Is Hollywood Mortgaging Its Future To Netflix?

Senior Contributor
03.02.17 4 Comments

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Bright has all the hallmarks of a massive Hollywood hit. Will Smith and David Ayer are fresh off Suicide Squad, a movie that grossed nearly three quarters of a billion dollars in theaters, and joined by Joel Edgerton and Noomi Rapace in a seemingly can’t-miss blockbuster about a human cop, played by Smith, and an orc, played by Joel Edgerton. It would probably do well in theaters, but it likely won’t play in a theater near you: The rights have been sold to Netflix, which only does a brief theatrical run for the movies it acquires before putting them up to stream.

Nor is it the only seemingly sure-fire theatrical hit that’s choosing Netflix over a traditional movie studio deal. Martin Scorsese’s mob movie The Irishman seems headed to the service (although impending legal action might mess up that deal). Adam Sandler has decided to leave theaters behind entirely and simply distribute his movies on Netflix, rapidly becoming one of the service’s top talents. Brad Pitt’s War Machine was arguably saved by Netflix in the first place, which stepped in with $60 million to produce the movie in 2015 when it was struggling. Sundance darling I Don’t Feel At Home In This World Anymore just arrived, to little fanfare, on Netflix despite winning the Grand Jury Prize, which generally assures the winner a theatrical run. What’s going on?

The problem, in part, is because Hollywood is struggling to make movies that aren’t either cheaper than $10 million or cost hundreds of millions. The issue, to some degree, is marketing. The basic mechanics of putting a movie in a theater, and putting eyeballs on screens to watch it, is costing more and more; in 2014, the average marketing cost of a Hollywood blockbuster was $100 million. Jordan Peele’s surprise hit Get Out, by contrast, cost $5 million to make.

For mid-range movies, that means the price tag goes from roughly, say, $50 million to make the movie to $150 million to get it into theaters. That’s a particular issue because many mid-range movies tend to be movies that don’t translate well to foreign audiences, i.e. you’re less likely to make your money back if it bombs in the U.S. For example, Bad Moms made $113 million here, five times its $20 million budget, but only $66 million overseas. By contrast, action flick xXx: The Return of Xander Cage cost four times as much and racked up just $44 million domestically, but collected $289 million overseas.

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