Netflix may be missing an opportunity in horror movies

A button for launching the Netflix application can be seen on a remote control in this photo illustration in Warsaw, Poland on April 25, 2019.

Jaap Arriens | NurPhoto | Getty Images

There is a major money issue haunting Netflix.

In recent years, the streamer has spent heavily on flashy, blockbuster-style action films such as “The Gray Man” and “Red Notice,” which grossed the company $200 million each. The films are the first steps in bidding to fuel event-level franchises. But they’re expensive, and it’s unclear how impact they’ve had on Netflix’s bottom line.

Meanwhile, the hit “Stranger Things”, a supernatural thriller with horror undertones, has become a definite cultural touchstone. The series, which has just released its fourth season, has inspired Halloween costumes and video game versions of the monster-filled alternate universe.

While the show has a similar budget to these high-octane action movies — about $30 million per episode, or over $200 million per season — its success has left some in the industry questioning whether high-budget features are worth the investment. worth of Netflix.

Netflix’s streaming rivals have begun to shift their own content strategies to spend less on direct-to-stream movie content. David Zaslav, CEO of Warner Bros. Discovery said Thursday that his company has been unable to find “economic value” in producing high-budget movies for its streaming services.

“Fortunately, by now having access to all the data, we’ve seen how direct-to-streaming movies are performing,” Zaslav said during the company’s second-quarter earnings call. “And our conclusion is that expensive direct-to-streaming films… are not comparable to what happens when you launch a film in the cinema, in the cinema.”

Netflix doesn’t often release movies in theaters unless it wants to qualify for the Academy Award, so it budgets for movies knowing that the only option to recoup spending is through subscription growth.

That’s why analysts have pointed to the horror genre as a possible avenue for Netflix.

The horror genre, in particular, tends to have lower production costs, making these types of films ideal for the box office, as they often bring in significantly more in ticket sales than they cost to make.

Blumhouse and Universal’s “Get Out” cost just $4.5 million to produce and grossed over $250 million at the worldwide box office.

And while “The Gray Man” will be developed into a franchise, Peter Csathy, founder and chairman of consultancy Creative Media, suggested that Netflix is ​​horribly overlooking franchise opportunities that could save the company hundreds of millions per movie.

“Scream”, “Insidious”, “Halloween” and other horror movie series have won over fans of the genre, as low-budget alternatives to more expensive franchise endeavors such as Fast and Furious, Star Wars, Marvel or Lord of the Rings.

“The cost of production is a fraction, a fraction, a small fraction of what it is for these huge bets being made,” he said. “And why not go for a cheap sure thing that reaches your targeted demo? Why not put your money into that, instead of doing these big prestige plays?”

Additionally, Csathy added, the target audience for the horror genre also happens to be young — the advertiser and streamer demographics want to tap into.

Netflix has had success with previous horror releases, including the “Fear Street” trilogy, and has a number of Netflix Original releases in the genre, including “No One Gets Out Alive” and “There’s Someone Inside Your House.”

Michael Pachter, an analyst at Wedbush, suggested Netflix could get more bang for the buck by sticking to a range of horror and romcom projects, both of which are relatively low-budget. With more modest budgets, missteps aren’t that big of a deal.

“The nice thing about low budget is that you can make mistakes,” he said. “Big budget, you just can’t make one. If you screw up, you’re screwed. So which is riskier, a $150 million movie or three $50 million movies?”

Missing stats

Part of the scrutiny of Netflix’s content stems from the lack of clear statistics on the financial performance of streaming-first shows and movies.

Box office numbers for theater releases and TV ad revenue are time-tested statistics. With streaming platforms alone, ratings vary from service to service and analysts provide an incomplete picture for analysts trying to determine how a movie or television show has actually performed.

A bill over $200 million for a movie like “The Gray Man” is harder to explain if there’s no visible financial gain at the end of production, as studios see at box office ticket sales. Streaming subscribers pay a fixed monthly or annual fee to access all available content. Netflix states that its content keeps users on the platform and hands over subscription fees.

For Netflix, the push towards big-budget movies is a way of polishing its image and the silent criticism that it produces mediocre content. The company has strengthened its balance sheet, is cash flow positive and has a three-year period before a significant portion of its debt matures, giving it some leeway to spend.

It’s unclear how much Netflix has spent per movie for its “Fear Street” trilogy, and there is limited performance data on the platform. But the Nielsen ratings estimate that “Fear Street 1994” generated 284 million minutes of viewing during its first week of service and “Fear Street 1978” generated 229 million minutes. It is unclear how the third film, “Fear Street 1666”, performed.

In addition, the fourth season of “Stranger Things” has become only the second Netflix series to have more than 1 billion hours viewed within its first 28 days of availability. Comparing Netflix’s movies to its TV shows is, of course, a bit of an apples and oranges comparison, but it’s the best data analyst analysts can access as long as the company is silent about content spending and success.

Many entertainment experts have been trying to figure out the numbers on how streaming hours translate into revenue, retention, and ultimately the strength of Netflix’s business. But much of how Netflix decides what to green-light and what to cancel remains a mystery to analysts.

Based on Netflix’s own data, “The Gray Man” amassed more than 88 million hours of worldwide viewing during the service’s opening weekend, 60 million fewer hours than “Red Notice” in the same period last November. “Red Notice” stayed at the top of Netflix’s top 10 for 12 days, while “The Gray Man” was usurped after just eight days.

As of Friday, the film is in fourth place on the list behind ‘Purple Hearts’, ‘Tower Heist’ and ‘Age of Adaline’.

So, was “The Gray Man” worth the $200 million price tag? It seems to have hit some behind-the-curtain stats for Netflix, which is moving forward with a sequel and spin-off.

“Netflix clearly has the data and methodology that they believe is accurate to determine what this success at Netflix is ​​and what isn’t,” said Dan Rayburn, a media and streaming analyst. “If [‘The Gray Man’] bombed according to their definition of bombing, whatever that is, we don’t know, they wouldn’t have announced a comprehensive deal.”

As for how Netflix makes its content choices, Rayburn says that while data isn’t generally available right now, that could change once the streamer launches. enters the advertising market.

“Whether they want to give us data or not, we’re going to get more data over the years, because of the advertising side,” he said. “That will help us better understand the content.”

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. Universal is the distributor of the Halloween franchise and “Get Out”.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *