In case you haven’t heard, Netflix made two moves that you may not be aware of. The first is their deal with iPic Entertainment, a theatre chain based out of Boca Raton, FL. The second is the bidding war they won to make Will Smith’s next film Bright, paying a hefty $90 million to wrestle it away from Warner Bros. As you can see, Netflix is continuing to push their way into the forefront of becoming a major player in the entertainment industry.
Why are these deals significant??? One, because it gives us the consumer, the choice to see new releases either in the comfort of our homes or at the theatre to enjoy that particular experience. Two, it gives Netflix more legitimacy in the game of Hollywood in terms of academy nominations, attracting top flight productions and working with A list talent. With the ever growing popularity of customers wanting first run viewing from home, these kinds of deals make more and more sense.
Now industry insiders and bean counters are balking at these dealings because one, they feel it undermines the traditional model of theatrical releases, and two, it gives Netflix a “monopoly” of releasing their films simultaneously on the big and small screens. It threatens the “exclusivity” of keeping films in theatres 90 days before hitting the home entertainment format. Meaning that it also cuts into the profits the major studios enjoy from box office receipts, blu-ray/DVD releases, premium channel subscriptions, etc.
Looking at this from the consumer’s perspective, what is the average cost for a family of four to go to the movies??? Easily a $100. The tickets alone is half that cost, depending on where you live. Compare that to staying at home to watch a new film where you can cook your own meal, pause the movie for bathroom breaks, and not have to shhh loud moviegoers around you. It puts more of the movie experience in your control, and with entertainment increasingly becoming more home based, consumers will ultimately dictate how they want their viewing to be.
From the perspective of the A-listers like Smith who are forfeiting returns from box office releases within the initial theatrical release, it is possible that they can make that up from Netflix subscriptions in addition to the blu-ray/DVD releases, which could net them more money in the long run. That’s how top talent like Tom Cruise makes so much money from his movies. He’ll take a smaller salary up front to make more on the back end with the home entertainment mediums. Netflix could add an additional kind of back end royalty.
On the chess board of business, Netflix appears to be making the right moves closer to checkmate. If the major studios don’t adjust, they could be off the board sooner than later. The theatre experience will always be there, but that’s what it is, an experience. An attraction like an amusement park or carnival. Something that you go to on special occasions. So as prices continue to rise at the ticket counter and concession stands, the demand of wanting first run releases to view at home will also. The industry powers-that-be can mo longer afford to play checkers…..