With Netflix announcing the potential release of 80 original films in the coming year, there are a lot of people wondering what Netflix is doing, and an equal number who know exactly what Netflix is doing and are angry about it. The first group has serious doubts about the financial commitment the company is making in the movie streaming industry. The second group, primarily consisting of physical movie theater owners, is worried about losing a serious amount of revenue to customers who will be able to see new releases from the comfort of their home. There are definitely questions to be answered, and details to be worked out. But Netflix thus far has been able to stake a large claim in the streaming landscape, and with younger audiences preferring mobile to cable the long term prospects look very good.
The doubters are taking a relatively simple position. They say that if Netflix is going to release 80 original movies, then a good number of those movies must already be in production. The second part of the cynicism is about the actual quality of the productions. It seems unreasonable for anyone to expect 80 blockbuster hits to be available in 2018 since Hollywood seems to have trouble creating 8 original hits over the course of a year. So some of the movies may be of the “experimental” genre, maybe from the selection available at the Toronto International Film Festival (they have an actual experimental category). For more standard productions, Netflix Chief Content Officer Ted Sarandos claims to have a deal to stream Bright, a police action thriller starring Will Smith, in December and has an estimated production cost of $90 million. Earlier this year, Netflix announced it was investing $7 billion in new content. With production costs like those for Bright that money won’t go very far.
Note: For the record, Netflix says it is staying far, far away, from the idea of bidding on the Weinstein Company, so no new content can be expected to come from there.
Movie theater owners are the majority of the second, angry group, and for good reason. One analyst pointed out that for $10 a month, the going Netflix subscription rate, viewers can choose to stay home and have a buffet of content to choose from. New movies that are available in movie theaters can be available on Netflix the same day. Theater owners can be upset about the Netflix marketing model, but at the same time Hollywood’s failure to consistently generate quality movies is also responsible. Why should someone pay top dollar to see an average movie when they can avoid committing the time and money by waiting even a few days? This seems to be connected to people pulling the plug on their cable boxes. Paying high prices for mediocre content is no longer a sustainable business model.
The direction of the stock charts for Netflix interestingly is basically the same for the 1 year and 5 year models. Approaching the $200 a share mark, it appears to have the investor confidence needed to take some risks. Sarandos doesn’t even appear to be fazed by Disney ending its agreement with Netflix to provide it with its content. Regardless if you are a doubter or an angry movie theater owner, it seems Netflix knows something not very many other people know about the future of TV and movie content. Avid movie goers need to keep watch on this Netflix (ad)venture because if Netflix is right about their target audience, Netflix will simply be the best choice.
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