Netflix promises a new premiere movie each week, which could disrupt the traditional “let’s all go out to a movie tonight” habit. The video streaming service marshals billions of dollars in marketing and content spending for that original-movies ambition, though there are some chinks in Netflix’s armor.
Netflix just reported very good calendar 2020 earnings with 203.7 million global subscribers after a net add of 37 million for the year (the nearest streaming rival Disney+ is at 90 million subs). Meanwhile, Netflix logged $25 billion in 2020 revenue and carries an enormous stock market capitalization of a quarter trillion dollars.
A week earlier, Netflix unveiled its movie slate that promises a fresh movie each week in 2021, after stockpiling original films prior to the Covid-19 pandemic. The weekly-movie volley goes beyond simply acquired movie content and beyond Netflix’s prior focus on TV series, which were Job One since TV series can “brand” a platform and spur ongoing viewing.
Even before the new movie-a-week initiative, Netflix has been the biggest cinema disrupter because of insisting its originals stream at the same time they are in cinemas. That results in very minor theatrical runs for most of its original movies.
Netflix has amassed the means to push its film ambitions. In 2020, Netflix spent $2.23 billion on “marketing” worldwide — everything from paid advertising to trailers to promotions. That’s to both publicize individual titles and also sell subscriptions, meaning subscriber acquisition costs. In comparison, Hollywood as an industry spends about $4 billion in a normal year on paid-advertising in the U.S./Canada market to support its theatrical releases (those two figures are not directly comparable because the Netflix’s $2.23 billion is global and includes non-advertising costs).
That $2.23 billion in Netflix global marketing is down 19% from 2019, no doubt as it scrambles to improve earnings. The previously mentioned chinks in the Los Gatos, Calif.-based company’s armor are negative cash flow that is abating and content spending that ballooned Netflix corporate debt into the middle of the speculative – or “junk bond” — range.
But Netflix says it’s turned the corner on financial red ink. One reason is completing is global rollout, so it’s finished with one-time setup expenses to enter each country; as each foreign territory comes online, subscriber revenue begins to come in, which boosts earnings. Wall Street investors love the strategy and shrugged off recent negative cash flow.
A Jan. 12 company post that unveiled Netflix’s movie-a-week initiative rolled out the cinema glitter and included a video trailer, saying: “Netflix will bring you a new movie every week featuring the biggest stars including Leonardo DiCaprio, Sandra Bullock, Dwayne Johnson, Idris Elba, Meryl Streep, Zendaya, Jennifer Lawrence, Ryan Reynolds, Jennifer Garner, Gal Gadot, Dave Bautista, Naomi Watts, Jake Gyllenhaal, John David Washington and Octavia Spencer.”
On the performance movies already offered, the just-released Netflix earnings letter to its shareholders says: “Our largest original film of the quarter [October-December 2020] was ‘The Midnight Sky’ starring and directed by George Clooney; we estimate 72m member households will choose to watch this title in its first four weeks. In its first 28 days, 43m member households chose to watch our animated feature film ‘Over the Moon’ (directed by legendary creator Glen Keane) with high levels of re-watching. ‘We Can Be Heroes’ (directed by Robert Rodriguez) was another successful family film with a projected 53m member households choosing this title in its first four weeks.”
The Netflix letter continues: “Our holiday movie slate also resonated with our members; in the first four weeks, 68m and 61 member households chose to watch ‘Holidate’ (starring Emma Roberts) and ‘The Christmas Chronicles: Part Two’ (starring Kurt Russell) respectively. Our first Portuguese-language holiday film from Brazil, ‘Just Another Christmas’ (starring Leandro Hassum), was also a big hit with 26m member households globally choosing to watch in the first 28 days of release.”
The “chose to watch” metric is loose, meaning “long enough to indicate the choice was intentional,” Netflix explained a year ago. That supposedly is 2 minutes. So those viewers do not necessarily stay for most or all of a program.
Note that a big component of Netflix’s movie ambitions is having the cream of its foreign-language movies do double-duty getting streamed elsewhere, including the United States.
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