Last week, Netflix CFO, David Wells, announced that the streaming company will make every effort to have 50% of their entertainment produced in house. This means that more than half of the content available to Netflix users will soon be Netflix originals. That may not seem like an outrageous or ground-breaking goal, but if you look closer, I think this spells trouble for an already struggling Hollywood and may even be partly responsible for the dreadful summer box office numbers.
Netflix Is Cheaper
Despite last year’s price hike in their monthly subscription charges, Netflix still remains cheaper than the average movie ticket! At only $9.99 a month, online streaming services crush theater options when judged on a value-per-dollar criterion. As theaters continually increase ticket prices (sometimes due to pressure from Hollywood studios) more and more people will choose to stay at home and stream entertainment. Some have observed that for the price of a standard ticket, consumers can almost purchase the blu ray of the film. As the overhead of theater operation continues to rise with the costs of property tax, minimum wage, and studio rights, cinemas will continue to raise prices, only exacerbating their dire situation. This summer alone, ticket sales slumped 10%. People are opting out of the theater experience in favor of something that simply costs less.
Netflix Has More Variety
Hollywood studios are producing fewer movies and focusing more on tentpole films, like Avengers, Jurassic World, and Star Wars. As smaller films get overlooked by Hollywood, they are getting picked up by Netflix. As I have said before, Netflix has been purchasing more distribution rights at film festivals than any Hollywood based studio, making the streaming service far more diversified than the local theater. Additionally, niche or minority targeted films are almost non-existent at the multiplex (see last year’s #OscarsSoWhite boycott of the Academy Awards), but these stories are becoming the bread and butter of companies like Netflix (see The Get Down as a perfect example of this strategy). Expect to see Hollywood and the theater system continue to suffer as the demands of moviegoers increasingly vary.
Netflix Has Better Stories
Finally, and I think most importantly, Hollywood has not been good at making something people want to watch this summer. This summer, more people watched Stranger Things than any theatrical release. In fact, TV and streaming services dominated watchtime compared to that of the theaters. If Netflix can maintain a list of original programming that is character and plot driven, instead of explosion and CG driven, then this trend will almost certainly continue. Scott Mendelson of Forbes Magazine has compared the U.S. theater system to that of video game arcades of the 90s. Once everyone had a gaming system at home, why waste your quarters down the street?
This is why Netflix’s announcement from last week matters so much. As the streaming company produces more and more content that is available at a cheaper price, appeals to more audiences, and tells better stories, Hollywood and theaters will suffer.