Game-Changer? Netflix Enters Film Business with 'Crouching Tiger 2'

Game-Changer? Netflix Enters Film Business with 'Crouching Tiger 2'

Monday night Netflix and The Weinstein Company (TWC) announced a joint deal that will see Netflix stream the sequel to the 2000 smash”Crouching Tiger, Hidden Dragon” the same day it is released worldwide on Imax. “Crouching Tiger, Hidden Dragon: The Green Legend” debuts Aug. 28, 2015.

Already, two of America’s bigger buggy whip makers theatre chains, Regal and Cinemark, released statements Tuesday confirming they will not allow the film to play on its Imax screens.

“We will not participate in an experiment where you can see the same product on screens varying from three stories tall to 3-inches wide on a smart phone,” Regal sniffed.

Cinemark was equally haughty.

That’s quite a statement coming from anyone in an industry that regularly allows a few unruly and rude patrons to ruin the theatre experience for the rest of us.

This response from these crybaby theatre chains can’t be a surprise to either Netflix or TWC. Over the years, acting like union thugs, theatre owners have regularly threatened studios with punitive action at the merest hint of any move that might shorten the release window between a theatrical release and a home video release, especially video on demand (VOD).

What theatre owners seem to have forgotten is that although the courts forced film studios to sell their interest in distribution (movie theatres) some 65 years ago, the courts have recently ruled that the studios can distribute their own films through VOD. Therefore it is in the best interest of the studios to eventually move to a VOD release platform where they can keep all the money instead of splitting it with theatre owners.

This is not going to happen overnight, or even over the next 5 years. But the studios certainly have a vested interest in changing our movie-going habits to a platform where they keep the first and last dollar.

Same day VOD releases have already been tried with some success. As the LA Times points out, titles like “Snowpiercer” and Richard Gere’s “Arbitrage” have profited with this model to the tune of $7 and $5 million, respectively. “Crouching Tiger,” however is something entirely different; a big title with worldwide appeal that is meant to boost Netflix’s subscription base.

With a movie theatre ticket averaging around $12 and a monthly Netflix subscription costing around $10, in Obama’s stalled economy, the math is pretty simple. This is a great deal for consumers, especially those with a home theatre that doesn’t include all those rude and unruly theatre patrons.

Is this a game-changer? No. As I’ve been saying for years, this is a slow-motion revolution. But Netflix is already pushing back against these theatre chains.

“Theater owners stifle this kind of innovation at every turn,” [Netflix Exec Ted Sarandos] said. “The reason why we may enter this space and try to release some big movies ourselves this way is because I’m concerned that as theater owners try to strangle innovation and distribution, not only are they going to kill theaters, they might kill movies.”

And Netflix has the money to keep that promise; so do the math…

Every 8500 or so new subscribers is another million dollars a year in subscription revenue for Netflix. How many new subscribers would a big box office release capture? Imagine if Netflix grabbed a Marvel movie. If Netflix paid $100 million for the exclusive domestic rights, fewer than a million new subscribers attracted by that title (who stayed for a year) would more than cover the cost.

That might seem like a pretty sweet deal to a studio watching domestic revenues decrease (at least this year). Moreover, that would be $100 million the studio would not have to split with theater owners. Imagine, as well, what the studio would save in domestic advertising costs. Better yet, the deal would still leave the rest of the world open for theatrical distribution.

Granted, I am way-way-way oversimplifying this kind of deal, but still… These are fascinating times. 


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