China’s box office was supposed to surpass North America’s this year. Then came the coronavirus

March 9, 2020, 7:00 AM UTC

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When Disney’s Mulan hit Chinese cinemas in 1999, the animated adventure bombed, earning just $373,000 at the box office in its first three days compared to $22.8 million in the U.S. At least part of the problem was that the film hit screens in China a year after its release in the U.S., so most Chinese consumers had already pirated it by 1999.

For the release of its live action Mulan reboot this year, Disney intended to launch the film on the same date worldwide—March 27—to scupper the pirates. With China still battling the coronavirus, however, Disney has had to postpone Mulan’s Chinese release. Beijing ordered theaters to close on January 23, the day before the normally lucrative Lunar New Year holiday began, in order to limit contagion, and many have yet to reopen.

This was supposed to be the year when China finally surpassed North America at the box office, but with the nation’s 70,000 cinemas still mostly shuttered, that feat looks unlikely. In 2019, Chinese ticket sales hit $9.2 billion, compared to $11.4 billion in North America. In the first two months of 2020, China’s ticket sales slumped 90%, falling from $2.15 billion in 2019 to just $238 million this year.

Enter Bytedance

The shutdown is a blow to Disney, which had hoped Mulan would do especially well in China. Disney’s other “live action” reboots have struggled in the market: Beauty and the Beast took in $84 million in China, compared to $504 million in North America; Aladdin collected just $54 million, compared to $355 million at home. Mulan, with a budget of $200 million, was the most expensive of Disney’s recent revival projects. But shutting the box office will be an even bigger blow to China’s distributors, which receive about 20% of ticket sales as payment.

Besides Mulan, foreign hits like Marriage Story, Jojo Rabbit, Little Women and 1917 have all pushed back their China release dates, as has the Sonic the Hedgehog, which delayed its global release twice already following fallout over its character design choices. Over a dozen domestic films have delayed their debuts, too, and production on upcoming releases has been forced on hiatus.

The sudden loss of screen time prompted one production house, Huanxi, to make the bold choice of selling distribution rights for Lost in Russia—the latest installment of the Lost in… comedy franchise—to Beijing Bytedance, the parent of TikTok and its Chinese sister app Douyin, for $90.70 million.

Bytedance streamed the film for free starting January 25. The two hour-long film was viewed 180 million times within its first three days. It was available across Bytedance’s content channels, including Douyin, where video clips normally max out at one minute. Bytedance doesn’t appear to have made any money from the deal but the agreement also signed Bytedance up as co-producer for an undisclosed number of Huanxi’s future productions, signaling Bytedance’s intention to move into long-form content.

The arrangement appeared to be a success for Bytedance, but China’s distributors weren’t happy about the disruption to their industry. A group of 22 cinema chains including giants like Wanda, which owns 500 theaters, published an open letter accusing the deal of undermining the current film industry and distribution system.

Watch offline

The current system in China is arguably ripe for disruption. Film distributors are known to collude with cinemas in order to inflate ticket sales during a movie’s opening run. The cinemas run phantom screenings in the middle of the night in which distributors buy all the seats, bumping up opening weekend box office earnings, and making the films appear more popular, which helps with sales.

Production companies make money back from ticket sales too, which explains why most movie studios have opted to delay films amid the outbreak rather than push them through online portals.

Disney just launched its own streaming service Disney+, which could be seen as natural direct-to-consumer platform for Mulan. The service launched in the U.S. and will be in Europe at the end of March, but it is not available in China, where operating as a foreign media company is complicated by stringent regulations on content.

Disney’s previous content service for China, DisneyLife, was run by ecommerce giant Alibaba, which also has a dedicated entertainment production unit. However, even with local hero Alibaba’s help, DisneyLife only survived five months before it was shut down by regulators for unknown reasons.

With the international release of Mulan going ahead as scheduled on March 27 but no new date set for its China opening, Mulan might once again suffer defeat at the box office as China’s entire cinema industry takes five.

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