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Sunday, December 05, 2021

Marvel’s ‘Shang Chi’ Crushed Box Office Expectations. Will That Convince Disney to Keep ‘Eternals’ in Theaters?

Prior to the debut of Marvel’s “Shang-Chi and the Legend of the Ten Rings,” Disney CEO Bob Chapek called its old-school theatrical release an “interesting experiment.”

The “experiment” in question: Would enough people show up to their local multiplex to see the latest Marvel movie to justify keeping the $200 million-budgeted film in theaters without an immediate backstop on Disney Plus? Overall ticket sales have been depressed in the pandemic, and the studio’s superhero installments typically open to more than $100 million in non-COVID times.

This weekend’s box office tallies revealed that, yes, even with the delta variant raging, “Shang-Chi and the Legend of the Ten Rings” could deliver movie theaters a much-needed jolt. The 25th entry in the Marvel Cinematic Universe had a bigger debut than the studio initially reported, collecting a mighty $90 million over the four-day Labor Day holiday weekend.

Tracking had indicated a three-day total around $50 million, so the movie’s better-than-expected start (it made $75.5 million over the traditional three-day weekend) offers Disney and cinema owners alike a boost of confidence in audience’s loyalty to the big screen even as the studio moves aggressively into the streaming space. Making its debut more impressive, Labor Day is typically a slow weekend at the box office as families opt to spend time outside before summer ends. “Shang-Chi” smashed the holiday weekend record previously set by 2007’s “Halloween” with $30.6 million.

“Marvel has set a remarkable standard for itself, and the opening is just below average for a Marvel series launch,” says David A. Gross, who runs the movie consulting firm Franchise Entertainment Research. “Under normal conditions, Marvel would not launch on Labor Day and the opening would be bigger.”

“Shang-Chi” didn’t only establish a new high watermark for Labor Day, it landed the second-best opening weekend of the pandemic, behind “Black Widow” ($80 million in its first three days). However, “Black Widow” wasn’t only available in theaters, and Disney reported that “Black Widow” generated $60 million in its inaugural weekend on Disney Plus in addition to its box office haul. It has since made at least $125 million from streaming rentals.

Does that tell Disney that “Shang-Chi” and other Marvel properties could stand to gross even more money with a day-and-date release on Disney Plus? Or would people turn out in greater numbers to watch the studio’s latest superhero entry on the big screen if they didn’t have the option to watch it from the couch?

Those are unknowable questions, making it challenging to predict Disney’s plans for Marvel’s upcoming installment “Eternals,” which is scheduled for Nov. 5. It could follow in the path of “Shang-Chi” and play exclusively in theaters for 45 days before moving to digital platforms, or it could replicate the pandemic-inspired rollout of many of the studio’s new movies, such as “Black Widow,” “Cruella” and “Jungle Cruise,” which premiered simultaneously in cinemas and on Disney Plus for $30.

Eric Handler, a Wall Street analyst with MKM Partners, estimates “Shang-Chi” needed to make at least $70 million in its first four days to satisfy Disney and encourage the studio to nix a hybrid release for “Eternals.” He says day-and-date releases on streaming platforms cuts into downstream revenues, like on-demand rentals, later on. Though “Black Widow” stands as the highest-grossing movie of the year in the U.S. with $182 million, its star Scarlett Johansson sued Disney in a bombshell lawsuit, asserting that the decision to simultaneously release “Black Widow” in theaters and on Disney Plus cannibalized the film’s box office revenue and cost her tens of millions of dollars in backend bonuses.

“Studios are very concerned about whether or not these movies can be profitable,” Handler says of big-budgeted films. “How many new subscribers are these movies each bringing in? Right now, from an investor standpoint, subscriber growth is important, but you have to look at the bottom line.”

A key difference between “Black Widow” and “Shang-Chi” is the former centers on a hero that moviegoers have gotten to know and love through a swath of Avengers mash-up movies. In contrast, “Shang-Chi,” starring Canadian actor Simu Liu as the eponymous hero and “Crazy Rich Asians” breakout Awkwafina as his best friend-turned-sidekick, follows a character that doesn’t have as much brand awareness as, say Iron Man, Spider-Man or even Thor. Similarly, “Eternals” — directed by Oscar-winner Chloe Zhao and starring Angelina Jolie, Gemma Chan, Kit Harington, Richard Madden and Kumail Nanjiani — focuses on an otherworldly species that’s not as well known to the casual comic book fan. That didn’t stop moviegoers from showing up to see “Shang-Chi,” which had a similar turnout at the domestic box office to 2018’s “Ant-Man and the Wasp” with Paul Rudd ($75 million) and 2016’s “Doctor Strange” with Benedict Cumberbatch ($85 million). It’s also not far off from 2019’s “Spider-Man: Far From Home” led by Tom Holland ($92 million).

The character of Shang-Chi may not have been a household name, but the movie, like “Black Panther” and “Captain Marvel” before it, was a watershed moment in representation as moviegoers flocked to see themselves reflected onscreen in the first Marvel movie with an Asian lead and primarily Asian cast. Directed by Destin Daniel Cretton, “Shang-Chi” takes place after the events of “Avengers: Endgame” and centers on a skilled martial artist who is forced to confront his past when he is targeted by the covert Ten Rings organization. It’s hard to know just how big of a difference its inclusiveness made when it comes to selling tickets because Disney doesn’t break down attendance by demographic. However, organizations like Gold Open rallied behind the film to ensure “Shang-Chi” had a strong turnout. That’s good news as Marvel continues to add greater diversity to its cinematic universe, with “Eternals” marking the inclusion of the first openly gay superhero.

“Disney is proving they can take minor characters and turn them into something,” says Michael Pachter, an equity research analyst at Wedbush Securities who covers the entertainment industry. “‘Guardians of the Galaxy’ proved the formula: you can take an unknown character and […] create franchises.”

To that end, Pachter says it would be “a bad idea” for Disney to continue its hybrid release model. “I think the days of the hybrid release are fast coming to an end,” Pachter says. “It impacts theatrical revenues by some portion, and it cannibalizes future [premium video-on-demand] rentals.” Piracy is also a massive concern, he adds. After “Black Widow” debuted online, it shot to the top of piracy websites.

According to insiders, Disney has a little over two weeks to make a decision about plans for “Eternals,” and the decision won’t be determined solely by opening weekend sales for “Shang-Chi.” However, box office revenues for “Shang-Chi” in its second weekend of release will be indicative about the film’s long-term prospects at the box office. For Marvel movies in particular, they tend to draw massive crowds in its first few days. Hollywood will be eager to see if the film plummets in its sophomore outing, similar to tentpoles like “Black Widow” and the Warner Bros. comic book film “The Suicide Squad,” or if “Shang-Chi” holds steady, like Disney’s other theatrical-only release, the Ryan Reynolds-led action comedy “Free Guy.”

Though the film industry remains in flux, it isn’t all bad news for cinema operators. Shortly after Disney announced “Shang-Chi” broke Labor Day weekend records, Sony announced plans to release its comic book adaptation “Venom: Let There be Carnage” two weeks ahead of schedule. That had movie theater owners breathing a sigh of relief, especially after speculation the Tom Hardy-led film would be pushed into 2022 and news that Paramount took its Tom Cruise tentpole “Top Gun: Maverick” off the calendar in 2021 and moved it into next year.

For those who survived months-long theater closures and seemingly endless release date delays only to endure the setbacks caused by the delta variant, “Shang-Chi” may be just the kind of hero the film exhibition business needs.

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