The international outcry over Putin’s invasion of Ukraine has been so great that the major Hollywood studios had little choice but to abandon the Russian market, at least temporarily. The race to the exit was started by Disney, with Warner Brothers, Sony, and Paramount following suit. Other media-related departures include Netflix, Discovery, and Amazon. The list is extensive.
A film embargo is unlikely to have a material effect on top-line profits. Spider-Man: No Way Home generated a whopping $55 million or so at the Russian box office, but that only represents about 3% of near $1.8 billion in global receipts, not including China, tallied by the end of February. Absolute numbers in the movie business can be stunning; relative numbers on a market-by-market basis are far less dramatic. For the record, Russia was Hollywood’s ninth largest foreign market before the pandemic.
Disney, which has more at stake in Russia than the other major studios, further announced the wind down of all its Russian operations, including “content and product licensing, Disney Cruise Line activities, National Geographic magazine and tours, local content productions and linear channels.” Still the numbers are small for Disney. The entertainment giant reported that Russia-based revenue only accounted for about 2% of its operating income prior to the invasion.
For industry players, this lost revenue could have an impact on some components of the business mix. House of Cards, the series that arguably made Netflix what it is today, cost about $5 million per episode. By extension, a major “win” with a theatrical release in the Russian market could have been sufficient to cover the entire seasonal production outlay for a mid-budget program intended for the now-conspicuous streaming market.
Also impacted may be the release of mid-budget films, such as comedies and sequels. Some of these projects may be deferred or axed due to revised expense considerations. Business strategies are ever-shifting in the movie business. We note that Paramount’s new CEO, Brian Robbins, asserted in September that his company was moving away from so-called tentpole productions in favor of streaming output. Industry insiders may recall that Warner Brothers once declared a similar move in 2020 with its short-lived Warner Max division.
For the biggest names, the financial effect of the embargo is akin to a large stone being thrown into a pond with the ripples fast dissipating. The move will have an altogether different consequence for the cinema industry inside Russia, which relies extensively on American productions to fuel its sales. The Hollywood Reporter cites that US films have amounted to 75%-to-80% of Russian box-office draw in recent years. This volume suggests at minimum there will be a massive restructuring among local exhibitors in Russia, alongside a dramatic spike in international digital piracy.
This prominent, soft-power decision by the major Hollywood studios may be about protecting their own long-term interests, especially given the withering effect of Covid-19 on the theatrical business. Public opinion in support of Ukraine crescendoed overnight; making money in the Russian market is now morally indefensible. In an interconnected world, the commercial risk of not taking a stand against Russia and its despotic president is simply too great.
Studio executives no doubt were impelled into the embargo by talent themselves. The outcry from A-list actors, directors, and musicians, among others, continues to burst from online media. As Angelina Jolie wrote in an Instagram post when the invasion first unfolded: “It is too soon to know what will happen, but the significance of this moment–for the people of Ukraine, and for the international rule of law—cannot be overstated.” ■
Our Vantage Point: For the major Hollywood studios, moral alignment with public opinion far outweighs short-term business considerations, especially when a film embargo is unlikely to have a material effect on top-line profits.
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