It’s official: Old Hollywood is back. Top Gun: Maverick, a product of Old Hollywood studios, has broken a Memorial Day weekend box office record with an estimated four-day opening of $156 million. According to Variety, approximately 55 percent of the movie’s audiences are 35 years or older. This is important because that demographic has been most reluctant to return to theaters since the COVID-19 pandemic hit.
People are definitely returning to theaters. Entertainment analysts believe that ticket sales for 2022 won’t approach the $11.4 billion generated in 2019, but even so, sales should almost double the $4.4 billion collected in 2021. With movie theater attendance picking up, we’re seeing a change in the contentious relationship between the New Hollywood streaming companies and the Old Hollywood movie distribution system.
Streaming companies — Netflix in particular — have long been at odds with movie theaters over film distribution. In the pre-pandemic days, theaters insisted on exhibiting films for 75-to-90 days before they were distributed via video and streaming. Old Hollywood studios played ball. But this model didn’t quite work for New Hollywood streaming companies such as Netflix, which believed that giving movie theaters exclusive access to Netflix productions would cannibalize potential streaming subscribers. Why give away audiences? So, Netflix quarreled with movie theaters over the distribution of Netflix titles such as The Irishman.
The pandemic tilted the balance of power to New Hollywood. When movie attendance virtually disappeared, suddenly New Hollywood was holding all the cards. Exclusive streaming windows for theaters seemed pointless. Old Hollywood studios, saddled with enormous sunken costs for movies they’d created already, negotiated with streaming companies to distribute their films, bypassing theaters completely. Disney, an Old Hollywood studio with a New Hollywood distribution platform (Disney+), controversially released movies simultaneously in theaters and through streaming. This approach is known as a day-and-date release.
Top Gun: Maverick was originally slated for a 2020 release, but the pandemic changed that. Tom Cruise, one of the movie’s producers and its marquee attraction, said at the Cannes film festival that he never considered distributing the movie to a streaming service. He held out for a movie theater release, and it looks like his strategy is working.
Top Gun: Maverick isn’t the only blockbuster movie to crush it in movie theaters, too. Spider-Man: No Way Home is one of the sixth highest grossing movies ever (globally) with all of that money coming from in-theater tickets sales. The big-summer blockbuster movies such as Doctor Strange in the Multiverse of Madness and The Batman enjoyed strong showings in theaters. More potential theater-friendly hits such as Jurassic World Dominion and Thor: Love and Thunder are waiting in the wings. And, movie theaters appear to be more flexible about insisting on a 75-to-90-day exhibition window: 45 days is the new standard.
Meanwhile, Netflix’s fortunes have fallen. Netflix recently announced that it had lost 200,000 subscribers during its first quarter — the first time that had happened in 10 years. To put that numbers in perspective: Netflix had predicted an increase of 2.5 million subscribers for the first quarter. Netflix also predicted the loss of 2 million subscribers over the second quarter. The company’s stock value plummeted. The news also led to an outpouring of existential angst about the future of streaming — especially as the post-pandemic, stay-at-home economy experienced a slowdown.
But even still, the times remain uncertain for everyone, movie theaters included. Theaters are still on shaky financial ground. Another COVID-19 surge could drive moviegoers away from theaters.
I believe that:
Netflix will become more flexible about allowing theaters to distribute its movies during the 45-day-window. This will happen for a number of reasons. First, Netflix’s previous strategy of living and dying by subscriber growth alone will change with the introduction of an ad-supported tier. Generating revenue from ads will lessen the need to grow through sheer subscriber volume. Second, Netflix needs to recoup the cost of movies. The most popular Netflix movie ever, Red Notice, cost $200 million — but it captured none of the buzz and staying power of Netflix’s limited series such as Stranger Things. Third, distributing films in theaters will help Netflix attract more Old Hollywood artists who prefer having their movies appear on the big screen.
New Hollywood will expand its presence through the Old Hollywood distribution system, too. A few New Hollywood companies actually own theaters: Netflix owns the Egyptian Theater in Hollywood, and the Paris Theater in New York. Disney owns the El Capitan Hollywood theater, where it plays its own movies. Owning a limited number of brick-and-mortar theaters gives New Hollywood a means to hold special events and build buzz for major releases without competing with chains. But would it make sense for a streaming company to expand even further? One fascinating possibility is for Amazon to scoop up some cash-strapped theaters, as has been speculated. I could see movie theaters becoming cash cows for Amazon to hustle its private label brands in the lobbies and offer special rewards for Prime members. The time may or may not be right for Amazon. The company suffered a rare loss in its most recent earnings announcement. But then again, theater chains are still hurting financially. And Amazon is clearly moving into brick-and-mortar industries such as retailing (most notably via the acquisition of Whole Foods a few years ago). Will Amazon make a move now?
