Citing the boycott that quickly followed the announcement from major theater chains, senior analyst Michael Nathanson of MoffettNathanson questioned whether any other major studio will step up to be one of the several unspecified films Netflix says is part of a slate of upcoming day-and-date releases.
“We are skeptical that any other major movie studio would be willing to go down this path as it jeopardizes the entire profit model for a successful release by essentially collapsing all windows and eliminating transactional purchases (box office, home video, EST) in favor of a subscription model,” he wrote Wednesday.
But while Nathanson was pessimistic that the “Crouching” sequel would set any kind of precedent, he pointed to Netflix’s experience in the TV business as a reason not to entirely discount the possibility, either.
“As long as none of the major studios break rank, we feel like this Netflix test will ultimately fizzle away just like premium VOD,” Nathanson said. “That said what we learned from the TV side of the business is that Netflix is willing to write big checks to convince its partners to test new strategies.”
Tony Wible of Janney Capital Markets interpreted the deal as marketing-minded considering the domestic exhibitor shutout will severely limit the theatrical distribution. “Essentially, Netflix will get hype for a relatively low cost via a film that will largely only be seen online in the U.S.,” he wrote.
Citing Netflix’s overseas growth, Wible wondered whether the deal was intended more for international strategic reasons.
“Netflix could use this model in foreign markets to get more exclusive content. Film rights are frequently pre-sold into smaller international markets. Studios may welcome another bidder for theatrical distribution rights in these countries, which would allow Netflix to get early access to exclusive content in newer markets without having to wait until the typical pay TV window.”
It seems highly unlikely these savvy companies all collectively possessed enough hubris not to anticipate that all major U.S. exhibitors would circle their wagons, effectively cutting off “Crouching” from domestic theatrical distribution in all but a handful of IMAX-owned theaters. Which essentially means that as far as the U.S. goes, “Crouching” was never really going to get a day-and-date release in the truest sense of the term.
Perhaps Netflix/Weinstein/IMAX envisioned their announcement as their best option for an opening salvo in negotiations to come with exhibitors, akin to how Warner Bros. and AMC eventually arrived at an agreement ahead of the release of “Veronica Mars” earlier this year.
The inevitable next step in this controversy: Netflix publicly complaining about being robbed of the opportunity to let U.S. fans see “Crouching” in theaters, putting exhibitors on the defensive. Netflix effectively raises the point it wants to make in the marketplace about disrupting windows without actually challenging a status quo too difficult at this time to change.
As Wible seems to indicate, just demonstrating its disruptor bona fides to subscribers has value for Netflix even if the company hasn’t achieved its actual goal of rattling Hollywood’s traditional window system.