Netflix Losing Flicks: Why It’s Actually Smart to Shed ‘Hunger Games,’ Other Epix Movies

Hunger Games Catching Fire

The “flix” part of Netflix is about to get less precise: Thousands of movies through its deal with Epix, the JV of Paramount, Lionsgate and MGM, are set to roll off the streaming service when the pact expires next month.

It’s sure to cause the subscription VOD leader some short-term pain with customer irritation and confusion. And Reed Hastings can’t be pleased that Hulu is opportunistically stepping into the breach with Netflix’s pass (though Amazon, it’s important to note, has had a pact with Epix since 2012 for exactly the same stuff).

But for Netflix, letting this deal go by the wayside is ultimately a savvy move.

The loss of the Epix catalog is real. Of the top 10 box-office grossing movies in each the last three years, Netflix currently offers just two on streaming — both via Epix: “The Hunger Games: Catching Fire” and “Transformers: Age of Extinction.” In the most recent quarter, Netflix subs have streamed an average of 75 million Epix movies per month, according to a source familiar with the pact, which would represent about 1.8 movies per U.S. sub monthly.

It’s not that Netflix doesn’t want movies. It’s that it wants exclusive rights, with titles you can’t watch on any other subscription service. That’s why Netflix is spending more on original film acquisitions, and why it’s paying Disney top dollar for pay-TV window rights for Mouse House pics starting with 2016 releases.

Given Netflix’s trajectory, its pact with Epix was doomed. Netflix calls itself an Internet TV subscription service and compares itself to HBO… and so, by extension, it’s also really a competitor to Epix.

In a certain light, then, Netflix carrying the movies from Epix is like McDonald’s cutting a deal to sell Whoppers.

Make no mistake: Epix wanted Netflix to renew, though Hulu presumably will help make up the difference. For Epix, which employs the traditional cable-distribution model, the more distributors it has on board the better. It sells through cable, satellite and telco TV providers and carved out an additional SVOD window, with titles coming to Netflix (soon to be Hulu instead) and Amazon 90 days after they hit TV distribs.

That’s fine. But Netflix decided a while ago it doesn’t want sloppy seconds to pay TV. Yes, non-exclusive library content is important to buttress the proposition that there will always be something to watch in your Netflix queue, including TV and movie favorites. The company’s infamously inexpensive output deal with Starz in 2008 (which ended in 2012) certainly helped jump-start Netflix’s meteoric rise.

Now Netflix is about quality — or, more accurately, exclusivity — not quantity. Last year, for example, it didn’t bid for SVOD rights to HBO’s library (for series three or more years after their network airdates) which remain available on HBO Go and HBO Now; instead, Amazon acquired that basket.

See More: Netflix to Focus on Adding Higher-Rated and Exclusive Titles, CFO Says

Netflix has eschewed the notion of being a comprehensive on-demand entertainment source, because it’s just too expensive. Live TV sports? Forget it, Ted Sarandos says; leave that to overpriced pay-TV bundles. And if you want movies or TV shows not available via streaming, Netflix will happily sell you a DVD-by-mail subscription.

“Netflix is a focused passion brand, not a do-everything brand: Starbucks, not 7-Eleven; Southwest, not United; HBO, not Dish,” the company says in its long-term view manifesto.

That’s a smart, sustainable strategy for standing out in the market. True, Netflix at some point soon will have to decide which content it must own itself instead of rent (originals including “House of Cards” and “Orange Is the New Black” are licensed from other studios, not produced by Netflix). And nobody can possibly argue that Netflix original films like indie drama “Beasts of No Nation” or Adam Sandler’s “Ridiculous Six” are going to outperform top Epix-supplied fare like “Hunger Games: Catching Fire,” “The Wolf of Wall Street” or “Star Trek Into Darkness.”

In Epix’s case, Netflix decided its money would be better spent elsewhere rather than paying up to $200 million per annum (though its fees to Epix went down after the rights became non-exclusive). Because if you’re Starbucks, it makes more sense to place your bets on creating the next Frappucino, not on moving Big Gulps.

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  1. george says:

    thats great, however does not explain why i cant watch a movie like superman

  2. Joe Laba says:

    This writer is a complete tool, comparing blockbuster movies to big gulps. This analogy doesn’t correlate in any way. They’re hit films because the masses made them so, I don’t believe the masses care about cheap soft drinks like they do hit movies If anything, hit movies are frappucino and low budget films are big gulps. Idiot, I hope Netflix goes down!

