Netflix fumbles for movie strategy while Amazon wins awards

Netflix released its latest stay-at-home blockbuster, Bright, a few weeks ago, and the reviews are in: it’s bad. Terrible, in fact, at least according to the critics. But according to Nielsen’s new streaming metrics, at least 11 million people streamed the film in its first three days.

The popularity of the film, and its universally panned reception by the critics, begs the question: if viewers stream a bad movie at home, can it be considered a hit?

Netflix, it seems, would say yes. The company has already ordered a sequel, as if to only send a message to the Hollywood elite: the rules of content consumption are changing, and movies are not exempt.

Theater attendance has become increasingly fickle in recent years. While big budget, CGI laden, 3D optional franchise-based action blockbusters continue to draw huge audiences, the rest of the movie genres don’t. Ticket prices continue to rise, as do the price of concessions, which has served only to keep audiences away from the artsy films, the dramas, the risky bets.

Of course, the reason so many watched Netflix’s Bright is precisely because it wasn’t in the theaters. Viewers can watch the movie at home, provide their own concessions, and perhaps most assuring, they can opt out of the movie at any point without needing to lament the $40 spent at the theaters.

Netflix ruffled feathers when it announced plans to screen its first originals in theaters alongside their digital release. The announcement served only to solidify the theater groups into an alliance that has promised to boycott Netflix films, although there is the potential for an anti-trust threat in the background, despite the fact that there has never been a proven connection between Hollywood and its theatrical distribution chains.

In 2017, the company launched 50 films, including three hits in Q3, according to Netflix’s content chief Ted Sarandos. “If viewing was buying a movie ticket, these would be sizeable successes,” he said. But because Netflix relies on its own algorithms and word of mouth to get its originals in front of the right viewers, what Netflix deems a sizeable success will certainly differ from what traditional success has looked like for films.

Netflix has adopted the same niche-by-niche strategy for its films that it has been using with its original series: it develops and releases films that it thinks will appeal to certain audiences, but never all audiences. In other words, Netflix isn’t really looking for a blockbuster. The company is instead interested in manufacturing cult classics. On the TV side, this strategy seems to have worked well.

Netflix thinks it has a winning strategy for the new stay-at-home moviegoers instead. Bright, which stars Will Smith, and was directed by David Ayer, is exemplary of that strategy. “I think people will start seeing the potential for this original movie initiative that it can be done on the enormous scale that we have on the television side,” Sarandos said.

The company will release a whopping 80 new films in 2018, spanning action, drama, comedies, and documentaries. “They range anywhere from the million-dollar Sundance hit, all the way up to something on a much larger scale, like we are seeing on Bright, at the end of this year and Irishman that’s in production right now with Martin Scorsese that should be in early ’19,” Sarandos said, referring to its next big production, The Irishman, starring Robert De Niro.

Amazon, meanwhile, has taken a more traditional route with its movie strategy. It offered to create a shortened theatrical window for its films, in hopes of currying favor with the theaters, and nearly all of its original films have seen limited theatrical releases. That move has helped it curry favor with the Academy, too. Amazon received its first Academy Awards last year, for the Casey Affleck starring film, Manchester by the Sea. Amazon also won an Oscar for an Iranian-made film, The Salesman, which it distributed exclusively in the US. Netflix won just one Oscar in 2017 for its short documentary on Syrian relief workers, The White Helmets.

Overall, Amazon’s film business is much smaller than Netflix’s. Amazon released about 13 films in 2017. But those fewer films have been more warmly received by critics. Amazon has five films that are currently making Oscar buzz for the upcoming awards ceremony, including critics’ favorite The Big Sick.

Amazon has relied heavily on indie festival acquisitions, rather than develop the content in-house. That will change in 2018, as wider strategy shifts at Amazon Studios will see more hands-on control of film projects that will be developed in-house. Amazon has said it has about 14 new movies in the works for 2018.

The big question Netflix is facing now is, in an era of social media and personalized content recommendations, does it need theater distribution or Academy recognition, to “win” at movies?

Like all things Netflix, the answer partly depends on how many new subscribers it can sign up. Churn is notoriously high for OTT players, though Netflix is arguably one of the stickier OTT services – the service has plenty of diverse original content to keep viewers engaged. The other side of the coin is whether a film like Bright can stop a viewer from changing inputs and opting to stream (or purchase a digital rental) on rival services like Amazon, Apple, or even pay TV VOD. Ultimately, if oddball films like Bright and the Adam Sandler series of sophomoric comedies can keep its viewers engaged with the service, it’s a win for Netflix, even if it doesn’t muster the surprising critical success of Amazon’s films.

Apple, on the other hand, is reportedly interested in releasing its own movies too. Apple represents an interesting new player in the growing field of “post-cable” content providers, as the end game isn’t clear. Apple was recently able to poach a few Amazon content execs for the content division it is building. And while most of the media attention has been on Apple’s TV ambitions, company execs have iterated that movies are on the table, too. But it’s hard to see how selling original programming to its users will help it either sell more devices or sell more TV and movie rentals – which represents an important piece of its iTunes revenue that has been challenged by the rise of the streaming services.

At the start of 2017, Apple said it plans to release its original programming to its Apple Music subscribers, which is another puzzling strategy. The plan seems to be to strengthen its streaming music service by offering more video content on the service. Considering how silly that strategy appears, Apple’s movie ambitions can be chalked up to nothing more than an exercise in spending money at this point.