Flexibility is the theme of 2022. Studios are increasingly comfortable distributing films — especially blockbusters — through movie theaters first under the new 45-day window. The Batman was closing in on $800 million worldwide before it became available to stream — which raises an intriguing question: might a shorter 45-day window actually create buzz in advance of its streaming release?
It will be a big summer for blockbusters that play well in theaters. But studios may take a different approach for quieter, “serious” fall and winter releases especially as the pandemic rears its head with occasional spikes as it will.
Buckle up, everyone. It’s going to be a bumpy but exciting ride.
Why did a 37-year-old song top the charts for the first time ever during Memorial Day weekend? Credit the Netflix Effect.
“Running up That Hill (A Deal with God),” from Kate Bush’s beloved 1985 album Hounds of Love, has helped the artist achieve a loyal fan following and critical acclaim over the years. But “Running up that Hill” has never achieved a Number One ranking in popularity — until Netflix featured the song prominently in the plot of Stranger Things, Season 4, which dropped on May 27.
“Running up That Hill” appears in a crucial plot point during Episode 4. The song has resonated with viewers. By May 29, “Running up That Hill” hit the Number One spot on iTunes. It also appeared on streaming charts for the first time — skyrocketing to Number 2 (as of this writing) on Spotify’s Top 200 — right up there with Harry Styles and Bad Bunny. #RunningUpThatHill also has 47.3 million views on TikTok (and counting), and #KateBush was trending on Twitter over the weekend.
The Netflix effect is powerful because Netflix is one of the most culturally relevant brands in the world. Netflix shapes attitudes, beliefs, and behaviors. For instance, in 2020 Netflix released The Queen’s Gambit miniseries, which tells the story of a woman’s journey to becoming a chess master. The show was so popular that it caused a surge in chess set sales and online classes. In 2019, Netflix’s Tidying up with Marie Kondo connected with American attitudes about materialism (and its consequences) so profoundly that the show actually created a spike in donations to thrift stores.
Stranger Things, set in the 1980s, has become a pop culture sensation by tapping into 1980s nostalgia — and has arguably engineering that nostalgia. A lot of that has to do with the use of music. Thanks to the work of Stranger Things music supervisor Nora Felder, the series has been credited for creating a resurgence in popularity for 1980s hits such as Toto’s “Africa” and the Clash’s “Should I Stay or Should I Go.” Because many 1980s iconic brands appear in the series, Stranger Things has also helped the likes of Burger King and Schwinn enjoy a boost in cultural currency. (And Netflix is monetizing that relevance through merchandising tie-ins with brands.)
Netflix is far from the first brand to wield cultural influence. The entire entertainment industry on its best days creates culture. Consider the Beatles andStar Wars. Both have influenced culture enormously, including how we speak and dress. The Beatles are still one of the best-selling acts in the world long after they stopped recording, and Star Wars, in the Disney+ era, might be more influential than ever.
Cultural relevance is more valuable than the most effective PR and advertising a brand can buy. That’s because cultural relevance is authentic. Authentic connections are more long lasting and real. They are less prone to the changing consumer tastes. As the New Hollywood streaming industry evolves, the brands that shape culture will win.
This is what agility looks like: Netflix launched Squid Game globally on September 17. By October 4, Netflix was selling official Squid Game merchandise on Netflix.shop, Netflix’s e-commerce site. By October 11, Netflix and Walmart had launched a Netflix Hub on Walmart.com, where shoppers could find merch based on Netflix shows, including Squid Game. Netflix has always had a knack for creating culturally relevant shows that connect with people through their beliefs and behaviors. Now Netflix is reading the pulse of culture and cashing in through retail.
Netflix.shop Launches a New Revenue Stream
Netflix launched Netflix.shop on June 10 to sell merchandise based on Netflix shows (as Disney has done so well with entertainment since the dawn of time). With the help of Shopify, Netflix uses artificial intelligence to quickly spot trends in consumer tastes and sell culturally relevant merchandise — which is exactly what is happening with Squid Game, the most popular debut show ever on Netflix.
Netflix.shop is an important foray into e-commerce for Netflix. The existence of the store represents a shift in thinking for the company that has define New Hollywood success. Netflix’s stock continues to eclipse previous all-time highs, but the company is spending $13.6 billion on content in 2021. Rising costs, coupled with a decline in subscriber growth, has led to ongoing speculation that the company will adopt advertising in some form. But so far Netflix has resisted an ad-supported tier as its competitors have done.
Selling licensed products is a revenue opportunity too big for a content creator to ignore. Sales of licensed products tied to shows, films and characters were about $49 billion in the United States in 2019, and $128 billion globally, according tothe most recent study of the industry by Licensing International, a trade group.
These relationships — hybrid in-show product placements plus real-world merchandising — offered a glimpse of how Netflix would monetize its titles more broadly. Notably, the tie-in capitalized on the growing popularity of Stranger Things, which was a turning point for Netflix’s commitment to merchandising.