  3. It’s like you’re intentionally not bringing up Disney and Marvel. That stat about the top 10 films of the last 3 years… Marvel wants you to buy their blu-rays. And they have a certain production value and fun repeat value where the masses are actually buying them. They never stop making money. Hunger Games, on the other hand, will not be missed.

  4. SteveP9090 says:

    Author must have failed all the analogy questions in her high school SAT’s. People don’t go to Starbucks for soda, but they DO go to Netflix for hit movies. Whichever service provides the MOST of what I want to watch, including my favorites – gets my money.

  5. Carl says:

    I would’ve thought that Netflix’s biggest competitor was still Channel Bittorrent… as the cheapest streaming offering it might find it’s subscribers simply opting out (rather than signing up elsewhere) if it doesn’t supply at least some big name films. The exclusivity instinct might end up being bad for the industry in more ways than one.

  6. Charles says:

    It looks like netflix is recreating the troubles of the past with media monopoly. Thought the internet could end it all, but no luck. They are going backwards. It is either lots of content or you lose your viewing public.

  7. David says:

    I think the CW has more original programming than Netflix does.

    They still completely rely on the old guard “sloppy seconds” for it’s programming, which without access to, netflix doesn’t exist.

  8. Alex says:

    Netflix hasn’t been listening. What customers want is MORE CONTENT. All kinds of content. Old, new, TV, movies and original. Customers want to choose what they want, when they want it from a huge library. So how does REDUCING the amount of content accomplish this? Besides allowing Netflix to offer less to customers for more of their money, I mean…. Well, looks like I’ll be switching off Netflix’ service for 9 months of the year. I can catch up with everything worth watching there in about 3 months time and cut my yearly Netflix outlay by three quarters. When Netflix goes up to $10 a month for all members in 2016, that will be $90 less I’ll be spending each year. In addition, I’ll pay for my 3 months with a prepaid Netflix gift card so as to get their hands off my credit card. I’ll keep AMAZON Prime since they offer other things besides streaming. Plus, my ROKU gives me huge amounts of low cost or free streaming and my antenna does too. So suddenly Netflix is reduced from a major source of content to a peripheral one. :-)

    • Zlato says:

      I switched from Netflix to Amazon last year. Since I get almost all of my orders now with free 2 day shipping, that pays for the yearly fee and the streaming is icing on the cake.

  9. Alex says:

    Don’t see how anything by Adam Sandler could be a win. Not creative, not funny, not even watchable. Netflix shouldn’t encourage tripe like this.

    • Tim Tringle says:

      You DONT GET FREE SHIPPING, you are paying for that service and they (amazon) have expanded what you get for that yearly subscription. Amazon very recently jacked up their prices too, yet every body expects Netflix to get everything. Start complaining to companies like Lionsgate, MGM etc, who are the ones trying to strong arm netflix and demanding hundreds of thousands for crappy movies because they throw the good ones in a bag along with them. Its that mentality that keeps the Supermans off these services yet ensures there are plenty of crap ripoffs on then like the C Thomas Howell version of War of the Worlds, or Transmorphers. When 15 years from now the only streaming services are Netflix and Amazon and they both own all the movie and TV studios they will regret not actually doing streaming right and trying to fight the inevitable. No one wants a repeat of what Cable has forced on us.

  10. Susan Thompson says:

    What a stupid article, praising Netflix’s imbecilic move. Amazing how the studios and distribution channels, including Netflix, just can’t seem to get it right and understand what we, the viewer, want. For Netflix to have even FEWER selections, this idiot of an author thinks this is what we subscribers think is great?? We could care less that Netflix has “exclusive” content, or high end stuff or yada yada yada. What we want is to be able to watch what WE want, when WE want it, whichever movie WE want, whichever series episode WE want. And without having to fool around that this series we want is on Hulu, but oh, only the current season, and we can get this movie on mailed DVD, but not on demand (we have to wait 4 days to get it) or it’s on Amazon Prime but not on Netflix. Or the ultimate last-century stupidity, network schedule TV push of shows under the obsolete paradigm of consumers watching shows when the NETWORKS think we should, like as if this is still the 1950’s. We’re willing to pay decent money to have video delivered exactly the way we want, namely all you can eat of what you want to eat, but it seems all the players from studios to distributors to Netflix just don’t get it, and won’t for probably 20 years at this rate……..

