In the wake of the coronavirus pandemic, studios are being forced to make tough decisions about which movies will be delayed and which will be sent to streaming and on-demand platforms. With many of the nation’s theaters finally beginning to slowly open again, there still aren’t many big, tentpole films being released. More and more are being delayed as Hollywood waits for the best time, whenever that is, to make the most bank.

Disney’s Mulan, bypassed U.S. movie houses completely and debuted on Disney+ on September 4, more than five months after its originally scheduled opening date in theaters. Warner Bros.’ oft-postponed Christopher Nolan film, Tenet eventually opened on September 3, but didn’t do the sort of box office the studios require, putting them in a stark moment of decision. With a huge backlog of films awaiting release and production restarting or beginning on others, does the year in movies have to include leaving the house?  Mulan wasn’t exactly a smash and Tenet wobbled financially, but we still haven’t heard any reports of theater-based viral clusters related to COVID. Still, it’s hard to imagine regular theatergoing — or major releases — resuming before the arrival of the New Year, a vaccine, or both.

Movie theaters are facing multi-pronged setbacks as the lockdown measures have forced movie-goers to stay home and tune into the closest alternative — online streaming platforms.

Many 2020 movies destined for wide release have already gone to streaming — Judd Apatow’s The King of Staten Island premiered on VOD, Apple bought the Tom Hanks WWII drama Greyhound, and Disney diverted Hamilton to Disney+, a decision that no doubt boosted its subscriber base, now at an impressive 60.5 million. And the Sundance hit Palm Springs, which Neon and Hulu paid more than $17 million to acquire, became a Hulu-only release this summer. But Mulan is different — it cost $200 million, and the company’s choice to release it through Disney+ means that nothing is off the table. The $29.99 price tag (for which you “own” the movie as long as you’re a subscriber) is high compared to a movie ticket, but for families that would have gone to see it together, it’s a no-brainer. And since it doesn’t have to share revenue with theaters, Disney needs to sell far fewer virtual tickets to make a profit.

That’s the argument being made by investors like Daniel Loeb, the chief of Third Point a hedge fund, who argues that Walt Disney Company to suspend its dividend and reinvest that money into acquiring and producing new content for its streaming services. Doing so, he insists, would double the company’s spending on tentpole films and series to highlight on its Netflix challengers. He also says that Disney should place more of its upcoming blockbusters on Disney Plus, suggesting that streaming services, and not theatrical exhibition, represent the future of movies.

Loeb’s hedge fund owns roughly 5.5 million shares in Disney, as of June 30 of this year.

As reported in Variety:

“Just this week, Regal Cinemas shuttered all its U.S. operations and physical theaters. While we all share a certain sadness and nostalgia for this eventuality, I am sure that people felt similar emotions about horse-drawn carriages when the automobile was first introduced,” Loeb writes in a letter to Disney CEO Robert Chapek. “Every Hollywood executive has been able to enjoy first run films in the comfort of their home theaters for years. We urge you to democratize this experience and to continue to embrace the future of home entertainment with the utmost urgency in executing the company’s digital transformation.”

Loeb has previously criticized other Hollywood companies, specifically Sony, who he thought were making poor spending decisions for its entertainment division. Here he is suggesting that Disney position itself for the future, even if their bottom line takes a temporary hit. In his letter to Disney he states:

“Disney deserves growth-minded, long-term oriented investors, and we believe that a strategy centered around using Disney’s many resources to drive growth in the DTC business will further attract them.”

Loeb speculates that spending more aggressively on shows and films will separate Disney Plus, along with Hulu and ESPN Plus, from their rivals AT&T, Comcast and ViacomCBS. Loeb further surmises that Netflix will begin to crumble under the weight of Disney’s ownership of Marvel, Pixar, Lucasfilm and other major brands.

“With Disney’s superior tentpole franchises and production capabilities, we believe that the company can exceed the subscriber base of the industry leader, Netflix, in just a few years,” Loeb writes. “But time is of the essence and the company should consider significant additional investments in content both through production and acquisitions here and abroad.”

Regarding Disney’s experiment with “Mulan,” skipping the traditional theatrical release for the film in the U.S. due to COVID-19, and instead letting Disney Plus subscribers buy it for $29.99, Loeb and other Wall Street analysts concluded that the results were not compelling and he thinks Disney should try another approach.

“While some pundits have described the ‘Mulan’ release as a ‘debacle’ due to the $29.99 cost for a VOD download, we see this as a valuable learning experience, expect stumbles on the way to greatness, and believe this will drive a faster decision to make all content available to subscribers for a simple subscription fee,” Loeb writes.

In the past, Disney has benefitted greatly from cable re-transmission fees and ticket sales. Loeb thinks the subscriber revenues on Disney’s streaming services could become a more meaningful source of profits.

“We are confident that Disney can build a DTC business that will meaningfully exceed its current cable TV and box office revenue streams, but only if the company leans into this opportunity and invests more aggressively,” he writes.

As of right now, the studios don’t have detailed proposals for how to release movies; they’re just staring at a horizon of uncertainty and expressing the wish that “maybe things will be better” by an ever-receding, unknown date. As more films go into production and pressure from that end of the pipeline increases, it will become easier for studios to tell theater owners that although there will be plenty of big movies for them whenever the pandemic ends, until then, they’re going to release their films in whatever manner keeps their audience (safely) fed. That is starting to feel more urgent; companies can’t just keep sitting on unseen movies forever. Something has to be sacrificed: movies or moviegoing. 

There may not be a choice in 2021. As the federal guidelines imposed restrictions on the number of attendees in cinemas, directly impacting daily cash collections and Hollywood’s response is to shift big ticket movies to 2021 or are experimenting with releasing movies directly on streaming platforms. Cinema chains like Regal Cinemas suspending their U.S. operations makes it seem like moviegoing experience is going away whether we like it or not.