But even then, Netflix viewed merchandising and co-brands as a way to gain exposure Netflix shows as opposed to being a serious revenue stream. CEO Reed Hastings said that Netflix did not want to “get distracted with alternative revenue sources,” because its subscriber engine is what drives revenue, Hastings said in the earnings interview.
“The core focus is, create all these merchandising opportunities, tie-ins, touch points, so that you feel the ‘Stranger Things’ energy so that more people join,” Hastings said. “We do monetize all that. It’s just we’re monetizing it through our giant engine rather than through little sidecar vehicles.
A Change in Strategy
That’s not the case now. In 2020, Netflix hired Nike and Disney veteran Josh Simon to lead its Consumer Products division. Since he came aboard, Simon has tripled the size of the Consumer Products team. In addition to the partnering with Walmart, he’s been behind Netflix arranging distribution deals with Targetand Amazon to sell Netflix-inspired clothes, toys, beauty supplies and housewares.
Simon toldThe New York Times that Netflix.shop operates as a boutique, with Netflix instead focusing its efforts on more deals with store chains and fashion brands. “Practically speaking, the revenue will come more from those partners around the world in terms of sheer footprint and number of locations and magnitude,” he said.
And this is where Walmart comes into play. The online hub is Netflix’s first such site on another retailer’s site. A dedicated hub makes it easier for shoppers to find Netflix merchandise and also raises Netflix’s profile with customers of the world’s largest retailer. In addition, Walmart said that an initiative known as Netflix Fan Select will make it possible for fans to vote for the merchandise they would like to see from favored Netflix shows. Steven Mallas of Seeking Alpha says the relationship gives Netflix two pricing tiers:
First, the Netflix shop destination at its own site could focus on higher-priced items, including limited editions and other collectibles. Higher price points allow the company to more efficiently sell its items: i.e., take more money per unit and carry less units, which reduces risk compared to a mass-merchandise production plan.
The other side of the coin, the Walmart deal, will presumably focus on the latter merchandise model. These will be items that are priced to sell for a wider swath of the Netflix fandom.
Indeed, for Squid Game, Netflix and Shopify have unveiled merchandise ranging from $50 hoodies to $35 custom tees.
The products capture some of the iconic moments and characters in the violent show about people playing for their lives in a deadly series of games. The Netflix Hub on Walmart sells similar Squid Game merchandise, including tees and caps, but at a lower price.
Mallas also says that Netflix Fan Select opens up some intriguing possibilities:
Crowd-funding is something I always believed Amazon (AMZN) would have pursued to an effective degree/scale by now, but Netflix/Walmart easily could exploit this form of funding. It would reduce risk of production by collecting capital upfront from the very consumers who want to buy the product. And if both companies are serious about taking this website beyond online shopping carts and search engines, perhaps special exclusive filmed entertainment content could be crowd-funded and sold.
Imagine a short film based on the Stranger Things universe brought into existence by the fans, and then sold as a digital download, or even as an NFT… it just depends on how far the two partners want to go. It would be an easy way to create brand extensions at attractive economics; consider a toy company such as Hasbro (HAS), which has a history of seeking financing from fans for crowd-funded projects. Why simply vote for a product when you can also pay for it too? There does exist a consumer willingness to help corporations out in this regard, so long as there is sufficient demand for a certain concept.
Meanwhile Netflix has now engineered a way to stoke the fires of cultural relevance with its content and brand. If Netflix sees a show trending on social media, it can move nimbly — an approach Nike is taking by building its Nothing But Gold site. The need for speed influenced Netflix’s decision to work with Shopify to run Netflix.shop. Shopify President Harley Finkelstein told The New York Times that Shopify understand how to handle big merchandise drops ranging Taylor Swift albums to sneaker releases, “We’ve been battle-hardened around some of the largest flash sales on the planet,” he said.
Well Positioned to Grow
That Netflix could launch Squid Game merchandise so quickly is remarkable. Squid Game seemingly emerged from out of nowhere to take the world by storm, with its popularity based on word-of-mouth marketing.
Netflix is well positioned to grow its e-commerce business. But the company also as challenge: it’s one thing to cash in on a show such as Squid Game that builds enormous buzz early on. But other shows can take time to build the kind of fan loyalty that translates to a steady stream of merchandise sales. And lately Netflix has been quick to cancel shows in their infancy. In 2020 alone, Netflix canceled 18 original series, prompting Ken Renfro of Insider.com to note that “Netflix has a TV-show problem.” The company may need to be more patient to allow shows to become merchandise-friendly brands.
The Covid-19 pandemic unleashed suffering on a global scale not seen in our lifetimes. As if waves of sicknesses and death were not bad enough, businesses everywhere were rocked to the core, resulting in job loss and economic hardship. And it’s not over. But amid the turmoil, some businesses are as strong or even stronger than they were before the pandemic changed everything. Here are their stories, and the lessons we may learn from them.
