Netflix Original Movies Not Profitable (REPORT)

Crouching2

That Netflix strategy to conquer the movie world may need to be rethought.

Apparently, buying up every movie in sight and then just dumping it on your cloud to no advertising fanfare isn’t an air tight business model, nor is forking over nearly $100 million with no broader release strategy to earn your money back. (David Ehrlich‘s recent analysis for IndieWire was the best analysis yet about how Netflix is bad for movies – more articulate and insightful than my venting, I’ll concede.)

According to a column on MarketWatch, Netflix had a rather lackluster earnings report this week as fewer subscribers were added than Wall Street had expected this past quarter, causing shares to briefly decline. While the streaming giant is still currently flush with cash and the stock holding well overall, the only originally produced content garnering eyeballs is the slate of Adam Sandler comedies (which also happen to be the only ones given any level of advertising, boosted by a recognizable star).

Conversely, its big budget sequel to Crouching Tiger, Hidden Dragon tanked, in large part because theaters refused to screen it as Netflix had originally planned.

CEO Reed Hastings, who usually touts Netflix with a good deal of bravado, told shareholders that Netflix original movies need more bang for their investment bucks. That’s going to be a challenge as their upcoming Will Smith December release Bright is coming in at the high cost of $90 million.

Hastings original strategy was to recoup those dollars through a day-and-date theatrical release coinciding with its Netflix debut. But now that all major theater chains are boycotting any Netflix feature that streams simultaneously, Hastings is expressing concerns about the situation without conceding any ground to theater owners’ interests, saying to his shareholders:

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

In other words, he’s whining.

Comments like “we are also open to supporting large theater chains” is classic passive-aggressive double-speak, trying to make it sound like he’s supporting theaters when, in truth, he’s griping about the fact that they’re not supporting him. Then he throws out populist rhetoric like “let consumers choose”, another lame bullying tactic that attempts (and fails) to make the theater owners the bad guys.

With Netflix expecting to see about $2 billion in negative cash flow this year, MarketWatch rightly surmises that “unless consumers can convince theaters to run Netflix movies in the theater when they are also streaming on their televisions, the economics of making big-budget movies may never add up for Netflix.”

Good. But if you (unlike me) are a fan of what Hastings is trying to do, don’t get upset if his ultimate solution is to jack up your monthly Netflix subscription rate.

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