Movie theaters want more from Netflix, but the streaming giant isn’t ready to budge on its release model

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  • Netflix is ​​about to launch its new ad tier, something the company has long said it won’t do.
  • But like its riotous TV show release model, the streaming giant seems willing to stick with only limited theatrical releases of its films.
  • However, some theater owners and industry analysts are wondering if the streaming giant will reconsider its resistance to the traditional movie release model.

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Netflix refused advertising. Should the theatrical releases be next?

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Some theater owners and industry analysts are wondering if the streaming giant will rethink its resistance to the traditional Hollywood movie release model as it looks for new ways to boost revenue.

This Thanksgiving, Netflix plans to release Glass Bow: The Story of Knives Out, the sequel to the 2019 hit Knives Out, in select theaters within a week, before offering it to subscribers a month later.

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The streamer reportedly shelled out $400 million for the rights to the two sequels after the original Knives Out grossed $312 million worldwide on a budget of just $40 million. The box office performance of the first film, in turn, raised questions about why Netflix limited the release of The Glass Bow to just one week in only 600 theaters.

And with not many big films this year, theater owners want more from Netflix.

“We’re excited that they’re experimenting and giving us an exclusive time window,” said Brock Bagby, director of content and development for B&B Theatres, which has more than 50 locations in 14 states. “But we would like it to be a longer run and we would like it to be wider.”

Some Netflix executives reportedly lobbied co-CEO Ted Sarandos. earlier this year to consider longer stays in theaters and wider releases for some films, but Sarandos scrapped the idea. The company’s senior management has repeatedly said that the future of entertainment lies in streaming.

According to some on Wall Street, Netflix could benefit from a more flexible approach to film releases. This could help boost box office receipts and attract filmmakers with the prestige that can come from the box office.

“If anything, the past year has shown that Netflix is ​​open to and needs new sources of revenue,” said Mike Proulx, vice president and director of research for Forrester. “The additional subscription revenue alone will not be able to reduce it in the future.”

Read more: Netflix wants investors to focus on revenue, not subscriber count

That’s partly why Netflix is ​​adding a level of ad support to its services after years of resistance, he says.

Michael Pachter, an analyst at Wedbush, said he understands Netflix does not make films to make a profit from theaters and that the company’s priority is to meet the needs of its members. “But that ignores the fact that filmmakers have a strong belief in theatrical production as a measure of success,” Pachter said.

Netflix executives are sticking to their decision to show The Glass Bow in just 600 theaters in one week. The company’s strategy in the past with limited theatrical releases – such as Martin Scorsese’s The Irishman – has been to generate hype among subscribers when the film arrives on its service. It’s a game, too, the company said Tuesday during an earnings video.

“We are in the business of entertaining our members with Netflix movies on Netflix,” Sarandos said during the call.

He said that Netflix brought films to festivals and gave them a limited run in theaters because filmmakers demanded it.

“There [are] all kinds of debates all the time, back and forth, but inside there is no doubt that we are making our films for our members and we really want them to watch them on Netflix,” he said.

Netflix declined to comment further.

Still fiddling around

“One thing that Netflix has historically been successful at is repetition, experimentation, and finding what works best for its members and shareholders,” said Ralph Shakart, research analyst at William Blair. “Then he builds on what works and discards what doesn’t work. We believe part of Netflix’s historic success has been its willingness to be flexible and try unconventional methods.”

He said Netflix was unlikely to agree to a longer theatrical window until he saw if the strategy could benefit his business.

In addition, Dan Wrayburn, a media and streaming analyst, said there is no publicly available data to suggest that Netflix will make more money from subscriptions in the long run if the company puts more of its movie content in theaters.

Of course, theatrical releases come with marketing costs, and Netflix is ​​reluctant to spend money promoting features that play to a limited number of members.

And while theatrical releases could open up a new revenue stream for Netflix, Forrester’s Prue noted that theaters may not be as relevant as they used to be. According to a December 2021 Forrester Consumer Energy Index and Retail Pulse survey, 54% of American adults using the streaming service said they prefer watching movie premieres via streaming.

However, people are returning to theaters after the start of the pandemic, especially for action and horror films, as well as established franchises. Halloween Ends debuted with $41.25 million at the box office over the weekend, despite launching on Universal Peacock’s streaming service at the same time.

There’s also an argument for making decisions on a case-by-case basis, especially with a film like The Glass Bow given how well the first installment in the franchise performed in theaters in late 2019, especially given that there are so few major films. films released in theaters before the end of the year.

The original Knives Out, which had a production budget of $40 million, grossed $26.7 million in its opening weekend and held the audience’s attention for several weeks before seeing another spike in holiday ticket sales over the December holiday. By the end of its theatrical run, it had grossed $165 million domestically and $312 million worldwide.

“The pros of a longer Netflix run outweigh any cons,” said Sean Robbins, chief media analyst at “This is not an unsubstantiated original film that the streamer has mostly made for its platform in the past, but a sequel with star names and strong commercial potential.”

He also pointed out that Netflix holds director Rian Johnson’s sequels so highly because of the success of the original film during its long and exclusive run in theaters under Lionsgate.

“Without that last component, would Netflix have invested that much in Glass Onion and its possible sequel, if at all?” Robbins said.

A contract for two sequels to Knives Out was announced in March 2021. was estimated at about $400 million.. Johnson was to retain full creative control and Daniel Craig, the star of the original film, would return for both films.

“Like in the first movie, the legs can be very strong,” B&B’s Bagby said of The Glass Bow.

Disclosure: Comcast is the parent company of Universal, Peacock and CNBC.

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