1 Take Care of Your People: Raising Cane’s Chicken Fingers Rallies through a Hard Times
Todd Graves saw the storm coming. Graves, the co-founder and CEO of fast-food chain Raising Caine’s Chicken Fingers, followed the spread of Covid-19 in China before the virus was news in the United States. He read about lockdowns happening to contain the virus. He quickly grasped the potential impact of Covid-19 on his business. So he and his management team went into crisis mode even though there was no crisis to react to yet.
The executive team canceled a scheduled management retreat to celebrate its five-year plan and started to change how the chain operated. Raising Caine’s quickly implemented CDC guidelines for social distancing and placed an “uber-intense focus” on sanitizing every location, as discussed in QSR magazine. Managers were trained on how to conduct team meetings in socially distanced fashioned so that operations would not be disrupted. Fortunately, most Raising Caine’s locations have drive-through service. So the company changed the focus of its marketing to put a full-court press on its enhanced safety measures and its drive-through service.
Almost all Raising Cane’s 500 locations stayed open and did a thriving business. Thirty-three non-drive-thru locations temporarily closed, but Graves kept employees in closed locations busy sewing masks and supplying local hospitals amid a mask shortage.
Raising Cane’s purchased sewing machines and supplies for the group. Two teams worked in shifts to comply with the company’s social distancing procedures. They created more than 600 masks in their first week and upped production to 100 a day. The mask sewing initiative gave employees in closed restaurants a sense of purpose as they gave back to the community. And beyond those efforts, Raising Cane’s launched fund raisers to help frontline workers in hospitals putting their lives on the line to fight the pandemic.
All the while, Graves refused to furlough or lay off any of the 23,000 workers.
“Our mantra then was no crew member left behind,” Graves told QSR. “I wanted the team that went into this pandemic to be the team we come out with. And so we’re going to work like heck to get through it.”
Initially, the chain suffered a hit as the pandemic upended our lives. Sales were down as much as 30 percent. But by late April, they had returned to pre-pandemic levels even as other restaurants struggled — a stunning turnaround.
This was a story we all needed to hear in the early days. Raising Cane’s gave us hope and put its people first.
2. Sense and Respond: Amazon, Target, and Walmart Ascend to Greater Heights
Some businesses prospered during the pandemic. You know three of their names: Amazon, Target, Walmart. All of them crushed their quarterly earnings announcements throughout 2020 and enjoyed all-time valuations on the stock market.
All three of them benefitted from the rise of the stay-at-home economy, in which people increasingly bought what they wanted from their sofas. Amazon already had a lock on ecommerce, and both Target and Walmart wielded an advantage with their curbside pick-up capabilities. People who preferred to order groceries, clothing, and housewares from their homes, then pick them up without leaving their cars, chose Target and Walmart. As a result:
Target’s curbside pickup service sales jumped by more than 700% during its fiscal second quarter.
Walmart’s eCommerce business jumped 97 percent year over year, partly because the popularity of curbside pick-up services.
Amazon just kept powering through, showing 37% year-over-year growth for the third quarter ended September 30, 2020.
Were they in the right place at the right time? No. They prospered because they know how to sense and respond.
Target and Walmart had been steadily building ecommerce services and curbside pickup over the past few years. They both saw the rise of a mobile consumer who preferred the immediacy of driving to the store but didn’t have time to go inside to make their purchase. When the pandemic made many people frightened to shop inside stores, curbside pickup served Target and Walmart well.
Amazon, building off its already strong ecommerce operation, had made a major investment in its own delivery capability, including its own air cargo fleet. The move triggered a war with FedEx and raised questions about whether Amazon had overreached. But as retailers struggle with maxed out supply chains in the 2020, Amazon seizing control of its own destiny now looks smart and forward-thinking.
In addition, by building out its cloud computing service, Amazon Web Services, Amazon positioned itself well when stay-at-home living in 2020 caused a surged in online usage. Amazon Web Services is the backbone for digital platforms ranging from Facebook to Netflix — a $10 billion business.
Leaders always think ahead — during good times and hard times.
3 Act with Purpose: Netflix Invests in Racial Justice
Netflix put its money where its mouth is.
As the world erupted with protest over racial inequality in 2020, businesses sought to have a voice. Many responded with gestures of support on social media. Others took action, and Netflix was one of them. In early June, Netflix CEO Reed Hastings announced that he was donating $120 million to support scholarships at Black colleges and universities. On June 30, Netflix announced it was allocating up to $100 million of its cash holdings into financial institutions and organizations that directly support Black communities in the United States. As reported in The New York Times, the action would help Black-owned lenders inject more capital into Black-owned businesses.
It turns out Netflix had been planning the capital reallocation since April. The New York Times reports that the company’s decision makers were influenced by book “The Color of Money: Black Banks and the Racial Wealth Gap,” by Mehrsa Baradaran, a law professor at the University of California, Irvine.
