Netflix's (NFLX -0.54%) Glass Onion could've been a box-office blockbuster.
The streaming giant isn't releasing any details about the Knives Out sequel's ticket sales during its weeklong release, but estimates put the number at $15 million. That's a far cry from the $300 million the original film garnered from its worldwide release in 2019. Experts expect a global release with a longer run would've garnered a similar amount for the sequel.
"Was there money left on the table?" Andrew Ross Sorkin asked Netflix CEO Reed Hastings at this week's DealBook Summit. Answered Hastings, "Lots."
Did Netflix just cost itself tens of millions of dollars?
If it wanted, Netflix could've done a standard three-month run at thousands of theaters for Glass Onion.
Theaters are hungry for new films after the pandemic significantly curbed their business, and media companies started splitting their focus between theaters and their own streaming services. In fact, that environment is what led major chains to provide enough concessions to allow Netflix to do a one-week limited run of Glass Onion.
If Netflix had gone the route of a traditional release window, generating the same amount at the box office as the original Knives Out, it would've brought home around $150 million. It also would've had to increase its marketing budget to reach those numbers, though, so you should trim a significant amount off of that estimate.
But Netflix isn't in the theatrical release business -- it's in the business of selling subscriptions to its streaming service. And $150 million in revenue is less than 1 million North American subscribers for one year.
Cheap marketing
Netflix was absolutely intentional in its efforts to keep the release of Glass Onion relatively limited. The goal wasn't to generate as much box office revenue as possible; it was to generate as much buzz as possible.
"With films, we released it typically in film festivals early to stimulate conversation and demand, but not fulfill that demand," Hastings explained. "Our week in theaters with a small number of theaters has done exactly that. Everyone's talking about it, it's excitement about Glass Onion, it's going to be huge."
When Sorkin asked if Netflix would ever consider a wider release of a film, Hastings said, "We use this as a promotional technique so that more people watch it on Netflix."
Efficient marketing may be of the essence for Netflix. It spent $465 million for the rights to produce two Knives Out sequels, and another $40 million producing Glass Onion. Meanwhile, the company has barely gained any subscribers this year after posting losses over the first six months of 2022.
If the limited-release tactic pays off, it could be some of the most efficient marketing Netflix has done. In that case, we'll probably see more of this tactic over time.
Follow the data
Netflix has always been a data-driven company focused on maximizing long-term value, and its efforts with Glass Onion are no different.
As a data-driven company, however, it requires patience from investors, and leniency to get things wrong from time to time. It's very possible Netflix did make a mistake and left millions of dollars on the table by restricting the release of Glass Onion.
But we'd never know it unless management took the chance that this limited silver-screen release pays off in a huge number of Netflix subscribers all logging in to watch the film at the end of December. Not only that, but Netflix also has to show it can capitalize on that viewership, growing subscribers in the long term.
With huge amounts of data at its disposal, Netflix is in a strong position to take these types of chances on big-budget productions like Glass Onion in order to generate long-term value for investors. Of course, Hastings is already touting the limited release as a success, so it might be wise to trust his judgment. But even if Hastings gets this one wrong, the long-term focus of Netflix makes it one of the best ways to invest in streaming.
