Netflix's (NFLX 2.72%) deal to debut its Knives Out sequel in movie theaters for one week before the film appears on the streaming platform indicates the movie industry still needs theaters just as much as theaters need support from Hollywood.

While the release of Glass Onion: A Knives Out Mystery likely benefits Netflix more than the theaters, it shows that cooperation between studios, platforms, and theater operators will allow all to thrive.

Laughing girl with popcorn bucket.

Image source: Getty Images.

Returning to the big screen

Netflix is losing subscribers and will begin offering a lower cost, ad-supported subscription tier to staunch the hemorrhaging. A theatrical release of the Daniel Craig murder mystery could help attract more subscribers to the platform. 

The original film was a financial success, if not a blockbuster, making $311 million in global box office receipts on a $40 million budget. Netflix won the rights to two Knives Out sequels, paying $450 million for the privilege, and a theatrical run where it splits the box office with the theaters allows it to recoup some of its costs.

Yet the benefits are limited. The Knives Out sequel won't be a full theatrical run, as it will only be shown in about 600 theaters, whereas wide-release films are typically shown in thousands of cinemas. It will also only be a sneak peak of the film, running for about a week prior to Thanksgiving before it moves over to the Netflix platform in December, meaning it will not earn the sort of money a typical theatrical release would. Netflix, though, is undoubtedly hoping enough buzz will build around the film to entice others to subscribe and watch the movie at home.

Getting bodies into seats

For movie theaters, the agreement keeps them in the loop, and the first-run exclusivity means they remain vital to the industry ecosystem at a time when attendance is running well below pre-pandemic levels.

Industry site TheNumbers estimates theaters will generate some $7.7 billion in box office receipts on 843 million tickets sold this year, compared to the $11.2 billion generated in 2019 on 1.2 billion tickets sold.

AMC Entertainment (AMC 0.93%) CEO Adam Aron said, "As we have often said, we believe that both theatrical exhibitors and streamers can continue to co-exist successfully...thanks to the larger cultural resonance those movies can gain from a theatrical release, they will wind up playing to a wider audience when they also are viewed on streaming platforms."

It helps theaters' bottom line as well, because they have more and varied movies to show and draw audiences. Aron also thinks it could lead to additional movie showings in the future from Netflix.

Just like the old days

This is not the first time Netflix has shown one of its movies in theaters before running it on its platform. Back in 2018, when the streamer had eyes on winning Oscars, it allowed for theater first-runs of Roma, The Ballad of Buster Scruggs, and the surprise Sandra Bullock post-apocalyptic hit Bird Box. Netflix has previously shown films like Beasts of No Nation, 22 July, and Okja in theaters, but those were same-day releases for the platform.

It was a marked change from years prior, when AMC, Cinemark, and Regal theater owner Cineworld refused to show the Netflix Crouching Tiger, Hidden Dragon sequel because the streamer would not respect the window of exclusivity theaters used to command. But the pandemic changed everything.

Where once it would take 90 days from its theater debut for a film to show up on a streaming platform, the window has been narrowing, and the COVID outbreak shut it altogether. Comcast (CMCSA -0.12%) upended everything when it released its Trolls: World Tour children's movie directly to streaming because movie theaters had been forced to close.

Although there was a lot of theater consternation, and Disney (DIS 0.33%) has said there is no going back to the old system, eventually agreements were worked out with studios to have many films released to theaters first for a period of time before making their way to in-house streaming platforms.

Better together

So in a way, Netflix's deal with AMC, Cinemark, and Regal isn't so much a landmark achievement but a return of sorts to the old status quo. And the more theaters can get streamers to show their movies in the cinema, the better off they will be. 

Although neither side makes out particularly well from the agreement, a spirit of cooperation may just allow both Netflix and the theaters to come through this period better than where they started.