A remote control in this photo taken April 25, 2019 in Warsaw, Poland shows a button to launch the Netflix application.
Jaap Ariens | Noor Photo | Getty Images
There is a big money question that haunts netflix.
In recent years, streamers have spent a lot of money on flashy, blockbuster-style action movies like ‘The Gray Man’ and ‘Red Notice,’ each of which ran a $200 million company. The movie is the first step to inspire an event-level franchise. But they cost money, and it’s unclear how much impact they’ve had on Netflix’s bottom line.
Meanwhile, the platform’s breakout hit, Stranger Things, is a supernatural thriller with elements of horror and a definite cultural touchstone. The series, which just released its fourth season, has inspired Halloween costumes and his version of the video game He in a monster-filled alternative universe.
The show’s budget is similar to those of these high-octane action flicks, around $30 million per episode, or over $200 million per season, but its success has led some in the industry to invest in high-budget features. Whether it’s worth Netflix’s investment has been questioned.
Netflix’s streaming rivals are beginning to change their content strategies to spend less on direct-streaming movie content. warner bros discovery CEO David Zaslav told his company on Thursday couldn’t see the “economic value” in producing big-budget movies for streaming services.
“Fortunately, having access to all the data has allowed us to see how direct-streaming movies work,” Zaslav said on the company’s second-quarter earnings call. And our conclusion is that expensive direct-streaming movies don’t compare to what happens when you show a movie in a cinema.”
Recognizing that Netflix doesn’t release movies in theaters often unless they’re seeking Academy Award qualification, the only option to recoup spending is through subscription growth. is budgeting for
As such, analysts point to the horror genre as a potential avenue for Netflix.
Especially since the horror genre typically has low production costs, this kind of film is ideal for the box office.
Blumhouse and Universal’s “Get Out” cost just $4.5 million to make and grossed over $250 million at the worldwide box office.
“Grey-Man” is also set to be franchised, but Peter Csassy, founder and chairman of consulting firm Creative Media, has suggested Netflix is overlooking the franchise opportunity.
Horror film series such as “Scream,” “Insidious,” and “Halloween,” are appealing to fans of the genre as low-budget alternatives to expensive franchises such as The Fast and the Furious, Star Wars, Marvel, and The Lord of the Rings. have earned.
“The production costs are tiny, tiny, tiny compared to those big bets,” he said. “And why not find something cheap and sure to hit a targeted demo? Rather than making these big prestige plays, why not put your money in there?”
Furthermore, Csathy added that the target audience for the horror genre also happens to be younger.
Netflix has had success with past horror releases, including the “Fear Street” trilogy, and has many Netflix original releases in the genre, including “No One Gets Out Alive” and “There’s Somesome Inside Your House.” increase.
Wedbush analyst Michael Pachter suggested that Netflix could make more money by sticking to a lineup of horror and romantic comedy projects that tend to be relatively low-budget. With a more modest budget, failure is less of an issue.
“The great thing about low budgets is that you can make mistakes,” he said. “The budget is too big to make anything. If it fails, it fails. So which is riskier: a $150 million movie or three $50 million movies for him?”
Part of the scrutiny of Netflix’s content spending stems from the lack of clear metrics on the financial performance of its streaming-first shows and movies.
Theatrical box office and television advertising revenues are proven indicators. On streaming-only platforms, viewing data varies from service to service, painting an incomplete picture for analysts trying to determine how a movie or TV show actually fared.
Billings of over $200 million for movies like “Gray Man” are hard to explain when there are no measurable financial gains at the end of production, as studios see them at the box office. Pay a flat monthly or yearly fee to access all available content. Netflix claims its content keeps users on the platform and hands over subscription fees.
For Netflix, its foray into big-budget movies is a way to hone its image and quiet criticism for producing mediocre content. A good portion has three years to mature, so there is some leeway to spend.
It’s unclear how much money Netflix spent per film for its “Fear Street” trilogy, and there is limited data on how it performed on the platform. generated 284 million minutes in its first week of service, while Fear Street 1978 generated 229 million minutes. It is unknown how the third film, “Fear Street 1666” was made.
Additionally, the fourth season of Stranger Things became the second Netflix series to surpass 1 billion hours watched in its first 28 days. Of course, comparing Netflix movies and TV series is like comparing apples and oranges, but as long as the company remains silent about its content spending and success, the best data analysts have access to. is.
Many entertainment professionals have tried to quantify how streaming time translates into revenue, retention, and ultimately the strength of Netflix’s business. But much of how Netflix decides what to allow and what to cancel remains a mystery to analysts.
According to Netflix’s own data, “Grey-Man” was watched more than 88 million hours worldwide during its launch weekend, 60 million hours less than “Red Notice” during the same period last November. ‘Red Notice’ stayed at the top of his Netflix Top 10 list for 12 days, but ‘The Gray Man’ just overtook him by 8 days.
As of Friday, the film holds the fourth spot on the list, behind ‘Purple Hearts’, ‘Tower Heist’ and ‘Age of Adeline’.
So, was ‘Gray-Man’ worth $200 million? It looks like we’ve reached a metric behind the scenes at Netflix, which is pushing ahead with sequels and spin-offs.
Media and Streaming Analyst Dan Raeburn said: “Netflix clearly has data and methodologies that they believe are accurate to determine what this success is and what is not on Netflix. “What if [‘The Gray Man’] Whatever the definition of bombing, we don’t know, they wouldn’t have announced an expansion pact. “
As for how Netflix selects content, Rayburn said the data isn’t widely available right now, but that could change as it becomes available to streamers. Entered the advertising market.
“Whether they want to give us data or not, we’re going to get more data over the years, for reasons on the advertising side.” It helps.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. Universal is the distributor of the Halloween franchise and Get Out.