Netflix’s financial commitment reflects the company’s culture in other ways. For example, Netflix’s marketing arm Strong Black Lead, is committed to hiring people of color and supporting their voices. (Read more about Strong Black Lead here.)
Netflix’s actions point to a bigger role that businesses have to be purposeful, a major news theme of 2020. Corporate accountability to society really took hold as the Covid-19 pandemic spread. In March, According to a recent Kantar study of the public’s attitudes about COVID-19, more than three-quarters (77 percent) of people surveyed said they wanted to see brands talk about how they’re helpful in the new everyday life. And 77 percent wanted to see brands to inform consumers about their efforts to face the situation. Meanwhile 62 percent of people around the world surveyed by Edelman said that their country would not make it through this crisis without brands playing a critical role in addressing the challenges. Then, in June, the conversation turned toward race. An Edelman survey revealed a widespread public outcry for businesses to take a lead tackling racial inequality. Sixty percent of Americans surveyed by Edelman said that businesses must speak out publicly against racial injustice. Sixty percent said that brands need to use their marketing dollars to advocate for racial equality and to educate the public on the issue.
Airbnb was on the brink of collapse. Under CEO Brian Chesky, the company had built one of the most storied brands in the digital age by creating a network of property owners willing to rent homes to travelers. Airbnb had become so successful that it was threatening the established lodging industry without owning a single hotel. It’s no exaggeration to say that Airbnb helped invent the modern-day sharing economy, in which people profit by sharing their assets for a fee. But Airbnb was like traditional lodging industry in one important aspect: Airbnb and its network of entrepreneurs needed people to travel and book lodging. And as the pandemic took hold, travel had practically ground to a halt. Overnight, bookings plunged. By mid-March, Airbnb saw $1.5 billion in bookings vanish.
Airbnb’s stellar trajectory was halted. A planned initial public offering was out of the question. Chesky laid off a quarter of his staff, slashed expenses, and sought capital to keep the business afloat. Things did not look good as the weeks went by. Even as people emerged from lockdowns, traveling was not popular.
Or was it?
In fact, Airbnb’s data scientists noticed something happening: people emerging from lockdowns were traveling. But their preferences had changed. Instead of looking to fly to cities and stay in tony urban locations — a mainstay of Airbnb’s revenue — travelers were looking to rent homes in smaller locations within 200 miles of their homes. People were ready to get out of their homes and travel. But they wanted to rent entire homes instead of sharing them with other people (and risk contracting the Covid-19 virus), and they wanted to drive, not fly. So as reported in The Wall Street Journal, the company quickly changed. Airbnb redesigned its website and app so that its algorithm would showcase travelers interesting locations such as cabins.
Incredibly enough, by July guests were booked stays at the rate they were just before the pandemic crushed the travel industry. By December, Airbnb had recovered so fully that it launched a successful IPO after all.
“People are now discovering small towns, small communities,” Chesky said. “They’re discovering national parks, falling in love with the outdoors, and realizing they can go to all sorts of other places. This is an irreversible trend.”
And Airbnb was ready to capitalize on that trend.
Airbnb needed to do a lot more than reposition itself to short term travelers in order to survive the tumult of 2020, but listening to its customer data and adapting were essential. In 2021, Airbnb says it appeals to a new type of traveler — people redefining their staycations, traveling in small pods of families and friends, or visiting different towns with an intent to relocate permanently. You can be sure Airbnb is adapting to them, too.
5 Be Bold:Disney Saves Its Future
It’s quite possible that “pivot” is the most overused word in 2020, used to any business that adapted during the pandemic. But Disney really did pivot its business, and may well have saved it.
It has been painful to watch the COVID-19 pandemic crush Disney’s fabled parks and resorts. In September, Disney announced it would lay off 28,000 employees across its parks, experiences and consumer products segments. Disney blamed prolonged closures and capacity limits at open parks for the layoffs.
On November 12, Disney reported its first annual loss in 40 years, and declining attendance at its parks had a lot to do with that decline. Disney said that the pandemic cost it $7.4 billion in operating income in the fiscal year, and $6.9 billion of that loss came from theme parks and experiences division.
But by November, Disney had already made a very important move to change course. On October 12, Disney reorganized its media and entertainment divisions in order to focus on streaming content, namely its wildly successful Disney+ platform. Kareem Daniel, the former president of consumer products, games and publishing, would now oversee the new media and entertainment distribution group, responsible for content distribution, ad sales, and Disney+.
In an announcement, Disney said that its “creative engines will focus on developing and producing original content for the Company’s streaming services” — meaning that Disney’s creative teams, ranging from Pixar to Lucasfilm, will be all-in to support streaming, focusing on Disney+, Hulu, and ESPN+, all streaming brands owned by Disney. Meanwhile, a newly created Media and Entertainment Distribution group under Daniel would be responsible for monetizing and distributing that content.
