Weekly Update

Netflix and the non-event movie

Hollywood is all about the event film. Studios can spend upwards of $60-$80 million in marketing and general hoopla to try to turn a movie’s theatrical debut into an “event.” The goal is to drive the maximum number of people into theaters to see the movie during the first weekend — preferably the first night — and the bigger the production budget the more of an “event” its release needs to be.

The reasons for such front-loading are many. For all the TV ads the studios run, word of mouth, especially in this social media age, is still the most powerful force in determining whether a movie is a hit or a flop. By maximizing the opening weekend the studios hope to begin generating positive word of mouth as quickly as possible, or, more typically, to grab as much box office as possible before bad word of mouth kills the thing.

Competition for screens is also fierce, especially during the summer months when moviegoing is at its peak. Once a movie’s per-screen gross begins to fall it will quickly start losing showings to fresher fare. In an age of competing 5,000-screen releases the shelf life of a film in theaters can be brutally short, so you better grab every dollar you can before your release reaches its sell-by date. The longer a film is out, moreover, the more vulnerable it is to piracy.

Equally as important, a big opening weekend helps cement a film’s reputation as a “hit” and raises its value in the ancillary markets, where most of the money still is.

For Netflix, however, which began life as an ancillary outlet for movies, the shift to financing and releasing its own films means treating them as non-events.

With its announcement this week that it will begin streaming a sequel to “Crouching Tiger, Hidden Dragon,” next year day-and-date with the film’s theatrical release in IMAX theaters, and even more so with the announcement a few days later of a four-picture deal with Adam Sandler, none of which will get a theatrical release at all, at least in the U.S., according to chief content office Ted Sarandos —  Netflix is doing more than flattening the traditional sequence of movie release windows. As it did for the traditional TV series with the release of its originals like House of Cards” and “Orange is the New Black,” Netflix is scrambling the entire, long-standing calculus as to what makes a “hit.”

We believe “House of Cards” and OITNB are hits because Netflix tells us they are. But we have no way of verifying that claim. No third party monitors or measures what gets viewed on Netflix the way Nielsen measures broadcast viewing. It’s not even clear what being a “hit” means in that context.

Under the traditional TV paradigm, whether a show was considered a “hit” or not was very much tied to its time slot — a “hit” on Thursday night at 10pm is of a different order of magnitude than a daytime “hit” — and to the show’s performance relative to its shows in the same time slot — its audience share. A hit also needed staying power; Thursdays come around every week.

None of those metrics mean very much to Netflix however because it doesn’t monetize its audience through advertising. It doesn’t need to care about  when “House of Cards” is viewed, or its share versus other programs. Its value to Netflix lies in its exclusivity, not the absolute size of its audience or their loyalty to the show.

Those differences in how Netflix measures success compared to traditional broadcasters have changed the very nature of the episodic TV series. Instead of releasing one episode a week Netflix released an entire season of “House of Cards” at once, as it now does with virtually all of its originals. In effect, it presented “House of Cards” to its audience as a single, 13-part movie, which could be watched all at once or paused and resumed later, and at any time. That strategy, in turn, is changing audience expectations regarding TV series in general, forcing traditional broadcasters to respond, by accelerating series’ availability on streaming platforms and structuring series in anticipation of binge viewing.

While I’m sure Netflix will do some marketing around the availability of its “Crouching Tiger” sequel when the time comes it doesn’t need to make an event out of it. The number of people who view it on its opening weekend is essentially irrelevant because “Crouching Tiger” won’t be competing for screens with other movies and it basically has no value in any ancillary market regardless. As with “House of Cards,” its value to Netflix lies in its exclusivity, not in its audience share or its gross popularity.

Unlike the traditional movie paradigm, the value of “Crouching Tiger” to Netflix will not decline over time and has no particular time “window.” It is not a depreciating asset but a long term investment in audience building, which makes it a very different animal from most movies.

It would be a stretch to suggest that one Wuxia movie and a handful of Adam Sandler comedies, by themselves, are enough to change the basic calculus of Hollywood, let alone change the nature of movies. But you have to start somewhere, and as Netflix showed with television series, changing how you measure success changes more than just the numbers.