Netflix (NFLX -9.09%) is going Hollywood. The leading premium video service announced a pair of deals recently to bring first-run movies to its streaming platform.
It's about more than just trying to repeat the same trick that it has done with original TV shows over the past couple of years with the award-winning success of House of Cards, Orange Is the New Black, and others. Netflix is trying to reshape the multiplex industry with its latest swings, even if the market's not catching on to the plot twist just yet.
Netflix has been a disruptor before. It's going to do it again.
Lights! Camera! Traction!
Netflix announced a deal to bring Crouching Tiger, Hidden Dragon: The Green Legend -- the sequel to the 2000 Ang Lee wire-fu classic -- to its streaming customers next summer. The release will coincide with its theatrical debut in a partnership with IMAX (IMAX 0.12%) to screen on its more than 800 super-sized theaters worldwide.
Traditional multiplex operators won't be screening the movie. Why should they? If folks can see the movie at home -- where an entire month of Netflix costs less than the average price for a single movie ticket -- why bother trekking out to the local movie house?
However, Netflix's push doesn't end there. It also announced last week that it would be bankrolling four upcoming Adam Sandler movies. There's no timetable on those releases. They are unlikely to simultaneously debut on IMAX, because that larger-than-life projecting platform gravitates toward big-budget action movies. There's a chance that they could also run on conventional multiplex screens, but it's hard to see exhibitors going for that. Again, why would someone pay for a movie ticket when the film is available at the same time through Netflix?
Hastings draws the line
"Movie theatres are upset with us because they see that if everyone gets the choice they might actually enjoy it at home," Netflix CEO Reed Hastings told The Telegraph last week. "Maybe theatre owners will refuse to participate. We're open to them. We're not anti-theatre, we just want consumers to have choice."
Exhibitors will give Netflix more resistance than cable TV did when the market darling began introducing first-run shows in 2012. After all, TV covers everything from free over-the-air local network channels to massive cable packages. There's a lot of content, and a lot of ways to consume the content. It's a different story for exhibitors, which rely on a slower trickle of movies that are all generally priced about the same.
Netflix has a big audience. There are more than 50 million global streaming subscribers, and that grows by the millions with every passing quarter. If you think Netflix has a wide reach now, it will be even wider next summer for the Crouching Tiger, Hidden Dragon sequel and wider than that when the Sandler movies start to roll out.
Netflix has never been a friend of the multiplex operator. "I'll wait for it to get to Netflix," has become a popular response to a ho-hum movie trailer. Studios also used to have their differences with Netflix, but then Netflix started to play along when it agreed to hold back on some new DVD releases until retail stores had a few weeks to sell them. Studios also rely on Netflix as a client. It had $7.7 billion lined up in future streaming content obligations as of the end of June.
Exhibitors don't have that kind of win-win relationship with Netflix. If Netflix is successful, it may put conventional theater houses at risk of buckling. It's going to be an interesting and intense fight. Multiplex operators had better hope that Netflix doesn't buy the film rights to that battle, too.
