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Is Hollywood's Fear of Netflix Much Ado About Nothing?

By Danny Vena – Apr 8, 2019 at 4:48PM

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Big movies still entice people to theaters and people who like to stream also like to go to the movies.

Netflix (NFLX -2.04%) must be among one of the most controversial names in Hollywood. After seriously disrupting the television landscape, many theater owners and industry elites are concerned that the widespread adoption of streaming will further erode already declining movie attendance. Since 2002, theater admissions in North America have experienced a consistent decline, with movie attendance going from 1.57 billion to 1.3 billion last year, according to data from the National Association of Theater Owners. 

Even some of Hollywood's most high-profile stars are weighing in, including legendary director Steven Spielberg and Oscar-winning actress Dame Helen Mirren, who both have voiced anti-Netflix sentiment.

Given the shifting media landscape, those fears are certainly understandable, but they may turn out to be unfounded.

An apparently frightened man peeking through his fingers while watching TV in the dark.

Are Hollywood's fears of Netflix misplaced? Image source: Getty Images.

Lashing out

Spielberg has been calling for a rule that would prevent films by Netflix and other streaming services from being considered for an Oscar unless they ran for at least a month in theaters before debuting on a streaming service.

The latest outcry comes just a month after the Netflix original film Roma, which only ran in select theaters for three weeks, took home three Academy Awards.  Spielberg sits on the Board of Governors for The Academy of Motion Picture Arts and Sciences (the organization behind the Oscars) representing movie directors, so his feelings on the matter hold a lot of sway with his fellow members.

The U.S. Justice Department has warned the Academy that any rule changes designed to exclude streaming services might run afoul of antitrust laws.

Helen Mirren turned heads recently at CinemaCon, the official convention of The National Association of Theater Owners (NATO), a lobbying group for the exhibition industry, when she used profane language to describe her feelings toward Netflix. This prompted a "thunderous applause" from the audience of theater owners, according to a report in Variety. 

These two incidents capture the level of animosity toward Netflix by some in Hollywood -- but those feelings may be misguided.

The reality may be far different

Even in the face of continuing competition from streaming, Hollywood set a box-office record in 2018, with $11.9 billion in revenue. While a 1.6% year-over-year increase in ticket prices helped boost the results, the biggest contributor to the year's success was admissions, which climbed 5% -- the biggest year-over-year increase since 2012. 

What caused the jump in attendance? Big movies.

Box office hits like Marvel's Black Panther and Avengers: Infinity War and Disney's (NYSE: DIS) Incredibles 2 topped the list of the highest-grossing films last year, coaxing consumers from their couches to catch films on the big screen. Jurassic World: Fallen Kingdom, which brought in over $1 billion in box office sales, was a breadwinner for Comcast (NASDAQ: CMCSA)-owned Universal, while Warner Bros., a division of AT&T (NYSE: T), celebrated the success of Aquaman

That's not all. A study commissioned by the National Association of Theater Owners showed that the most voracious streamers are also the most avid moviegoers. A survey of 2,500 U.S. residents reported that 80% of respondents had been to the movies over the past 12 months. Of that group, those who saw the most movies (nine or more in the last year) also consumed the most streaming content (eight or more hours per week). Conversely, of those who hadn't been to a theater at all in the past year, nearly half didn't stream either. 

Perception is reality?

The evidence is clear. A strong slate of must-see movies brings people to the multiplex, and there's a high correlation between movie visits and streaming consumption. This all flies in the face of conventional wisdom, which says that streaming will eventually kill off theaters.

With all due respect to Spielberg and Mirren, their fears regarding streaming may just be overblown.

Danny Vena owns shares of Netflix and Walt Disney and has the following options: long January 2021 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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