Bob Chapek’s New Streaming Moneyball

hocus pocus 2
In many ways, Hocus Pocus 2 has become perhaps the quintessential title for understanding much of the anxiety in the industry. Credit: Matt Kennedy/2022 Disney Enterprises, Inc.
Julia Alexander
November 8, 2022

Hocus Pocus 2 has astounded the town with its opening weekend Nielsen numbers on Disney+—in particular, more than 2.7 billion minutes watched, or the equivalent of some 26 million completed views. But this being Hollywood in 2022, analysts and executives and critics couldn’t help but simultaneously count the tens of millions of dollars in revenue that was forfeited by not sending the movie to theaters first. In many ways, Hocus Pocus 2 has become perhaps the quintessential title for understanding much of the anxiety in the industry. If a movie this successful on streaming isn’t going to theaters, what does that mean for other films in the pipeline at Disney? 

Streaming versus theatrical is, of course, the debate at the center of Hollywood’s ongoing identity crisis. On one side there is Warner Bros. Discovery C.E.O. David Zaslav, who doesn’t believe there’s a reason to bypass theaters, especially when films can be monetized on HBO Max after only 45 days. On the other side is Netflix co-C.E.O. Ted Sarandos, who is expectedly adamant that movie franchises can be born out of streaming, and has only recently begun to test limited theatrical runs. NBCUniversal C.E.O. Jeff Shell is somewhere in the middle—open to experimenting, as he did with the Halloween franchise, which has been simultaneously released in both theaters and on Peacock.

Disney+, which was late to the streaming game but is now the second-largest platform, also lands somewhere in the middle of this spectrum. Most of its movies now go to theaters first, but select titles, like Hocus Pocus 2, debut on Disney+ exclusively and globally. HP2 not only became the most watched movie on Disney+ in its opening weekend, but it was also the most watched streaming film that Nielsen has captured since it started covering streaming platforms. HP2 also had a score of 50.2x the average demand of all films in the U.S. during its opening weekend, which puts it in the top 0.2 percent of all titles, according to Parrot Analytics, where I work. (Disclosure: Disney is a client of Parrot Analytics.) For comparison, Pixar’s Turning Red, the platform’s second-biggest debut, had 36.2x in its opening weekend. 

The vast majority of films should get theatrical releases—all data points to titles generally performing better on streaming when they go to theaters first. There are some titles, however, that do feel more valuable as streaming-only titles when considering global audience demand, perceived value of a theatrical outing, and goal of the film. HP2 falls squarely into that category. 

A Global Audience?

Consider that Disney maintains a global theatrical business, run by a team that is extremely aware of what will likely work in theaters and what won’t. Also consider how audiences may interact with a movie like Hocus Pocus 2 versus a new live-action Disney movie based on bankable pre-existing I.P. or part of an ongoing franchise, and then consider the importance of growing Disney+ from both a subscriber and—just as important—an engagement perspective. 

Superhero movies aren’t the only titles that can play theatrically, but Disney’s theatrical strategy is all about global releases. And Hocus Pocus 2 isn’t likely to perform at the level the Mouse House would expect. There’s strong nostalgia for the original 1993 film in the U.S., making it an easy sell for families, but that nostalgia doesn’t travel as well outside of the domestic market. Demand for Hocus Pocus 2 outside the U.S. sits at around 9 percent, according to Parrot. Compare that to Turning Red, which sees an average of 20 percent outside its home market. Big theatrical titles, like Black Adam, can see an average of closer to 30 percent. 

Sure, there’s an argument that Disney could have released Hocus Pocus 2 in theaters in early September and moved it to Disney+ just in time for the Halloween weekend, which is where I expect we’ll see a bump in viewership again from Nielsen. There also wasn’t much competition at the box office for family movies: Lyle, Lyle, Crocodile has failed to cross $65 million globally. So assuming that audience interest in HP2 would have translated to spending $15 on a ticket, Disney could have generated some revenue on a relatively limited marketing spend, at least in the domestic market.

But I think the calculation here was a little different: if Disney isn’t going to take a movie to theaters in every market, why risk a potential theatrical loss when the audience on Disney+ is all but guaranteed? The domestic box office is still down 34.5 percent compared to 2019 and, while it’s up more than 100 percent compared to 2021, the return to theaters outside of major blockbusters and scary movies is still sluggish. Also, Disney has already prioritized Disney+ for certain films. Lady and the Tramp moved to Disney+ ahead of the streaming platform’s launch, Pinocchio became a Disney+ exclusive, while Cruella saw a simultaneous day-and-date release. Disney, like its rivals, used Covid to accelerate into the D.T.C. space, but this wasn’t a rash decision. 

Disney, especially under C.E.O. Bob Chapek’s prioritization of Disney+, is looking for titles that can work for both streaming audiences and draw viewers into theaters. When looking at the past track record of other live-action sequels that were released in a healthier theatrical market—Maleficent: Mistress of Evil and Alice Through the Looking Glass both saw 40 percent drop-offs in box office revenue compared to the originals; Christopher Robin reportedly lost $40 million in theaters, and The Nutcracker and the Four Realms about $65 million—it starts to become clearer why the team picked a streaming-first release. Success at the box office wasn’t guaranteed, even domestically, but the value of having a sought-after title on Disney+ is an easy win. 

Hocus Pocus 2 drove massive viewership on Disney+ in the U.S. because it’s a familiar title that families can throw on at home. The less-than-stellar audience reviews on Rotten Tomatoes may have hindered people going to theaters, but it lends itself to multiple repeat viewings in the run-up to Halloween. Engagement with Disney+ increases; therefore the perceived value of the subscription—heading into the Dec. 8 price hike—also increases. 

Hocus Pocus 2 probably hasn’t had a huge impact on subscriber growth domestically. The audience for a Hocus Pocus sequel likely already has Disney+. But engaging Disney+ subscribers who don’t watch very often or convincing someone to stay subscribed is probably more valuable to Disney than a small return at the box office that isn’t as guaranteed.