Disney didn’t wait for its restructuring to change the way it operates, either. In September, Disney bypassed movie theaters in the United States and released its feature film Mulan on Disney+ (while distributing the movie in theaters internationally). Mulan received mixed reviews and lackluster box office receipts globally. But as Kay McGuire of Screen Rant discussed in an analysis of Mulan’s financial results, Disney+ was a lifeline for Mulan.
These were big-time moves, but they did not emerge from left field. In 2019, Disney had already laid the groundwork for its newfound focus on digital content — first, by taking ownership of the popular Hulu streaming service, and then by launching Disney+. Hulu gave Disney an instant streaming audience of 28 million (at the time) and a prestigious content library with popular titles including The Handmaid’s Tale. Disney+ gave Disney an arm to unleash its powerful library of content, including the coveted Marvel franchise, as well as new titles such as the wildly popular The Mandalorian, which tapped into the eternal appeal of Star Wars.
Little did Disney know that a global pandemic would trigger a massive shift in people’s entertainment options, from going to the movies to streaming them. By the end of the 2020, Disney+ subscribers had grown to 86.8 million, and Hulu paid subscribers had grown to 36.6 million.
And the financial results reflect the increase in subscribers. In its earnings announcement, Disney said that its Direct-to-Consumer and International division, which includes streaming, had generated $4.85 billion in revenue, up 41 percent year over year.
Disney knows where its near-term future is: streaming. And so it doubled down. And its stock value, incredibly enough, increased even as its theme parks continued to struggle.
Disney demonstrated an eternal truth about industry leaders: when times are tough, the make bold moves. Disney’s digital-content first approach was reflected elsewhere in the entertainment world, too, most notably when Warner Brothers said it would release its entire slate of movies on the HBO Max streaming platform as well as in movie theaters.
These are hard times. Businesses that want to survive them can learn from Disney.
Hope in 2021
Weeks into 2021, we see glimmers of hope for a sustained rebound from the ravages of the pandemic. The travel industry as a whole is showing some signs of life. The live events business, crushed by the pandemic, could return as early as the fall of 2021. Initial public offerings area actually booming. Much uncertainty and hardship remains. But new stories will be told and lessons learned. Stay tuned.
Wonder Woman is changing with the times. When she squares off against Maxwell Lord and the Cheetah in Wonder Woman 1984 (aka WW84) on December 25, she’ll do so in movie theaters and on streaming service HBO Max. That’s right: streaming services have been promoted to first-run status. Or maybe it’s the other way around: movie studios are crawling to the streaming services.
Welcome to the rise of New Hollywood during the pandemic.
Old Hollywood Is in Trouble
Old Hollywood studios are in a terrible bind. Going into 2020, they’d scheduled their usual slate of big-budget blockbusters for global release in theaters around the world. Those titles included tentpole films such as Warner Brothers’s WW84 and MGM’s No Time to Die, the latest James Bond thriller and the last to star the ever-popular Daniel Craig as Bond. Hopes were high for both: WW84 followed 2017’s lucrative Wonder Woman, and James Bond movies are perennial cash cows. These were also costly undertakings, with $500 million budgets between them.
That strategy depended on saturating movie theaters, the dependable cash-cow distribution system for Old Hollywood. True, going into 2020, movie theaters comprised a distribution system that was showing cracks in the seams, but it was still effective and dominant. Then the COVID-19 pandemic disrupted everything.
During the pandemic, movie theaters have experienced closures and dramatic declines in attendance. They’re struggling to stay alive, thus denying Old Hollywood its essential revenue source. To put things in perspective:
Rival chain AMC Theatres reported that attendance had dropped from 87.1 million in the third quarter of 2019 to 6.5 million in the third quarter of 2020. Revenue fell from $1.3 billion to $119.5 million.
Meanwhile, the New Hollywood entertainment companies, whose businesses depend on streaming, are flourishing.
New Hollywood Rising
New Hollywood business such as Amazon Video, Hulu, and Netflix were already gaining considerable power by creating their own original content, winning Academy Awards, attracting visionary talent, and gaining subscribers. Some Old Hollywood brands such as Disney and WarnerMedia noticed and acted. Disney took an ownership stake in Hulu and launched its own vaunted streaming service, Disney+, in 2019, two moves that might have saved the company. WarnerMedia, through its ownership of HBO, launched HBO Max in 2020, thus creating a streaming outlet for the movie catalog from Warner Brothers (owned by WarnerMedia).
Disney acted just in time. In 2020, as people got used to staying home more during the pandemic, subscriber totals for streaming services skyrocketed, including an astounding 73 million for Disney+ in less than a year. The jury is still out for HBO Max. The service hit the market late, and it’s hampered by a confusing brand extension problem (to wit: how exactly does HBO Max differ from other HBO offerings available?).
Hard Choices for Old Hollywood
So what’s an Old Hollywood movie studio going to do with its movie inventory?
