Netflix's Next Backtrack: Movie Theaters

Netflix is sort of like Steve Jobs in a way. That is, they keep insisting they're not going to do something – until they turnaround on a dime and do it. Ads. Sports. And soon, I bet: movie theaters.

To be clear, Netflix already has done some releases in theaters, but it's the exception they make to their usual rule. Sometimes for stars. Sometimes for awards eligibility. In fact, they bought a movie theater in Los Angeles to help with just that. But for years and years now, all we've heard is that they don't view the theatrical window as beneficial to their business. In fact, they view it as detrimental as it limits the reach of their films.

That's undoubtedly technically true. Far more people have Netflix – 283M as of last week – than regularly go to movie theaters to see the latest and greatest movies from Hollywood. Even a worldwide phenomenon like Barbie last year likely had something around 100M people see it in theaters. Netflix makes it nearly impossible to compare apples to apples here with their ridiculous "hours viewed" metric (though not quite as ridiculous as comparing box office revenue year-to-year without accounting for inflation), but their top movie of the past few years was Red Notice, which had 364 million hours viewed. Given that the movie is almost exactly two hours long, this equates cleanly to 182M "views" – but that's per screen. Multiple people are often watching such screens at once, of course.

We're too in the weeds, point is that Netflix viewership for top content easily dwarfs that of movie theaters. So yes, Netflix has a point, which is why they keep making it. And yet I still think their theatrical aversion is a mistake.

Netflix is simply thinking about this the wrong way. EARMUFFS ANYONE IN HOLLYWOOD – theatrical releases are now simply the highest end of marketing.

This is not a new notion, of course. But it is increasingly the reality of the business. Yes, there are a handful of movies each year that find great success in theaters. But for most films, it's increasingly about spreading word and boosting clout. It's sort of like back in the day when DVDs became the biggest part of the business, but the model didn't really work without the theatrical release. 'Straight-to-streaming' works a lot better than 'straight-to-DVD' did, but 'quick-to-streaming' would work even better for many movies.

It's marketing 101, a theatrical release, even if it's not a blockbuster, buys clout for a movie and helps immensely with awareness when it goes to streaming. It doesn't need to be a worldwide-release – in fact, it shouldn't be for the vast majority of movies these days, as a movie bombing at the box office can have the opposite effect, though I bet more people want to stream Megalopolis now just to see how bad it really is, etc – but enough to whet the appetite for streaming.

Again, all obvious. And yet, Netflix mostly still refuses to play this game. As Lucas Shaw relayed yesterday in his newsletter for Bloomberg:

There is “no way to have cultural impact without the theatrical experience, just not possible on direct to streaming,” producer Jason Blum said at the Screentime conference this month.

Netflix hates this narrative. Chief Content Officer Bela Bajaria disputed it at Screentime just hours before Blum went on stage. This past week, Sarandos touted the large audience for Netflix movies during a call with analysts.

“What we do for filmmakers is we bring them the biggest audience in the world,” Sarandos said. “And then we help them make the best films of their life.”

Blum is correct, Bejaria and Sarandos are wrong. It's the main reason why no one remembers or talks about Red Notice despite those 182M "views". Well, that and the fact that it was decidedly mediocre – more on that in a minute. But even the "good" and massive Netflix releases just don't carry the cultural cachet of, well, Megaflopolis! Yes, it's partially due to legacy Hollywood reasons. But again, it's also just ingrained assumptions all of us have since we were kids. And while you'd think that's changing with younger generations raised on streaming, my six-year-old daughter is far more excited to go see a movie in theaters than she is to watch one on Netflix. It's both an experience – something theaters need to fully recognize and play in to! – and it's a differentiator content-wise in our era of abundance.

Back to mediocrity, Netflix also has finally acknowledge this reality and problem for their films. I brought this up four years ago in a post entitled 'The Great Okay' noting just how many of the service's top movies are just completely 'meh'. And most importantly, why this would eventually matter, perception-wise even if the numbers didn't showcase it. Yes, it's subjective, but in aggregate it was true too. And now in hindsight, Netflix clearly agrees, as Shaw notes:

Lin is eager to reset the public perception of the studio – among viewers and the Hollywood community. Most people in the film business don’t think Netflix makes good movies.

As such, Netflix has both stopped taking the "leftovers" from other studios, and they've started focusing less on "more" and more on "better" for their own content. That's great news. But I still believe the theatrical component is going to be needed to truly boost Netflix into the top Hollywood echelon.

I know I'm writing this just as Apple is making almost the exact opposite move: pulling back from theatrical. But Apple has been their own worst enemy here. For some reason, a company perhaps more synonymous with marketing than any other company in the world has not been able to figure out how to market their films correctly. It's weird.

But even still, their approach isn't to totally end theatrical distribution, it's simply to use it more sparingly. And that's the correct approach for everyone going forward. Again, not every movie should be released widely in theaters going forward – most shouldn't. But F1 clearly should. And even targeted releases make sense for a whole host of reasons, including, yes, prestige and marketing.

So again, my bet is that Netflix backtracks and gets on board with this sooner or later. Not for the one-off exceptions that they've currently been doing, but as a standard tool in the tool belt. So when Red Notice 2 is ready to go, it goes to theaters for a week or two before streaming. It will both make a lot of money doing this (Netflix clearly messed up with Glass Onion, the sequel to Knives Out, in this regard – which makes their continued aversion all the more weird), but also build up the brand and allows The Rock, Ryan Reynolds, and Gal Gadot to fully do their thing, out and about at premieres around the world to prime the theatrical audience.

Remember The Gray Man? You know, the big budget movie with two of the biggest movie stars in the world, Ryan Gosling and Chris Evans? You don't? Weird.

And this potentially also opens the door to the very top filmmakers, the Christopher Nolans and Denis Villeneuves of the world, eventually being open to working with Netflix. These auteurs are cinema die-hards, but they too need to wake up to the reality of the future: movie theaters remain a part of the picture, but a much smaller one, one that is leveraged in far more strategic ways. That's perhaps not the most romantic way to frame an art form, but everything evolves.

Netflix is busy buying up old department stores to make experience centers. You know what would make for a great Netflix experience center? Just saying...