This week Disney shocked cinema owners around the world when it announced that it won’t release its hotly anticipated, $200 million (€169 million) blockbuster film Mulan in theaters. Instead, the live-action epic will go online.

From September 4, subscribers to Disney+, the studio’s new streaming service, will be able to rent Mulan for $29.99 (€25.30). Customers will be able to watch the movie for as long as they remain a Disney+ subscriber.

In addition to the US, Mulan will be made available to Disney+ customers in Canada, New Zealand, Australia and Western European countries including the UK, France, Italy, and Germany.

Read more: Animated film in Germany

After Mulan was moved online, Disney’s stock jumped more than 5% despite reporting a $4.7 billion (€3.96 billion) loss from April to June this year. Instead of focusing on the studio’s movie and theme park businesses, which have been battered by the coronavirus pandemic, investors saw a positive story in Disney’s digital operations, which are soaring.

Disney+, launched nine months ago, already has 60.5 million subscribers. That trails streaming giant Netflix, which has 193 million subscribers worldwide, but is far ahead of Disney’s own target of 60 million to 90 million Disney+ subscribers by 2024.

Disney embraces the future — and a better profit margin

Mulan’s online release, apparently, is a sign that Disney is abandoning its traditional cinema past and embracing a digital future.

“Out of both success (Disney+) and necessity (COVID-19 disruption), Disney is moving to push its streaming strategy to new levels of investment and growth,” writes Morgan Stanley analyst Benjamin Swinburne in a recent report.

Bob Chapek (CEO Courtesy of Walt Disney )

“We’re looking at ‘Mulan’ as a one-off,” says Walt Disney CEO Bob Chapek

On the surface, Disney’s Mulan move looks like a win-win for the Mouse House.

The high-profile movie will bring new subscribers to Disney+, and because Disney is renting Mulan to fans directly rather than going through an intermediary like a movie theater, the studio will keep every dollar from every “ticket” sold. Whereas, an a theatrical release, a Hollywood studio typically splits box office revenue 50-50 with the cinemas.

A better revenue split means more money for the studio. Universal, which took the direct-to-online route in April with its kids’ animation sequel Trolls World Tour, said it generated the same profits — around $77 million — from $100 million in digital sales for Trolls World Tour in the US as from the $154 million box office take of the first Trolls film back in 2016.

Outside North America, the stream is only a trickle

Go outside North America, however, and things look different. Compared with the theatrical box office, the direct-to-digital market in much of the world is still tiny. It’s near nonexistent in China and even in a more mature movie market like the UK, on-demand digital sales made up just 5% of the country’s $3.2 billion home entertainment market in 2019.

Actress Scarlett Johansson in an outdoor action scene with something burning in the background (Courtesy of Walt Disney Studios )

A normal theatrical release this November is planned for the new Marvel movie “Black Widow” starring Scarlett Johansson

“The digital business has spiked because of the COVID-19 lockdown with everyone at home streaming movies, but that’s not been nearly enough to compensate for losses for films they were, or still are, planning to release theatrically,” says David Garrett, head of Mister Smith Entertainment, an independent film production and sales company based in London.

Aladdin, Disney’s last live-action adaptation, grossed $1.05 billion (€890 million) at the box office globally. To make those profits on Mulan, the studio would need around 30 million people — or half of Disney+ subscribers — to rent Mulan at $29.99 a pop. A tall order, especially in a world hit by a once-in-a-lifetime economic recession.

Actress Liu Yifei in the film Mulan (Courtesy of Disney Enterprises Publicity )

Disney is still planning to release Mulan in theaters across most of the world, including China

Digital piracy an ongoing threat

And digital releases have a dark side: piracy.

A new study by British analysts at Muso suggests that studios releasing films online faster has led to a spike in piracy as better rip-offs are available sooner.

After the coronavirus cut short the theatrical release of Sony’s Bloodshot, a Vin Diesel action movie, it rushed out the film on PVOD — only to see a massive 1,600% increase in piracy streaming in the following seven days. Piracy traffic for Sonic the Hedgehog, a Paramount title, jumped 719%.

To compare, Warner Bros.’ Joker, which started in US cinemas on October 4 last year and had a full theatrical release window, saw only a 29% increase in pirate site visits after a high-quality copy of the film leaked on November 10.

Walt Disney Logo

60.5 million subscribers have signed up for the Disney+ streaming service since it launched last October

That explains why even Disney is hedging its bets with Mulan’s digital premiere. In China and many other places Disney+ is not available, meaning that in most of the world Mulan will get a regular theatrical release.

Warner Bros. is taking a similar approach with Christopher Nolan’s sci-fi epic Tenet, which will open in theaters outside the US in late August with a limited US release September 4.

“We’re looking at Mulan as a one-off, as opposed to saying there’s some new [business] model that we’re looking at,” Disney’s CEO Bob Chapek told investors this week.

For its next big movie, the Marvel film Black Widow, Disney is sticking to the plan of a regular theatrical roll out on November 6. By then, Hollywood hopes the tired cinema business will be up and running again and it won’t have to exchange cinema dollars for digital dimes.