Bob Chapek was on Disney’s Q3 FY21 earnings results webcast and during the Q and A session, Bob Chapek made excuses for why recent movie releases like ‘Jungle Cruise’ and ‘Black Widow’ were failing so miserably in their second week. He also answered questions regarding the strategy of new movie releases going forward. Following the webcast, which was transcribed by The Motley Fool, Chapek participated in a Q and A and was asked by MoffetNathanson analyst Michael Nathanson what the understanding was behind the recent releases.
“I wanted to understand how the company is thinking about near-term theatrical releases given the steep fall off in second week box, rise of the Delta variant, international markets still unopened. So why not delay or pause release schedule?”
Chapek blamed the uncertainty of the current climate globally on why things aren’t go so well for these recent releases.
“Michael, as you probably recognize we live in a very uncertain world in terms of the recovery of some of our markets in the theatrical exhibition world is certainly part of that. We’ve said from the very beginning that we value flexibility in being able to make as last-minute calls as we can given what we see in the marketplace.”
Chapek then added by adding that the resurgence of the Delta Covid variant was an uncertainty that has had an impact on the marketplace
“And certainly, when we planned our schedule that we’re executing right now, we did not anticipate nor did I think anybody the resurgence of COVID with the Delta variant that would have such a significant impact on the marketplace. At the same time, when you work in an ecosystem, having a lot of partners, they need to be able to plan their business, too.”
Global Markets Are Not the Entire Problem
As far as I know theaters in all states are at a 100% capacity. You can get that data at cinemasafe.org. So blaming the new Covid variant on that is a weak argument. It might account for a very very small percentage of those people that might be wary of sitting in a crowded theatre but not why sales for ‘Black Widow’ and ‘Jungle Cruise’ have plummeted in their second week. He’s also using the excuse that theatre markets globally are very uncertain right now. I remember a time when box office sales were just domestic and international markets were not even a thing that was considered in a movies success or failure. I mean, it wasn’t until the mid nineties that we actually started getting actual data from foreign markets on a consistent basis. I get that modern entertainment companies rely on that global revenue stream, because, let’s face it, China, Japan, etc are really big markets to consider. But, to use that as an excuse is a scapegoat, in my opinion, because these movies should intentionally be for the primary consumer which is the North American market. Chapek then asserted that ‘Shang Chi’ was a movie that Disney was going to place in the market by itself for a limited time to see what happens.
“And so at some point, we have to put a stake in the ground and say, for example, Shang-Chi, that’s going to be a title that we’re going to put in the marketplace or Free Guy. That’s going to be a title that we’re going to put into the marketplace.”
“Not knowing, again, three months earlier when you make that commitment, what exactly the marketplace is going to look like. But what I do think that says, Michael, it says that we value flexibility and we value to follow where the consumer is going to go,”
In other words, oops, it was probably a mistake to have ‘Black Widow’ and ‘Jungle Cruise’ come out simultaneously in movie theaters and Disney Plus
as we all saw the result of that, including the lawsuit that Scarlett Johansson brought against Disney for doing that as well. Chapek followed that with a hard line on Disney making a decision on what to do because of the current fluctuating environment that new release movies find themselves in.
“And while some of that’s uncertain, I think in terms of relative to where the rest of the market is, you see that we’ve got more flexibility in terms of how we program. And nothing is in stone because the marketplace is rapidly changing.”
“But at some point, you’ve got to put a stake in the ground and say, this is what we’re going to do and that’s where we ended up on Shang-Chi and Free Guy, which are our next two titles out.”
‘Godzilla vs Kong’ Was a Success…What’s Disney’s Excuse?
Again, I find a lot of excuses and a company that is backed into a corner because of the decisions they are making. Bob Chapek can’t use Covid as an excuse because we all saw successes with other movies such as ‘Godzilla vs Kong’, ‘A Quiet Place 2’, and ‘Furious 9’. ‘Godzilla vs King Kong’ was released simultaneously in theaters and HBO Max and it more than doubled its production budget. So, Bob Chapek and Disney using excuses like an uncertain global market and Covid are extremely weak. Nathanson then asked a follow up question.
“Why wouldn’t you just add from your access given what you saw happen, I think, successfully with Black Widow to those two titles?”
Chapek then answered with a very vague “let’s throw anything at the wall and see if it sticks”.
“OK. Good question. On Free Guy, obviously, this is a title that we acquired under a different distribution assumption and set of agreements. So we don’t have the degree of freedom to do that on Free Guy.”
“On Shang-Chi, we think it’s actually going to be an interesting experiment for us because it’s got only a 45-day window for us. So the prospect of being able to take a Marvel title to service after going theatrical with 45 days will be yet another data point to inform our actions going forward on our titles.”
“But once again, I’ll refer back to my previous answer. When we plan Shang-Chi that title was planned on being in a much more healthy theatrical environment, and at this point, unfortunately, due to distribution agreements that we have and due to just the practicalities of last-minute changes, it wouldn’t be possible.”
First off I think Michael Nathanson is a little misinformed when it comes to ‘Black Widow’s’ success…unless I’m reading that wrong. ‘Black Widow’ has been a complete failure sales wise. ‘Black Widow’ has only made $175.7 million at the domestic box office and $352.2 million globally. With a production budget of $200 million and a total cost of $400 million when you include the marketing costs, ‘Black Widow’ is not going to break even let alone make a profit. I didn’t even include the cut that movie theaters get. The sales are even worse for ‘Jungle Cruise’ which had a production budget of $362 million. It would need to do over $500 million to even break even.
Disney is a Company That is Lost
Disney has an identity problem in that they have so married themselves to identity politics in their entertainment that they are a company lost and don’t know what direction to go. Because no matter which direction they go, there will be someone in the SJW crowd who will disapprove, get loud on Twitter about it, and Disney will comply as a result. Bob Chapek and company will continue to throw excuses at us instead of looking in a mirror and start to hold themselves accountable for bad storytelling. Disney used to be about original ideas and content. Now it’s about rehashing, replacing, and remaking characters, franchises, and entertainment that should have been left alone. In addition, Bob Chapek can use all the excuses he wants as to why ‘Black Widow’ and ‘Jungle Cruise’ are failing, but ‘Black Widow’ should have been released a long time ago, or for that matter, been made and released at the conclusion of ‘Avengers Endgame’ when it would have been relevant and Disney could have rode the coattails of that success. Finally, Disney is allowing Marvel to produce movies and TV shows that no one cares about just to appease a certain group of people. I mean ‘Shang Chi and the Legends of the Ten Rings’ and ‘The Eternals’? Who the hell cares about those characters…no one does or has never heard of them unless you are a die hard comic book fan. So, it’s not the excuse that the current global climate Disney finds hard to navigate that’s the problem. It’s really because Disney doesn’t know how to make good quality entertainment anymore because they are afraid of pissing off the wrong people. As a result, fans are getting identity politics shoved down their throats, and frankly, the true fans are sick and tired of it and that is why Disney is seeing lackluster sales at the box office.
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