Netflix wrestles with whether to put its original movies in theaters

The Future. Netflix execs are debating whether putting movies on the big screen will bring more people to the streamer. The company is still the only holdout from trying to create franchises theatrically. But on the strength of its most recent earnings report, co-CEO Ted Sarandos has publicly made it clear that he’s focused on making Netflix movies for Netflix first. With the streamer experimenting with some theatrical rollouts next month and debuting an ad tier (something it said it would never do), don’t be surprised if Netflix changes course if the economics suddenly make sense.

Which screen matters most?
After Netflix’s stock took a nosedive earlier this year, top film execs outlined to Ted Sarandos in a June memo why the streamer should try putting more of its movies in theaters, per WSJ.

• The execs said that putting more movies meaningfully in theaters (releasing on thousands of screens, with real marketing spend behind it) would eventize titles, bring in millions in revenue, and spur more demand for merchandise.
• But other execs said that would be what is internally called a “trust buster” — “a move that betrays the expectations of subscribers and degrades the perceived value of a subscription.”
• And there’s a split on what creates cultural buzz — movies debuting directly on Netflix or releasing them on the service in the afterglow of being in theaters.

Although Netflix toyed with the idea of a higher-priced tier that would include theater tickets or early access to films, Sarandos decided that the company wouldn’t change its strategy — citing his belief in the streaming-first model, its value to subscribers, and the flexibility it provides to greenlight various types of films.

Beta rollouts
Despite the reservations, Netflix is technically still experimenting with theatrical, giving Rian Johnson’s Glass Onion: A Knives Out Mystery a week-long, 600-screen “sneak preview” a month before it hits the service. It’s also giving Alejandro González Iñárritu’s Bardo a month-long theatrical release in select US theaters (and a wide release in Mexico). So, it looks like the door is still open.

But with its Q3 earnings call showing a rebound in subscribers and revenue, Sarandos feels emboldened that his ultimate anti-theater decision is the right move, writing to shareholders this week that “we’re in the business of entertaining our members with Netflix movies on Netflix.”

That’s a sentiment that the major chains (who all agreed to show Glass Onion after it was pitched as the “first of several real tests”) are not very happy about.