Analyst: Netflix Film Strategy Could Get Company Exclusive Content Abroad
He calls it "a great way" to generate publicity and compares the cost to what Netflix pays for DreamWorks Animation films
Netflix's push into original films with partner Imax could allow the streaming video giant to get more exclusive film content in international markets, Janney Montgomery Scott analyst Tony Wible said in a report on Wednesday.
The strategy "will likely maintain the status-quo in the U.S., but may allow it to get more exclusive content in international markets," he wrote. The title of his report explained his take on another benefit in the U.S. and beyond: "90 Minute Original=Low Cost PR." Explained the analyst: "This is a great way for Netflix to generate publicity."
Earlier this week, Netflix announced a partnership with Imax, with the first film, in cooperation with The Weinstein Company, set to be a sequel to 2000 martial arts film Crouching Tiger, Hidden Dragon. On Tuesday, big exhibition chains said they wouldn't screen the film.
"Theaters will not tolerate this and have forcefully defended their window in the past," Wible said. "Essentially, Netflix will get hype for a relatively low cost via a film that will largely only be seen online in the U.S."
But he said the model could work in international territories. "Film rights are frequently pre-sold into smaller international markets. Studios may welcome another bidder for theatrical distribution rights in these countries, which would allow Netflix to get early access to exclusive content in newer markets without having to wait until the typical pay TV window," Wible wrote. "This new model may also be a viable strategy for smaller independent films that would not normally play on many U.S. screens."
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Will the publicity from the move into original movies affect Netflix's subscriber growth? Wible said it could "marginally" boost subscribers.
Addressing the possible financials of the Crouching Tiger sequel, he wrote: "Netflix is likely to spend very little…as the original film was produced for only $17 million. Netflix may need only pay $10 million for the co-produced film versus the $20 million-$40 million it pays for each DreamWorks Animation film it gets about nine months after theatrical release. This is also a small fraction of the $100 million spend needed to get controversial buzz for House of Cards."