'The stakes could not be higher' for the film industry this Labor Day weekend

Key Points
  • "Tenet" arrives in U.S. theaters this Labor Day weekend while "Mulan" will debut on Disney+.
  • This weekend will indicate if consumers have confidence in returning to movie theaters.
  • The hope is that "Tenet" will be able to tally $25 million to $35 million this weekend, about half of what the film could have made with no pandemic.

In this article

John David Washington stars in Christopher Nolan's "Tenet."
Warner Bros.

In normal times, Labor Day weekend signifies the end of the summer box office. For many, it is the last weekend before kids head back to school and blockbuster action films are replaced with horror flicks and Oscar contenders.

This year, Labor Day weekend holds new meaning. The coronavirus pandemic shattered any hopes of seeing superheroes and souped up cars on the big screen. It wasn't until late August that Hollywood began releasing big-name films to the public again and major movie theaters were able to reopen their doors to moviegoers.

After two weeks, the first big test for the film industry will arrive in theaters. Warner Bros.' "Tenet" will finally be made available in the U.S. and its performance will signal if the domestic box office can withstand the headwinds posed by the ongoing Covid-19 outbreak.

"Many have said this is the film they have been waiting for; the film they would risk seeking out in the middle of a pandemic," said Jeff Bock, senior analyst at Exhibitor Relations.

Labor Day weekend will also see the arrival of Disney's "Mulan," which was initially slated for a theatrical run back in March. However, after months of pushing the film further on the calendar, Disney ultimately made the decision to place the film on Disney+ for an additional one-time charge of $29.99. 

Analysts are eagerly awaiting these two film releases because they will not only indicate whether consumers have confidence in returning to movie theaters for big-budget movies but whether studios will have the confidence to continue to release films in theaters in 2020.

"It's not an overstatement to say that the movie industry is at one of the key inflection points in its history," Comscore senior media analyst Paul Dergarabedian said. "The stakes could not be higher."

The theatrical test

While independent films have been released during the pandemic, Aug. 21 is when major theater operators like AMC, Cinemark and Regal reopened. "Unhinged,"  Solstice Studios' road-rage film starring Russell Crowe was the trailblazer, garnering $4 million during its opening weekend. "The New Mutants" followed the next weekend with a $7 million haul. Although not massive opening weekend numbers compared with pre-Covid times, these films proved there's demand for new content at theaters. 

The hope is that "Tenet" will be able to tally $25 million to $35 million this weekend, about half of what the film could have made with no pandemic.

This target is "possible given that we are missing the New York and California markets and the lack of seating capacity forced by the pandemic," said Doug Stone, president of Box Office Analyst. "Frankly we're in a very unsettled period with little to compare right now."

Currently, California, New York and North Carolina have not reopened movie theaters to the public. New Jersey was part of that holdout group until Monday, when Gov. Phil Murphy announced that theaters could reopen this weekend. AMC will not be opening its four New Jersey-based theaters this weekend, but Cineworld-owned Regal will open 11 locations in the state on Friday.

IMAX CEO on 'Tenet' premiering in theaters during the pandemic
IMAX CEO on 'Tenet' premiering in theaters during the pandemic

Last weekend, less than 50% of U.S.-based theaters were open and operational, according to data from Comscore. It's unclear how many theaters will be open this weekend because that information does not become available until later in the week. 

Another headwind is the fact that theaters are operating at 50% capacity or less due to social distancing guidelines. 

"Tenet's overseas performance has already exceeded expectations, providing encouragement that the film's stateside release will draw moviegoers who feel safe enough going back to cinemas," said Shawn Robbins, chief analyst at Boxoffice.com. "Studios and theater owners recognize that it makes absolutely no sense to view Tenet's opening under the same parameters we would during pre-pandemic times."

Internationally, "Tenet" arrived in 41 territories last weekend and hauled in around $53 million. Ultimately, "Tenet" will likely make back its $225 million production budget and additional marketing costs by playing for longer in theaters.

"If Tenet does do better than we expect, it would probably dissuade other distributors from pushing big budget films to streaming early, but even a more modest opening still leaves the question open as to what is the right model," Stone said.

The move to streaming

"Mulan" is an example of an alternative model. Instead of entering theaters, the film will be made available on the streaming platform Disney+ for an additional fee.

The unexpected move in early August to bring "Mulan" to on-demand was done out of necessity. Many U.S. theaters were unable to reopen to significant crowds due to a resurgence of coronavirus cases, and Disney had already pushed the film's release again and again. 

Analysts and movie studios are eager to see how well "Mulan" performs over the weekend.

"Studios are definitely keeping an eye on 'Mulan,'" said Eric Handler, managing director of media and entertainment equity research at MKM Partners. "I don't think there were many [premium video on-demand] films that were very successful. As so many films have been pushed into 2021, I think the studios recognize, at least with tent-pole films, that the theatrical window remains very important."

Liu Yifei stars in Disney's "Mulan." Disney CEO Bob Chapek said that "Mulan's" streaming release is a "one-off" and not a signal that the company was swapping to a new business model, but the company will pay close attention to how many accounts opt to purchase the film on Disney+.

The $30 price tag is Disney's way of recouping the film's $200 million production budget and its estimated $100 million marketing budget. While some consumers have balked at the steep price, Disney expects parents will be keen to pay the fee to have new entertainment to show their kids. After all, the cost to buy "Mulan" and have access to it on Disney+ in perpetuity is cheaper than taking a family of four to the movies.

Disney will supplement those on-demand purchases with the theatrical releases in countries without Disney+. So "Mulan" has a good chance of recouping its production costs and actually making a profit.

Disney CEO Bob Chapek has said "Mulan" was a "one-off" and not a signal that the company was swapping to a new business model. Previously, it made "Hamilton," "Onward," "Artemis Fowl" and "The One and Only Ivan" films that were destined for theaters, available on Disney+ for free.

"Even if Mulan does well, it will not be a new strategy for the studios for the vast majority of their films," media and streaming analyst Dan Rayburn said. "They lose money by not having blockbusters in the theaters where they make the most money, in some cases a billion dollar box office for a single movie. ... The global pandemic right now won't last forever and we will go back to movie theaters."

We had many shows sold out under the restrictions: Cineworld CEO
We had many shows sold out under the restrictions: Cineworld CEO