Opinion: Netflix - the exhibitor of the future?

O P I N I O N Netflix — the exhibitor of the future?

Danny Jeremiah, head of cinema products at Arts Alliance Media, cuts Netflix a little slack

IT’S SAFE TO SAY “NETFLIX” hasn’t been our favourite word for some time. Look at controversy surrounding the success of “Roma” at the Oscars; a film most exhibitors couldn’t program even if they wanted to break their own rules about the theatrical window. But if there’s one topic debated more passionately recently, it’s Moviepass. For what was (initially) a rather large monthly fee, Moviepass let subscribers to attend unlimited screenings at any big chain in the US, with no say from the exhibitors.

There followed an at times farcical struggle to find what’s known in the tech arena as “product-market-fit”. Moviepass raised and cut prices and modified terms on an almost daily basis, trying to find a profitable sweet-spot. The business model’s long-term sustainability may be in doubt, but it did demonstrate the appetite for a subscription ticketing model. And who knows subscriptions better than Netflix? More than 148 million people worldwide subscribe to its streaming service. In the US, market penetration is close to 50%.

They know what audiences want arguably better than traditional major studios. Netflix is creating and acquiring world-class content and uses data gathered through deep connections with its audiences to make informed decisions about stories it develops, in ways studios can’t yet replicate. It has 90 original feature films slated for 2019 with budgets, reportedly, up to $200m, which, if true, places them firmly in blockbuster territory. It’s also acknowledged that theatrical runs play an important part in the lifecycle of feature films.In January, the MPAA announced that Netflix would take Fox’s place at the association, so it now has a seat at the top table.

Subscriber growth is accelerating, but it will saturate eventually. That — and a competitive market — limit Netflix’s ability to raise subscription prices. It means the company has to explore areas outside its core business to achieve longterm growth. Keeping in mind Netflix’s strengths and limitations, and CEO Ted Sarandos’ recent assertion that “entertainment is what [they] do”, I foresee one logical path it could take. By adding a cinema tier to subscription plans, even if initially for Netflix originals only, it could remove those limitations. As the owner of the film rights, it would also share in the box office revenue, a model Moviepass alluded to, but couldn’t accomplish. The prospect of another third party subscription scheme encroaching on the exhibitor’s territory may not appeal to all, but I don’t think the industry should fear an offering like this. The average adult goes to the cinema between 3 and 5 times per year. We should be pushing to increase that. If Netflix offers a new avenue to help achieve this, it would be careless to discount its efforts.

My enemy’s enemy is my friend...?

As president of the National Association of Theatre Owners, John Fithian, noted at CinemaCon, “It’s great that people like to watch movies and television shows on Netflix, because people who love content love it everywhere.” Consumer habits are changing rapidly, something that digital natives like Netflix are well placed to act on. The only trends the cinema industry can trust to persist, and really invest in are flexibility and adaptability, and there are worse partners than Netflix to help them get there.