Netflix has flexed its financial muscles once again, shelling out $12 million on March 2 for the rights to Cary Fukunaga’s feature “Beasts of No Nation” in a continued bid for cinematic legitimacy — and as a warning to competitors.
“Beasts” may be a small, $6 million movie about a child soldier in Africa, but there was nothing tiny about Netflix’s play for the picture. In order to nab its prize, the streaming service had to edge out the likes of Fox Searchlight and Focus Features, pledging an awards-qualifying run along with the richest offer.
It’s a gaudy pricetag, and a bet that Fukunaga, director of the first season of “True Detective,” will appeal to a segment of Netflix’s subscriber base of 57.4 million in the same way that “House of Cards” and “Orange Is the New Black” have encouraged viewers to sign up, or to stay with the service. Those Netflix-branded properties have become more important now that rivals like Amazon are fielding buzzy shows of their own (think “Transparent”).
“Content is what sells and what wins,” says Michael Pachter, an analyst at Wedbush Securities.
Being the highest bidder for content is a luxury that Netflix, with its $28.3 billion market cap, wields to scare off any companies eager to make a splash in the online-streaming business.
“As Netflix gets bigger, it will be harder to economically outbid them for any title,” says media analyst Mark S. Mahaney, with RBC Capital Markets. “They have the largest indie audience. They have the largest arthouse audience. They have the largest teenage werewolf audience. That puts them at a real advantage.”
Achieving top-dog status is costly. Tony Wible, an analyst with Janney Montgomery Scott, estimates that Netflix will spend $5 billion in programming next year, more than anyone save ESPN. It also eclipses the $4.5 billion that rivals Amazon, HBO, Starz and Showtime are estimated to have shelled out in combined spending in 2014.
“They need to be all things to all people if they want to hit the subscriber numbers they’re talking about (100 million globally),” Wible says. “They’re emulating HBO in the way they’re trying to improve the quality of the programming and the brand perception.”
Writing checks with lots of zeroes means Netflix could disrupt the independent film market much as it once upended fees for licensing movies and shows. The very presence of companies such as Netflix and Amazon seemed to inflate prices at this year’s Sundance Film Festival — even though neither company did much buying — as movies including “Brooklyn” and “Dope” landed big deals.
Buying Oscar-nominated docus such as “Virunga” and “The Square” has helped Netflix establish its arthouse bona fides, and its buying power looks likely to cause upheaval throughout the film world as it moves more aggressively into features.
“The impact has been felt most significantly in prices in the documentary market,” says film sales agent John Sloss, founder of Cinetic Media. “There could be a similar impact now that they’ve crossed over into narrative features.”
Netflix’s eye-popping acquisition of “Beasts of No Nation” is not the only headline-making moment for one of the most obsessively chronicled new-media companies. Netflix also made waves last week when it announced a partnership with Leonardo DiCaprio to produce a feature-length documentary and a docuseries on environmental issues, and when it unveiled plans to premiere supernatural thriller “The Returned” from “Lost” executive producer Carlton Cuse exclusively on its streaming service outside of the U.S.
A-list talent clearly is growing more comfortable with the idea of Netflix as a landing spot for projects.
For Amy Kaufman, a producer on “Beasts of No Nation,” part of that comfort level has come from being a Netflix user herself, and an avid “House of Cards” watcher. She says she appreciates the company’s willingness to back its projects to the hilt.
“When you’re outside in L.A., you see all around you the power of Netflix in terms of what they give you in ad support and billboards,” she says. “That weighed in on our decision.”
Moreover, old prejudices about the primacy of a bigscreen experience are weakening. Fukunaga, for instance, has moved seamlessly between features such as “Sin Nombre” to TV shows like “True Detective,” strengthening his hold on the popular imagination in the process.
“His career is reflective of a more elastic and enlightened view of what an auteur storyteller can be,” Sloss says.
There is, however, a danger in what Netflix is doing. Its stock has soared in recent months, and its burgeoning international subscriber base enabled it to beat analyst projections during its most recent quarterly earnings reports. Rising content costs continue to put pressure on Netflix’s subscription price, though, and raising that price could lead to defections. Moreover, HBO’s plans to introduce its own digital-only offering may represent the biggest challenge yet to Netflix’s streaming supremacy.
So while winning an Oscar for “Beasts of No Nation” would give Netflix bragging rights, the company would probably be willing to pass up a trip to the podium in favor of keeping its competitors at bay.