    • PG says:

      “We’re willing to pay decent money to have video delivered exactly the way we want…”

      Part of the problem though – and maybe why this move DOES (maybe) have an element of sense to it – is that *MOST* people are *NOT* willing to ‘pay decent money’ for anything: they expect it (as near to) free.

      Thus, if you must require customers to pay, offering them something that is *nowhere else* is a moderately smart move.

      Whether people will deem that the exclusives are worth it, and whether there’ll be enough people paying… those will be the big hurdles.

      • Joe Laba says:

        Are you in Africa or some third world nation? almost no one views content free anymore in 1st world countries or music for that matter. We all stream music and movies but refuse to buy them, so no we dont expect free content. We are still paying by streaming! If I used torrents to watch and listen to content for free, the FBI would be kicking my door in! This is why everyone in 1st world nations basically stream content now. Also who wants all that damn clutter from buying something that is stream-able? oh, an old ass generation who is materialistic!

  11. Jacques Strappe says:

    Every time Netflix goes through one of these content purges, it always results in lots of angry comments and threats about dropping the service. Oh well, welcome to the wild west of streaming. Somewhere at some point in time one can find and stream what they are looking for at a price but no one service will be the source for everything all the time.

  12. This is a real disappointment – I had been watching Hunger Games on Netflix and was waiting for the last installment. It’s especially bad losing Lionsgate – I’ve enjoyed their films. Seems to me that if you want to add value, you add titles – not take them away. Pretty pissed that I’ll have to add a hulu account in order to see what I want.

  13. Peter Burgess says:

    Perhaps other commenters know something I don’t, but Netflix still streams shows that aren’t new from a variety of sources, they still stream small movies AND big movies, AND they’re adding their own content.

    A more apt comparison here would be that people are bitching about Starbucks changing their menu options a bit, while still selling coffee, and fraps, and most everything else they did.

    BUT HOW DARE YOU TAKE OUT THE WHITE CHOCOLATE MOCHA? HOW DARE YOU, COMPANY THAT CHOOSES YOUR OWN PATH! Don’t you know you only have one type of customer? For shame. For shame.

    People will complain, and passionately, but it doesn’t change that for all intents and purposes, it’s the exact same service it was before this announcement, and all I see is a bunch of whiney children who can’t predict the future and think they know all the things about this. You’ll drop. Others will join. Netflix willbe fine and we’ll all move on.

    • Greenlakes House says:

      NO, as the article suggests; Netflix wants to “become” Starbucks (not coffee, Frapucccinni’s! since they cost three times as much), and I want 7-11. I don’t care about Netflix “exclusive”, they suck balls compared to HBO anyway. I want GOOD/EXCELLENT MOVIES!!!!
      If that awesome movie is also on five other services, I don’t care since I bought Netflix and not the other five services. Netflix acts like I am so dumb I paid for five services. But I have only Netflix and a super crappy cable company to provide broadband. Soon I may have HBO GO (better exclusive content AND more GOOD MOVIES) and crappy DSL to complement a Netflix DVD or Cramazon/Wallmart (it won’t be long ’til one buys the other, they have the same customers) subscription. This is Netflix way of going “exclusive”. I do not want “exclusive”/easily downloaded anyway, I want EVERY DAMN MOVIE EVER MADE, and that seems to be what Netflix wants to avoid giving me.

      Why the hell can’t companies sell me what *I* want? I hate what the monopolistic crap they usually want to sell me anyway. EXCLUSIVITY IS NOT WORTH THE COST

      But nice to know you like to waste your money at Starbucks Peter Fool.

  14. Nick Ernst says:

    Is it possible for this article to have any more pro-netflix spin? What a bunch of nonsense. Reality is that losing these films is terrible for Netflix, and is a huge boon for Hulu. Netflix is forgetting what made them so successful in the first place, and we are their subscribers are paying the price for it. This trend can’t continue; it’s not worth paying 10 bucks/month for a couple of original shows(even if they are great). I’m getting close to the point where I’m going to start turning off my netflix sub, except for the times when they have new seasons of shows(and honestly, both House of Cards and OitNB were pretty lousy for Season 3 anyway).

