“Netflix rhymes with Wet Chicks” for Sandler, means an opportunity for all

Any game changes and evolves, so players’ attitude, and laws and regulations need to evolve accordingly.

The primary game changer Netflix has just announced, right after declaring that the first day-and-date worldwide release of a blockbuster will happen soon, that they are going to produce and distribute as soon as 2015 four feature films starring Adam Sandler, therefore coining the term web film, which is a film meant specifically for online distribution.

Said Sandler: “When these fine people came to me with an offer to make four movies for them, I immediately said yes for one reason and one reason only: Netflix rhymes with ‘wet chicks.’ Let the streaming begin!”

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We’ve seen Netflix give TV a run for its money with a number of well-worth-watching original series, including House of Cards, starring Kevin Spacey, and prison-set dramedy Orange is the New Black. Now it seems the streaming video service has set its sights on the big screen… ish. And this means, for some, that they are continuing to thumb nose at theaters.

Well, probably. But first of all it means adding opportunities for talents. Ok, not everyone is Adam Sandler: the actor’s films, most of them comedies, have grossed more than $3 billion globally, and he is going to keep his agreement with Sony, while his films consistently rank among the most viewed by Netflix members, both in the U.S. and overseas. Therefore Netflix is prepared to pony up as much as the majors studios do for a Sandler film, which, on average, costs in the $80 million range. But this latest Netflix’s move is designing a new path, where theatrical release is not the only synonymous of artistic dignity anymore, where online distribution is not some kind of underground and neither alternative, but a perfectly viable and smart option.

Because, hey folks, not everyone can make it to the theater… right? Well, now not everyone wants to make it to the theater. Which will mean, in my opinion, that quality of theatrical releases is going to rise as there will be movies meant for the theater and others which will be better off with other types of distribution strategies. As a result, theater programmers will not be pushed by distributions to get packages of content, whereas will be able to select according to their specific audience. And audiences will be willing to pay a premium price for premium content and premium experiences. This is a win-win-win paradigm, just like it happens any time market opens up with new opportunities.

Furthermore, as said in the first paragraph, I believe also that laws and regulations related to funding production and distribution need an update. For instance, in Italy at the moment productions are eligible for tax benefits and public funding only if the film is meant priory for theatrical release and such benefits are assigned proportionally to previous year theatrical box office. Such provisions create a non-sense overcrowded line for accessing theaters even when strategic thinking would not suggest it, even for one week only or less, therefore saturating the market and lowering the quality.

Business models are changing, but theaters will be alive in 100 years for now because people need that kind of social gathering and they enjoy the magic, no doubts about it. They will increasingly be the destination for a premium or very customized experience, whereas new business models will get into the game because probably “being able to compete for consumers’ attention and dollars over the preciousness of access is a thing of the past” and so “people should have the opportunity to see it on a big screen if they want to, but if they want to watch it at home, they can stream it” as Netflix’s Ted Sarandos says, adding up to his concerns that “as theater owners try to strangle innovation and distribution, not only are they going to kill theaters, they might kill movies.” (video: Keynote Address | 2013 Film Independent Forum).

All in all, a more open discussion between the parts of the value chain is desirable in order to stay closer to customers needs and flourish in a fast changing market.

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Day-and-date release, Bubble or Tiger?

The Weinstein Company planning worldwide day-and-date release on Netflix and IMAX theaters of Crouching Tiger, Hidden Dragon sequel is nothing new to the industry practice.

The first noticeable (because of the combination of a high-profile director and the backing of maverick billionaires Todd Wagner and Mark Cuban) example of such strategy was in 2006 when Magnolia Pictures released the Steven Soderbergh’s movie Bubble simultaneously to theaters and cable television channel HDNet Movies, whereas four days after they released the DVD. The well-wisher of the initiative was Mark Cuban, the outspoken Internet billionaire who also owns the NBA’s Dallas Mavericks, who used his network of art-house Landmark Theaters and digital television for giving the consumers the choice of how they wanted to watch a new film, even though receiving harsh criticism from Hollywood purists, windowing lovers, and being boycotted by the other theater chains who refused to screen the film.