One option is to take your chances and distribute your films through movie theaters, which means taking the plunge now or postponing your release until audiences feel safe to return to theaters. Warner Brothers adopted the former approach by releasing Christopher Nolan’s latest film, Tenet, in theaters on September 3, and the movie is on pace to lose $50 million to $100 million.
But waiting until audiences feel safe to return to theaters presents a huge question mark: when will that date arrive? No one knows.
But for studios without their own streaming service, selling distribution rights isn’t an easy choice — not if you have already sunk millions into film costs and were relying on movie theaters to make a profit. MGM had originally slated No Time to Die for a May 2020 release. But as the pandemic worsened, MGM delayed the release of the movie to November 2020 — and then to April 2021. Meanwhile, as reported in Variety, MGM shopped No Time to Die to streaming platforms such as Apple TV+ and Netflix. But the film has a staggering $301 million budget, and to recoup that cost, MGM offered a price between $600 million and $850 million, which was unacceptably high to Apple and Netflix.
Now MGM is like a homeowner who sinks a fortune into improving the house only to find no buyers on the market. And James Bond is left cooling his heels unless MGM lowers its sale price or some sort of miracle happens in 2021 to convince people to go to theaters again. It should be noted that the stock for AMC and Cinemark rose after Pfizer announced a vaccine breakthrough — a glimmer of hope.
The WW84 Saga
Warner Brothers faced a similar dilemma with WW84. Warner Brothers originally planned to release WW84 as a summer tentpole movie in 2020. There was talk of a potential $1 billion gross in ticket sales. As the pandemic worsened, Warner Brothers moved the release date to Christmas Day. Deadline reported that Warner Brothers would postpone the movie release again until 2021. But Warner Brothers had already moved the release date five times going back to 2019, raising the question of whether further delays might cause audiences to lose interest completely. As Variety reported:
[T]he studio couldn’t delay the release of “Wonder Woman 1984” indefinitely. The movie was filmed and completed in 2018, which seems like an eternity ago given everything that’s happened in the last few months. There was a sense that sequel would get stale if they waited until summer or next fall — four years after “Wonder Woman” premiered. Even with several promising vaccines, there’s no guarantee that the world will return to some kind of normal in a matter of months.
Instead, Warner Brothers pulled the trigger with a hybrid approach for Christmas Day. The film will debut theatrically in international markets that do not have HBO Max on December 16, 2020. Instead of banking on WW84raking in $1 billion, Warner Brothers is counting on the movie to drive sign-ups for HBO Max, whose 8.6 million current subscribers pales in comparison to rivals such as Netflix (196 million subscribers), Amazon Prime (150 million), and Disney+ (73 million as noted). HBO Max also counts a potential 28.7 million HBO pay TV customers who are eligible to subscribe to HBO Max but have not activated their membership. Perhaps the movie will inspire them in addition to attracting more.
As for movie theater distribution, Warner Brothers will need to bank on international sales with half of all U.S. movie theaters closed — and who knows how many more will by December 25 as the pandemic worsens? As a sign of how desperate theaters are, AMC Theatres CEO and President Adam Aron said he supports WW84’s hybrid strategy, which normally would have been a slap in the face to theaters depending on the revenue from a first-run:
For many months, AMC has been in active and deep dialogue with Warner Brothers to figure out how best this cinematic blockbuster could be seen at AMC Theatres in these unprecedented times . . . Given that atypical circumstances call for atypical economic relationships between studios and theatres, and atypical windows and releasing strategies, AMC is fully onboard for Warner Brothers’ announcement today.
Now movie theaters are not only onboard with the studios — they’re also forging new relationships with them. Universal has struck deals with both AMC Theatres and Cinemark to shorten the theatrical windows of Universal releases to 17 days, with Universal sharing video-on-demand sales with the theaters. These agreements are highly unusual. But desperate times call for new thinking.
Movie theaters were already in decline before the pandemic hit. In 2019, ticket sales in North America totaled $11.4 billion, down 4 percent from 2018. As Brooks Barnes and Nicole Sperling of The New York Times reported in March,
Looking at the last 20 years of attendance figures, the number of tickets sold in North America peaked in 2002, when cinemas sold about 1.6 billion. In 2019, attendance totaled roughly 1.2 billion, a 25 percent drop — even as the population of the United States increased roughly 15 percent. Cinemas have kept ticket revenue high by raising prices, but studio executives say there is limited room for continued escalation. Offerings in theaters may also grow more constrained. Even before the pandemic, major studios were starting to route smaller dramas and comedies toward streaming services instead of theaters.
Now theaters might be dead. The questions for Warner Brothers and WW84now are: is there enough life left in movie theaters, and will WW84 deliver a breakthrough for the fledgling HBO Max? The answers will shape the future of the film industry.
