Can Netflix save theaters and save itself?

Netflix‘s (NFLX 3.07%) agreement to debut knives out sequel in theaters for a week before the film appears on the streaming platform indicates that the movie industry still needs theaters as much as theaters need support from Hollywood.

While the release of Glass Onion: A Knives Out Mystery Likely to benefit Netflix more than theaters, it shows that cooperation between studios, platforms and theater operators will allow everyone to prosper.

Laughing girl with bucket of popcorn.

Image source: Getty Images.

Returning to the big screen

Netflix is ​​losing subscribers and will start offering a lower cost ad-supported subscription tier to stop the bleeding. A theatrical release of the Daniel Craig murder mystery could help bring more subscribers to the platform.

The original film was a financial success, if not a box office success, grossing $311 million at the worldwide box office on a budget of $40 million. Netflix won the rights to two knives out sequels, paying $450 million for the privilege, and a theatrical run in which he splits the box office with theaters allows him to recoup some of his costs.

However, the benefits are limited. the knives out The sequel will not be a full theatrical run, as it will only be shown in about 600 theaters, while blockbuster movies are usually shown in thousands of theaters. It will also just be a sneak peek at the movie, which will run for about a week before Thanksgiving before it moves to the Netflix platform in December, meaning it won’t make the kind of money a typical theatrical release would. . Netflix, however, is no doubt hoping that enough buzz will be generated around the film to entice others to subscribe and watch the film at home.

Put bodies on seats

For theaters, the deal keeps them informed, and first-run exclusivity means they remain vital to the industry ecosystem at a time when attendance is well below pre-pandemic levels.

Industry site TheNumbers estimates that theaters will generate about $7.7 billion in box office receipts from 843 million tickets sold this year, compared to $11.2 billion generated in 2019 with 1.2 billion tickets sold.

AMC Entertainment (AMC -4.41%) CEO Adam Aron said, “As we’ve often said, we believe that both theatrical exhibitors and streamers can continue to successfully co-exist…thanks to the greater cultural resonance those movies can get from a theatrical release, they will end up being played at a wider audience when they are also viewed on streaming platforms.”

It also helps the bottom line for theaters, because they have more and more varied films to show and attract audiences. Aron also believes that he could lead to additional movie screenings in the future from Netflix.

Like old times

This is not the first time that Netflix has shown one of its movies in theaters before running it on its platform. In 2018, when the broadcaster had its sights set on winning the Oscars, it allowed the first theatrical performances of Rome, The Ballad of Buster Scruggsand the surprise post-apocalyptic success of Sandra Bullock bird box. Netflix has previously shown movies like Beasts of no nation, July 22Y okja in theaters, but those were same-day releases for the platform.

It was a marked change from previous years, when AMC, film brand, and owner of the Regal Theater Cineworld refused to show the Netflix Hidden Dragon Crouching Tiger sequel because the streamer would not respect the window of exclusivity that theaters used to command. But the pandemic changed everything.

Where it used to take 90 days from its theatrical debut for a movie to appear on a streaming platform, the window has been shrinking and the COVID outbreak has closed it entirely. Comcast (CMCSA 0.04%) everything changed when he released his Trolls: World Tour children’s film straight to broadcast because movie theaters had been forced to close.

Although there was much theatrical consternation, and Disney (DIS 0.33%) has said there is no going back to the old system, eventually deals were struck with studios for many movies to be released in theaters first for a period of time before making their way to internal streaming platforms.

Better together

So in a way, Netflix’s deal with AMC, Cinemark, and Regal isn’t so much a landmark achievement as it is a return to the old status quo of sorts. And the more theaters that can get streamers to show their movies in theaters, the better off they will be.

Although neither side comes out of the deal particularly well, a spirit of cooperation may see both Netflix and theaters get through this period better than when they started.

Rich Duprey has no position in any of the listed stocks. The Motley Fool has positions and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast and recommends the following options: $145 long calls in January 2024 at Walt Disney and $155 short calls in January 2024 at Walt Disney. The Motley Fool has a disclosure policy.

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