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Will Disney Accidentally Solve Hollywood's Biggest Problem?

By Rick Munarriz – Aug 14, 2021 at 11:00AM

Key Points

  • Disney's newest film is the first since last summer to be available exclusively in theaters.
  • Its legal battle with the "Black Widow" star is a bad look, but also a necessary conversation for the industry to have.
  • It wasn't by design, but Disney's different approaches to film distribution and the Scarlett Johansson lawsuit pave the way for the next phase in Hollywood.

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A new approach to theatrical distribution and a headline-rattling legal fight could be just what Disney -- and the industry -- needs right now to figure out its future course.

It's probably not the way Walt Disney (DIS -0.01%) scripted it out, but when it comes to solving Hollywood's film distribution problem, it seems as if all roads lead to the House of Mouse. Free Guy is the latest Disney movie to hit theaters this weekend, and it's approaching distribution in an entirely different way from the entertainment giant's recent releases. 

Disney is also being sued by Scarlett Johansson, the star of this year's highest-grossing multiplex release. Disney didn't plan Free Guy's distribution strategy. It also obviously didn't want to trade legal fisticuffs with the Black Widow star, especially since another movie deal has come undone as a result of the standoff. However, as unintentional as these events may be, this could be the reason there's a projector light at the end of the movie production tunnel. 

A couple watching a film at a movie theater with popcorn and a beverage.

Image source: Getty Images.

Not-so-free guy

Since August of last year, Disney's approach to its planned theatrical releases has taken one of two paths. Its biggest potential blockbusters hit theaters at the same time they were available through Disney+ Direct Access for anyone willing to shell out $29.99 for unlimited streaming access to the new release. Black Widow, Cruella, and Jungle Cruise have gone this route, and it's not a surprise that they're the studio's three top-grossing films of 2021 in the U.S. market. These films will be available to all Disney+ subscribers three months after their theatrical premiere. 

The balance of Disney's slate has been either pushed out to a later release date or just dropped onto Disney+ for all of the platform's existing subscribers. We've seen Soul and more recently Luca go this route.

Free Guy is breaking the mold in that it's the first Disney-owned release in more than a year to play exclusively in theaters. It's also a tighter than usual window of movie-house exclusivity, as Free Guy can be streamed legally 45 days later. This wasn't by Disney's design. Free Guy -- like next month's Shang-Chi and the Legend of the 10 Rings -- are properties the media juggernaut inherited with its acquisition of 20th Century Fox assets. They are tied to earlier release deals. Making matters seemingly worse, when that 45-day window of theatrical exclusivity is over, they are going to be available on Disney+ rival HBO Max first. 

This isn't a bad thing. Disney is now learning a lot about many different flavors of distribution. It will be better suited to work the right levers if audiences come back to movie houses or if they stay away, either as a result of COVID-19 escalation or just the evolutionary migration to home-based streaming. 

Johansson's lawsuit over her Black Widow contract may be harder to sugarcoat, but this is an inevitable battle between studios and top talent. Johansson negotiated her contract to take a cut of the box-office receipts before the pandemic, and before premium digital delivery was disrupting the traditional distribution channels. This is a fight that has to happen, especially since the future may not be as rosy as the past for the industry in terms of sheer revenue generation. Both parties are fighting for bigger slices of a thinning pie. Just as we're seeing salary caps for some sports leagues start to contract as viewership diminishes, the industry is going to have a painful reality adjustment. Once everything is reset -- and you may as well spill blood now rather than later -- the better it will be for all sides to negotiate win-win contracts.

Disney didn't pick its cards. It was dealt the Free Guy card. It didn't want to lock horns with Johansson in a legal battle that now finds a production deal for a Tower of Terror-themed movie to fall apart. It all had to happen for the media stock to once again be the industry bellwether and tastemaker. As they say in The Mandalorian on Disney+, this is the way.

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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