix co-CEO Reed Hastings still thinks there is a place for brick-and-mortar movie theaters for the long term.

"People like a communal experience, and going to the movie theater some of the time, and they like watching at home," Hastings told Nikkei Asia in an interview.

Disney's Chapek declined to elaborate on his company's future vision, but more clues may be forthcoming in Disney's virtual Investor Day session next month concerning investments in streaming.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more