Netflix Says It’s Willing to Work With Movie Theaters (Sort of)

April 18, 2017, 8:36 PM UTC

Netflix’s thorny relationship with movie theater owners has been well documented. Only a year ago, the head of the National Association of Theatre Owners, John Fithian, called the massively popular streaming service “a grave threat to the movie business.”

That contentious relationship mostly stems from the overall threat of at-home entertainment options, like streaming video platforms, as well as Netflix’s shirking of traditional Hollywood norms regarding exclusive theatrical releases for feature films.

Netflix has been reluctant to release its original productions in theaters at all, though the company has occasionally made certain feature films and documentaries available in a handful of theaters, including the 2015 war drama Beasts of No Nation and last year’s Academy Award-nominated documentary on race in America, 13th. Netflix also signed a deal in the fall with luxury theater chain iPic Theaters to release films across iPic’s roughly 16 theaters on the same day they premiere online.

But in Netflix’s latest letter to shareholders on Monday, the company expressed some willingness to work more closely with large national theater chains, including Regal Entertainment Group and AMC Theatres, which is owned by China’s Dalian Wanda. Netflix indicated in the letter that it might be willing to consider wide theatrical releases for some of its upcoming feature films—including the Will Smith fantasy, sci-fi movie Bright, which Netflix recently acquired for $90 million. Yet the company remains adamant that any theatrical release of a Netflix original film would have to come on the same day as the movie’s debut on the streaming platform.

“Since our members are funding these films, they should be the first to see them,” Netflix said in the letter to shareholders. “But we are also open to supporting the large theater chains, such as AMC and Regal in the US, if they want to offer our films, such as our upcoming Will Smith film Bright, in theatres simultaneous to Netflix. Let consumers choose.”

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The simultaneous launch in theaters and online is the real sticking point for movie theater owners. Traditional movie studios typically allow films to run in theaters for anywhere from 90 to 120 days before releasing them for at-home viewing (either on-demand or as a DVD or Blu-ray).

Amazon, Netflix’s streaming rival, has mostly hewed more to the traditional side of the equation by allowing lengthy theatrical runs for original films like Oscar-winner Manchester By the Sea in order to appease theaters while also collecting an extra revenue stream from a split of box office receipts.

Netflix continues to go rogue, though. And with roughly 50 million subscribers in the U.S., Netflix boasts a large group of people who may be unlikely to pay to see a Netflix production in a movie theater when they could watch it at home as part of the cost of their membership.

Netflix seems to be framing its refusal to offer exclusive theatrical release windows as an example of its loyalty to its own subscribers. As Netflix adds more and more subscribers around the world—a number that is close to topping 100 million, despite slower than expected growth in the most recent quarter—the company collects more fees that can help support its ambitious, and ever-expanding, original content production plans.

This year, Netflix says it plans to spend more than $6 billion—an increase of about $1 billion from last year—to churn out over 1,000 hours of original content in the form of movies and TV series.

Netflix also maintains that many of its streaming-only feature films have pulled in major audiences online. In the company’s shareholder letter on Monday, Netflix claimed that its user have spent roughly 500 million hours watching Adam Sandler movies since the streaming release of the comedian’s The Ridiculous 6 in 2015. Netflix made that movie as part of a three-movie deal with Sandler’s production company and the streaming site recently re-upped that deal for another four films. (In fact, a new film starring Sandler and actor Ben Stiller will be among the two first-ever Netflix movies to screen at the film festival in Cannes this year.)

So what’s behind Netflix’s seeming change of heart with regard to working with big movie theaters? The company could be extending an olive branch following a quarter of slower subscriber growth. Netflix could also see potential value in making its big-budget action film starring Will Smith available on larger screens.

Or Netflix’s “let consumers choose” line from the shareholder letter could be read as a challenge to theater chains. Perhaps Netflix is daring them to prove that the theatrical business model can exist side-by-side with streaming.