    • Todd Spangler says:

      It will be interesting to see Netflix’s subscriber numbers for Q3/Q4, for sure. The Netflix bet is (and has always been) that they have enough content on the service & in the pipeline to make people feel the low price point is worth it. Of course they’ll have customer churn from this; the question is how many will bail over loss of Epix catalog which nets to 1.8 movies watched per month.

  15. Kwaku Danso says:

    Wow! How much did Netflix pay this author to sugercoat a bad situation. Netflix will lose thousands of options for viewers…but that’s somehow a good thing? Get outta here with that foolishness.

    • Todd Spangler says:

      Netflix can’t boil the ocean. HBO and Showtime don’t have Paramount/Lionsgate/MGM catalog either, and they’ve done OK.

      • Steve says:

        HBO doesn’t have the Epix catalogue but they do have first TV and streaming rights to films from 20th Century Fox, Universal and Warner Bros. plus GREAT original programming. Netflix is no HBO.

  16. Boy, did this article skirt around a lot of issues. Netflix trying to be like HBO? That’s not what gave Netflix such a boost. New original programming is always going to be limited. It was the fact that Netflix had so much to offer that people could watch anywhere and anytime.

    And now, much of that content is circling the drain with very little to replace it. Even the Disney stuff isn’t complete. If I had made that deal, it would have been, “Okay, open your vaults with all that TV stuff you’re hoarding form the sixties and seventies, plus all your catalog titles.” Paying as much as they did for Disney, exclusivity or not, it appears Netflix overpaid. And besides that, the Disney contract was signed two years ago so why drop the Epix stuff now?

    Orange Is The New Black may be great. And House of Cards may be as well. But you can only run those once a year, something Netflix seems to have forgotten. And if the content you keep to supplement it is made for video nonsense such as The Crow XVIII, then there will be no point in paying for anything beyond the show you want to see.

    Sorry Mr. Spangler, but you sound like a publicist for Netflix letting the public know how much better it is by getting less than what they were paying for before. It doesn’t work that way.

  17. Dan Simmons says:

    Well, Netflix just got a bit less attractive to me. I love HBO shows, but can turn off HBO for 9 months out of the year and watch everything I need to in a 3 month period – then turn it off again.
    I can do the same with Netflix. We watch movies, tv shows and documentaries on Netflix. That they have a great deal with Disney is awesome. That they will provide less service with a recent price increase is not awesome.
    I loved Daredevil and am looking forward to Jessica Jones, but I can cancel my account for the next 4 months til it begins now with little regret.

  18. Steve says:

    It is my understanding that the HBO content that went to Amazon Prime was never offered to Netflix, presumably because HBO had no interest in lending credence to Reed Hastings’ comparisons of Netflix to HBO.

    Netflix started out by streaming Disney and Sony movies through an agreement with Starz. When Starz refused to renew that agreement, Netflix hooked up with Epix. If Netflix wants to become a new mini-HBO, fine. However, it’s not the Netflix that I originally subscribed to for its mix of TV content and classic as well as art house and some blockbuster movies. In fact, it has now moved so far away from that model that I can barely recognize it. I think that dropping Epix and making its own art-house movies, movies that major studios have passed on (the Brad Pitt movie) and movies with Adam Sandler is just plain stupid.

    • Todd Spangler says:

      The point is that Netflix largely *doesn’t* have a lot of recent big movies on streaming- that’s a big reason they did the pay-1 deal with Disney.

      • David says:

        Err, no. Netflix refused to pay the proper valuation of the Starz held properties, which included Disney films, Starz didn’t “refuse” anything.

        Now, Netflix will be paying almost as much for Disney alone as they would have paid and gotten more from Starz.

  19. Rob Mark says:

    Hooey is kind

  20. J. V. Bryar says:

    The Variety article must have been written for them by the Netflix marketing team. What an absolute load of hooey!
    The reality is that Netflix made a commitment to its customers and then decided to reneg on that promise when it cost them money. If the company wants to seek a better set of customers or wishes to set itself up as a just another content creator more focused on ownership and control than it is to serving its customers it has every right to do that.
    The customers, in turn have every right to feel abused and to find vendors who remember that customer service comes first.

  21. John says:

    I subscribe to Netflix primarily for my children, they like the wide selection of TV and Movies. I guess Netflix don’t want my money and think the future can be given up to it’s competitors. I’ll be unsubscribing and switching to Hulu, my kids will grow up with that brand instead I guess.

