Over the past several years, the prevailing wisdom has been that the advent of streaming would be the death knell for cinema. It has been widely believed that over-the-top services like Netflix (NFLX +0.22%) and Prime Video by Amazon.com (AMZN +1.77%) were garnering more of consumers' limited free time, which would ultimately be the straw that finally breaks the back of movie houses.
As it turns out, that logic is just plain wrong. Recent data suggests that those who spend the most time watching streaming video also spend the most time in theaters.
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Survey says...
The National Association of Theater Owners (NATO) commissioned a study by Ernst & Young's Quantitative Economics and Statistics group. The purpose of the survey was to determine just how many people were forgoing theaters to stay home and watch streaming content. While the research was expected to reveal that movie fans were spending more time on the couch, the results showed quite the opposite: People who go to cinemas to watch films also watch the most streaming content.
The study, which included 2,500 U.S. residents, found that 80% of those surveyed had been to a movie theater at least once during the previous 12 months. Of that group, the majority those who saw nine or more movies in a month also viewed eight or more hours of streaming content each week. Conversely, those who only saw one or two movies in the past year reported viewing seven hours of streaming per week or less.
Another surprising conclusion of the survey: Among the respondents who didn't go to the theater at all in the previous 12 months, nearly half didn't stream any content, either. This shows a very high correlation between movie attendance and streaming behavior.
A bitter rivalry
There's been an ongoing and very public war of words between theaters owners and Netflix. Back in 2013, NATO chief John Fithian addressed Netflix's practice of releasing its films in theaters and on its platform on the same day. "Subscription movie services and cheap rentals killed the DVD business, and now [Netflix content chief Ted] Sarandos wants to kill the cinema as well ... The only business that would be helped by day-and-date release to Netflix is Netflix."
In 2014, the four largest theater chains in the U.S. -- AMC (AMC 5.79%), Regal, Carmike, and Cinemark (CNK 1.26%) -- all declined to show Crouching Tiger, Hidden Dragon: The Green Legend, Netflix's first original film, because of the company's day-and-date release policy. AMC eventually relented, allowing the movie to show on a few screens as a favor to partner IMAX (IMAX 0.33%). The major multiplex chains similarly refused to exhibit Netflix's Beasts of No Nation the following year.
Netflix has had trouble internationally as well. Last year, the folks at the Cannes Film Festival announced that Netflix and other streaming services would be prohibited from submitting any of their films for consideration unless they were first shown in theaters. This followed a protest by French theater owners in 2017 after Netflix's original movies Okja and The Meyerowitz Stories were shown in the competition. French lawmakers had previously passed a measure that banned movies from streaming services for three years once they had been shown in theaters. This left Netflix in an untenable situation, causing the company to boycott Cannes.
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Amazon bypassed much of the controversy by releasing its biggest movies in theaters and honoring the existing 90-day window between theater debut and streaming release required by theaters. It became the first streaming service to win at the Academy Awards, taking home three statues for Manchester by the Sea in 2017.
Will anything change?
Netflix, with its 137 million subscribers worldwide, is more interested in catering to them than theater chains. That said, there are signs that the company is willing to adjust its strategy given the right incentive. Netflix has long coveted Oscar gold for its original movies. The company recently departed from its long-standing practice of day-and-date releases by showing several high-profile movies in theaters before they debuted on its streaming platform. Alfonso Cuaron's Roma, The Coen brothers' The Ballad of Buster Scruggs, the Andy Serkis-directed Mowgli: Legend of the Jungle, and the Susanne Bier-helmed Bird Box all had limited theatrical engagements before being released to Netflix subscribers.
The findings of the survey and the company's willingness to debut some films in theaters before they hit the streaming queue may begin to thaw the chilly relationship between theaters and Netflix. Even if it didn't, Netflix's allegiance is still to its subscribers.
Check out the latest Netflix earnings call transcript.
