Movie theaters were relying on 'Mulan' to boost ticket sales, its move to Disney+ is a 'sucker punch to the gut'

While the U.S. is dealing with a resurgence of coronavirus cases that continue to restrict movie theater reopenings, the rest of the world is ready to welcome Hollywood back to the big screen.

However, on Tuesday, international theater owners were caught off guard when Disney decided to launch the much-anticipated "Mulan" as a premium add-on to its Disney+ service. The move made it so that any country where Disney+ is present would not get a theatrical release of the film.

"With cinemas across the U.K. now continuing to reopen and welcome back their customers, the decision by Walt Disney Studios yesterday to put 'Mulan' on their Disney+ service and not into cinemas will be seen by many as hugely disappointing and mistimed," Phil Clapp, chief executive at the U.K. Cinema Association, said.

Placing "Mulan" on Disney+ for an additional $30 is a way for Disney to recoup some of the film's $200 million production budget and its estimated $100 million marketing budget. By not doing a simultaneous release in theaters and on its streaming service, Disney avoids the dust-up that Universal faced following its release of "Trolls: World Tour." 

In countries where Disney+ is not present and the company doesn't have plans to make it available, "Mulan" will be able to go to theaters. That means the film will likely reach Chinese viewers in theaters. "Mulan" was expected to do big business for Disney in China during its initial slated release back in March.

While pushing "Mulan" to Disney+ should help Disney meet its financial targets, it leaves movie theaters around the world in more precarious positions.

"For many this will seem a step backwards rather than forward," Clapp said.

"Mulan" was expected to exceed $1 billion at the global box office, and that was a conservative estimate. Those proceeds would be split between Disney and the movie theaters.

"Every exhibitor I have contact with feels like this is a sucker punch to the gut…" Doug Stone, president of Box Office Analyst, said.

"I completely understand Disney's move as there are certainly carrying costs in continually delaying 'Mulan' into the future," he said. "The only real options left in theatrical would be to move it to the next holiday period, November, and there is no guarantee that enough theaters would be open by then to justify putting it out then. Besides that would mean reshuffling their release schedule yet again."

The theatrical calendar for the next year and a half is packed with movies that were uprooted from their positions earlier in the year. Warner Bros. "Wonder Woman 1984" is slated for release in October and then Disney has "Black Widow" and "Soul" in November, followed by three Fox film releases.

There wasn't a lot of room to place "Mulan" during those months without cannibalizing ticket sales, assuming enough theaters will be able to reopen in the back part of the year.

"Mulan" was a bright spot on the horizon for movie theaters in the U.S., it was used as an anchor for major theater chains planning to reopen to the public, and to global chains that have been able to reopen already, but are lacking new content.

Cinemas have used nostalgic library titles like "Jurassic Park," "Star Wars," "The Big Lebowski" and "Jaws" to lure audiences back to theaters, but they can't operate on that content indefinitely. Movie theaters rely on studios to provide new, enticing content to drive ticket sales and supplemental concession purchases. Without these films, movie theaters could face bankruptcy.

Already AMC Entertainment had to secure a new debt deal to keep it afloat through 2021 due losses as theaters sit closed. The company is set to report second-quarter earnings Thursday.

Cinemark is in a more secure position, having around $525 million in cash as of July 31, but it's burning through $50 million a month, Sean Gamble, the company's chief operating officer and chief financial officer said during the company's earnings call Tuesday.

While shares of Disney soared as much as 10% Wednesday, movie theater chains saw stock prices drop. AMC remained relatively unchanged Wednesday, but Cinemark was down more than 5% and Marcus Theaters slumped nearly 5%. 

"This announcement came as a surprise to many, but maintaining perspective has never been more important," Shawn Robbins, chief analyst at Boxoffice.com, said. "Yes, exhibitors were hoping to benefit from a tent pole like 'Mulan' during their reopening phase in the months ahead, but mid-pandemic logistics have created several major 'howevers' from the studio's perspective."

Robbins noted that Disney is in need of a sizable revenue source to make up for the losses at its theme parks, studios and television production. 

"In 'normal' times, 'Mulan' would certainly have enjoyed massive global theatrical success, but the limitations and constraints of this rather unusual marketplace has caused studios to re-evaluate on a case by case basis the release strategies for their films," Paul Dergarabedian, senior media analyst at Comscore, said. "The fact that a theatrical release is part of the new plan for 'Mulan' shows the importance of that component and that this is a function of the unusual and challenging nature of the current environment."

The National Association of Theater Owners, which represents more than 35,000 movie screens globally, declined to comment. AMC, Cinemark, Cineworld and Marcus Theaters did not immediately respond to CNBC's request for comment.

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