Walt Disney's (DIS 0.18%) ongoing experiment with the dual release of some of its films in theaters and on its Disney+ streaming service seems to be working, at least for Disney.

To be sure, the decision has irked movie theater operators like AMC Entertainment Group because it violates long-held deals regarding theater-only release windows and hurts theater revenue. And some of the movie stars haven't been too pleased with how the releases have affected what they expect to earn for their work.

In its most recent quarterly report, Disney highlighted that premier access sales of Cruella bolstered revenue at Disney+. That boost is likely to be much higher this quarter, including sales of Black Widow and the newer release Jungle Cruise.  

But where is this going long-term for the company?

People sitting in a movie theater.

Image source: Getty Images.

Disney's earning more negotiating power 

Disney management began this experiment in the height of the pandemic in spring 2020 as theaters were temporarily closed and its various film studios were tired of pausing and delaying the release of several films. With fewer consumers visiting movie theaters as they followed COVID-19 restrictions, Disney decided it did not want to put movies in theaters that would draw limited audiences. To account for the audience segment who were avoiding theaters because of the virus but would otherwise like to see the movie, Disney began releasing some films on Disney+ at a premium price of $29.99. 

So far, management says the new system is working reasonably well. Marvel's Black Widow has now exceeded $125 million in sales on Disney+. The film has also generated $370 million at the box office. On the surface, it appears that sales on the streaming platform are not taking away from box office receipts.

Importantly, Disney keeps a larger share of its income from Disney+ sales than it does from box office receipts. Most studios negotiate a 50/50 split of the receipts with theaters over a certain time frame. However, because of its clout, Disney regularly negotiates for a 60/40 split with Disney getting the majority. Success on its streaming platform could give Disney even more power in negotiations with movie theaters going forward. Although Disney only generated roughly one-third the number of sales for streaming the film compared to box office receipts, it gets to keep the full receipt. Releasing the film on Disney+ could have the added benefit of attracting new streaming subscribers.

What this could mean for investors 

The data Disney is getting from these simultaneous releases could become invaluable. The eventual fate of film releases could be straight to streaming. Comparing the price of taking a family of four to the movies versus buying premier access is strongly in favor of staying in the comfort of your home.

Movie theaters have spent years implementing pricing policies that some consumers consider predatory. Add in other policies such as restricting the ability to bring your own food and beverage (then turning around and selling $6 cups of soda and $9 buckets of popcorn) and the streaming premium sounds even better to some. And that doesn't even account for theater ticket prices hitting $17.75 per adult in some big cities.

All things considered, watching a new release at home could cost 75% less than it does at the theater. Sure the experience is sometimes better at the movies with the large screen and excellent surround sound, but is it worth three to four times the price?  

It's a prudent move by Disney management to prepare for the scenario when streaming releases overtake box office receipts. Who knows, maybe movie theaters will get the message and adopt more customer-friendly policies that bring larger groups of people back to their establishments. 

Either way, the emergence of a direct-to-streaming premier access release gives Disney the opportunity to capture more of the benefits from its blockbuster films. Just how large could that impact be? Between 1995 and 2021, Disney's movies have earned over $40 billion at the box office. Assuming the generous 50/50 split, that's $20 billion Disney has split with movie theaters. Or roughly $1 billion per year. The success of Black Widow on Disney+ is another step toward more of that revenue staying with Disney and away from movie theater operators.