  22. bradazevedo says:

    It’s sad to see so many content providers choosing the terrible platform that is Hulu, but it’s unsurprising given that they charge customers a monthly fee and still show an obscene amount of ads. It’s clear traditional content distribution companies care more about profit than celebrating content. Thank goodness for Netflix and Amazon.

  23. Canadagraphs says:

    I watch predominantly TV series on Netflix…. but I think a lot of that is because the movies Netflix offers are pretty mediocre.
    Theres a lot of movies I miss in theatres because of time, or forgetfulness that I just assume I’ll see on Netflix 6 mos later that never come up. To be honest, it frustrates me. I EXPECT Netflix to have MOST of everything, and they don’t.

    I’m in Canada and cant get Hulu (not that I think I want to ever give my $$ to a service that refuses to allow us in anyways. Screw them.) so when Netflix doesn’t have something…. that means I have no option to see it. I’m not about to go out & buy a $20 DVD of something I am not sure I will like. Netflix was the testing ground for things. I have stumbled across 2 or 3 series now that I like and actively follow because of Netflix.

    In the end, this probably will only minimally reduce my Netflix usage time, as I watch maybe 10-14 hrs of TV to each hr of movies I watch on there…but it still sucks…. especially when they had such a crappy selection as it was already.

    • Aaron says:

      I suspect it’s not nearly so bad for non-US viewers. Netflix buys different rights in every country. Since Hulu is American-only the rights for Epix content are probably for sale outside of the US. For instance Netflix Canada is already showing Hunger Games: Mockingjay Pt 1, and it’s not available on Netflix US.

  24. Tammy says:

    we watch Netflix everyday, we watch some of their original series, which are pretty good. I watched all of SONS on Netflix. I have CinemaNow and VUDU for any movies. Netflix means no commercials. I am good with that and Disney will bring more movies than The Hunger Games.

  25. HPR says:

    I’m in the camp that doesn’t look to Netflix for big studio movies; I go for the programming and cool docs and indie stuff and past favorites. f the hunger games.

  26. I’d be much more pleased if Netflix left behind the huge blockbusters. Most of the worthwhile blockbuster’s I’ll have already purchased. I prefer to see hidden gems I might not have heard about, indie documentaries, and even smaller movies by big studios that seem to get lost in the Hollywood hype, not because they are bad, but because they’re not the next big superhero film.

    This is a smart move. Honestly, I watch more shows on Netflix than anything else anyway.

  27. John Harris says:

    Personally, I do not watch blockbusters on Netflix. My interest is in the indie fare and foreign flix.

  28. Great move business wise but horrible move from my perspective. These news stories just make me more and more aware that all Netflix wants is my money, they don’t really care about my viewing pleasure, as long as I don’t unsubscribe.

  29. The move is smart long term, especially it’s deal with the Mouse. The Epix deal is backwards looking…selling hits that have run their course, and been seen a million times.
    The Disney deal…with its stable of Lucasfilms, Pixar, Marvel, and Disney Animation…is betting on the future. Those studios have Billion dollar films in them that haven’t even played yet…and are the kinds of multi-generational flicks that keep entire families in front of the tube year after year.

  30. Joe says:

    Smart? It’s a dumb move. People aren’t paying for Netflix to watch the lame Adam Sandler movies he is making for Netflix. They are paying to watch blockbusters like The Hunger Games.

    • Magic says:

      I thought the same thing. I pay for Netflix for great content. Not the stuff that’s straight to DVD type fare

      • Anthony says:

        Well, would streaming the Star Wars series of films and/or the Indiana Jones series strike your fancy? How about all the Marvel superhero stuff? It will even itself out and other good content will come at us commercial free. I find that I can RedBox, go to the library or just wait for what ever content isn’t streaming now. There is a lot of content out there and for all intents, you don’t have the time to see all of it. Between Netflix, regular TV dvr’d, and Amazon Prime I have more than enough to distract me.

        These deals are made by huge greedy companies and individuals, Netflix included. This deal makes a lot of sense if they want to keep pushing forward towards the future instead of staying with tired old models of business.

  31. nerdrage says:

    Netflix doesn’t have to get everything, just enough things: enough titles in various genres that any given subscriber will always find something interesting in the genres that interest them. This is why Netflix’s development seems so scattershot and lacking in a coherent brand. They need to hit all the niches. Any given person is not going to like the majority of Netflix originals. They’re not supposed to. They just need to find enough to keep their fingers away from the Pause Account button.

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