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LifestyleNetflix

After disrupting TV and upending Hollywood, Netflix could be looking more like a cable network and movie studio

By
Tristan Bove
Tristan Bove
Contributing Reporter
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By
Tristan Bove
Tristan Bove
Contributing Reporter
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May 18, 2022, 1:46 PM ET
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Netflix is going through some tough times right now.

The company’s shares dropped by as much as 37% last month after the company released poor first quarter earnings, fueled by a subscriber loss to the tune of 200,000. 

The subscriber and revenue loss has pushed Netflix to force through layoffs, cutting 150 jobs just this week. And by Netflix’s own account, the pain is far from over, as the company forecast to lose an additional 2 million subscribers next quarter.

Things are getting desperate for Netflix, and, after years of disrupting the traditional movie and television industry, it might be turning into the very thing it once came so close to destroying by reportedly considering major movie premieres, and adding commercials to their streaming business model.

Netflix is considering letting the movies it produces run in theaters for up to 45 days before moving them to at-home streaming, Bloomberg reports. The company will reportedly try out a theater release with two high-profile films this year, including Knives Out 2, the sequel to the 2019 film that brought in over $300 million at the box office, and a new unnamed film by director Alejandro González Iñárritu.  

Analysts say that prolonging the amount of time Netflix movies are shown in theaters makes sense for the company, as it resolves one of the streaming service’s biggest issues: visibility for its blockbusters.

“The theatrical release is essentially the premier marketing campaign for all revenue streams, as far as movies are concerned,” Dimitrios Mitsinikos, founder and CEO of film industry analytics firm Gower Street, told Fortune. “In the era of streaming, the cinemas have the potential to help all content owners, including streaming platforms like Netflix, highlight their best content and essentially market their platforms to their core audience.”

For Netflix, theatrical releases may be a necessary medium for Netflix to get its big blockbuster movies known to a wider audience.

“There is no better buzz-building platform than a movie theater release,” Paul Dergarabedian, an industry analyst with Comscore, told Fortune. “Within the unlimited bandwidth of the streaming ecosystem, even big budget star-driven movies can get lost in that massive sea of content.”

Netflix did not immediately respond to Fortune’s request for comment.

Netflix is no stranger to theatrical releases for its high-profile films, but has so far limited these to no longer than a few weeks. A release that lasts 45 days would be a significant departure from how they have operated in the past. The company’s business model relied on delivering exclusive content instantly, but the streaming giant’s recent troubles and unnerving financials might be forcing the company to reevaluate.

Since the release of last quarter’s poor results, Netflix has also toyed with the possibility of implementing ads in its services, as well as creating different types and payment tiers of subscription models. The company is reportedly also planning on launching a new brand of content focused on unscripted livestream shows and stand-up specials, a novelty for the service.

Should Netflix implement ads and livestreaming services, the platform would begin to look very similar to the old TV model it so effectively disrupted. And with new bundle options aggregating Netflix with other streaming services, the platform appears to be quickly morphing into a new iteration of old cable TV.

Netflix was the first major streaming service to hit the market in 2007, and for a long time threatened to completely disrupt the traditional film industry and movie-going experience. Allowing its movies to live longer in theaters would be a reversal of the trend, but it might be a wise move, as analysts see movie theaters being in for a strong next few years after a prolonged pandemic-induced lull. 

“The 2019 pre-pandemic global box office was $42.3 billion and we expect to bounce back to these levels in 12-18 months from now,” Mitsinikos said.

Excitement for major cinematic blockbusters this year—including sequels to the cult classic Top Gun and box office record-beater Avatar—is high, leading some old-school Hollywood executives to declare that “movies are back” for the silver screen. 

Letting movies live longer in theaters could also help attract a wider pool of directorial or acting talent for streaming services like Netflix. In the past, directors like Martin Scorsese, Alfonso Cuarón, and the Coen brothers have agreed to direct movies for Netflix on the condition that the company play their movies in theaters beforehand. 

“This may be in fact the most important part of a theatrical strategy for a company like Netflix for whom the opportunity for a theatrical release could be the perfect motivator for major talent (both in front of and behind the camera) to agree to be a part of such a production,” Dergarabedian said.

“There is no substitute for that big screen, and everyone recognizes that,” he added.

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