Because of the limited release and the hardly marketable art-house nature of the movie, the experiment was a total flop as it only grossed $145,626 in the US, shown for four weeks in 32 theaters, and $116,340 internationally. Nevertheless, it definitely shook the conscience of the industry regarding windowing.

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Here is how Cuban responded to John Fithian, National Association of Theater Owners head:

With the release of Bubble on January 27th in theaters, on DVD and for 2 showings on HDNet Movies, there has been a ton of press and discussion about the future of the movie industry. The most extreme has come from John Fithian, who wins the award for the best ever imitation of Jack Valenti’s famous comparison of the VCR to the Boston Strangler when he was quoted in FastCompany as saying [Fithian] called Iger’s suggestion this summer a “death threat” against his members. Fithian says that “if [release] windows were eliminated, what you would have would be fewer movies, fewer total dollars for the industry, and less choice for the consumer.” He thinks movies would become little more than commodities and that hundreds or thousands of theaters would close. But he wasn’t done there. He said the same thing to USA Today: It’s the biggest threat to the viability of the cinema industry today,” John Fithian, president of the National Association of Theater Owners, said of the so-called “day and date” release strategy. How sad is it when the President of the National Assoc of Theater Owners doesnt think his members can create a better movie going experience than what we can see in our houses and apartments? Guess what John, I can whip up a mean steak, but I still like to go to restaurants. Because I enjoy it. I enjoy getting out of the house with family, friends, who ever.

How would he respond today to major theater chains announcing they will be boycotting the Netflix-IMAX release? Probably, in a very similar way, even though this time the “other” distributor is VOD and not television, and the rationale behind is a little different as no customer experience can be more different than the ones offered by IMAX and Netflix, and therefore we are talking about two tatally different products which cannot cannibalize their own sales.

In 2006, a typical film used to earn about half of its revenue from home video and only about 25% from theaters. The remainder coming from selling the film to cable and broadcast TV and other sources. Media companies were already aware they had to adapt to the changing demands of consumers and the rise of digital consumption.

By 2018 the biggest chunk of revenue for film consumption will come from electronic home video, growing by 114% to reach $45B globally, with this figure possibly being even bigger if we manage to fight piracy consistently, which includes shrinking windows for films that we can forecast not performing exceptionally theatrically and most of all with a relatively short product life-cycle. Generally, while large, event movies such as King Kong may work best on the big screen, simultaneous release could be beneficial for small, independent films that often struggle for an audience while blockbusters hog theater screens. But this really needs to be analyzed on a case-by-case basis.

The future of theatrical film distribution is unknown. Practices that might not have worked 5 years ago are commonplace today, such as movies opening via VOD weeks before they reach theaters, or enjoying day-and-date release structures to reach a wider audience. Probably it will depend on the ability to provide exceptional experiences to their audiences, and also on their openness to innovation. Including experiments like Warner’s Veronica Mars crowdfunded production followed by day-and-date release, for instance: AMC Theaters rented out 260 out of 270 screens for the limited “four-walling” release, where the theater gets paid a flat rental rate, the studio keeps 100 percent of the ticket sales and the theater does not violate the industry’s theatrical “window” policy, so the risk is very low and everyone is happy.

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It’s worth asking would this stance if this Netflix model is adopted by major studios. Not that this would occur in the next year or two. But let’s say, down the line, that the latest Marvel movie would be available on Netflix on the same day that you also could see it on an IMAX screen. Would they still refuse to carry an obvious moneymaker on principle? Is it worth for theaters to fight Netflix and other major VOD platforms as their worst enemies, or shall the industry converge on possible synergies and new strategies in order to maximize overall returns? 

The discussion is ongoing and is more interesting than ever. But #SmartMoviegoing is too powerful to be stopped and there is no industry that can survive without listening what their customers want and need, that is a fact. Therefore, a more flexible mindset is needed.