Last year at this time, the Academy Awards were buzzing with anticipation about Netflix possibly cleaning up at the Oscars. There was a very real possibility that the Netflix-produced Roma would become the first Academy Award Best Picture winner from a streaming company (which didn’t happen – although Roma won three Oscars). But even though Netflix landed 24 Oscar nominees in 2020, the 92nd Academy Awards are shaping up to be a victory for Old Hollywood studios, not the New Hollywood streaming companies.
Old Hollywood is composed of well-established studios that earn their money largely by making crowd-pleasing movies distributed through traditional movie theaters. New Hollywood consists of streaming companies that finance storytellers who want to create daring, original work that sometimes challenges audiences. And they’ve joined forces with streaming companies for many reasons, such as Old Hollywood not financing their work, and New Hollywood making them lucrative offers.
New Hollywood has steadily attracted big-name talent consisting of Old Hollywood executives and storytellers. For example, New Hollywood has attracted the likes of:
Storytellers such as Alfonso Cuarón (who made Roma with Netflix), Martin Scorsese (whose The Irishman was financed by Netflix), Viola Davis, and Forest Whitaker (Davis and Whitaker signed production deals with Amazon Studios in recent years).
It’s not accurate to say New Hollywood has disrupted Old Hollywood; more like New Hollywood has morphed out of Old Hollywood. And neither Old Hollywood nor New Hollywood has an exclusive lock on talent. All that said, Martin Scorsese’s widely reported diatribe against Marvel movies only hints at the resentment that New Hollywood artists feel about the way they’ve been treated by Old Hollywood studios. Old Hollywood companies, in turn, resent the way streaming businesses have developed movies with a streaming-first mentality, largely bypassing movie theaters and then expecting to have their films treated with the same respect and consideration accorded to films produced the traditional way.
New Hollywood Gains Ground
New Hollywood is gaining ground when it comes to gaining artistic legitimacy. But this will not be a shining year for New Hollywood productions that have been nominated for major Oscars, most notably Netflix, which leads all studios with 24 Oscar nominations.
Netflix’s most prominent noms include The Irishman (with 10), Marriage Story (six), and The Two Popes (three). The Irishman and Marriage Story are nominated for Best Picture. But being nominated and winning are not the same. In 2020, Netflix secured several Golden Globes nominations but was largely shut out. And the same thing will likely happen at the Oscars. The film pundits are predicting a poor showing for Netflix, and they’re probably right. Here’s why:
1 Netflix Faces Stiff Competition
Netflix-produced nomineesare up against an extraordinary field of films, such as 1917, Once upon a Time . . . in Hollywood, and Parasite. Old Hollywood studios showered the world with strong, critically acclaimed movies that also happen to be the types of movies that Oscar loves. Sony Pictures’s Once upon a Time . . . in Hollywood is not only a career highwater mark for Quentin Tarantino, it’s also a movie about Hollywood – and Hollywood loves movies about itself. Universal/Amblin Partners’s 1917 is not only a career achievement for director Sam Mendes and cinematographer Roger Deakins, it’s also the kind of sweeping, emotional drama that wins Oscars.
By most accounts, 1917 is the front runner, which has gained momentum following major wins at the BAFTA Awards and Golden Globes. If the Academy of Motion Picture Arts and Sciences is going to reward a more daring, independent movie, look for Bong Joon-ho’s Parasite to get the nod.
Parasite wowed audiences on its release, but its popularity might have peaked too soon. In 2019, Roma showed that a foreign film could get serious consideration for Best Picture. Roma may have paved the way for Parasite.
2 Netflix Did Not Make Movies That Oscar Loves
On the other hand, Netflix’s offerings, while impressive, are not easy for the Academy to fall in love with. For example, The Irishman is long (well over three hours) and bleak (gangsters face the ravages of aging). One wonders how many members of the Academy saw The Irishman all the way through. Marriage Story is also downbeat, telling the tale of a crumbling marriage (as one Academy voter said anonymously, “ . . . it’s getting harder and harder for me to care about entitled people’s marital relationships”). The very attributes that made the films personal works for their directors have likely turned off Academy voters. Although you could argue that 1917 is bleak, the movie’s grand scale and compelling portrayal of an underdog soldier fighting the odds play well with the Academy.
3 Old Hollywood Wants to Put New Hollywood in Its Place
The identifies of the Academy of Motion Picture Arts and Sciences voters is a secret, but they’re widely perceived to represent the Old Hollywood establishment. The Academy has made changes over the past few years in an attempt to be more progressive and diverse, with mixed results. But it’s fair to assume that the Academy still represents an Old Hollywood perspective, which is decidedly anti-Netflix. As Brooks Barnes and Nicole Sperling of The New York Timeswrote, “The academy’s old guard has resisted a dogged push by Netflix to join the best picture club, arguing that, since the streaming service does not release its films in a traditional theatrical manner, its offerings should be better considered by Emmy voters. (Helen Mirren, onstage at the most recent National Association of Theater Owners convention, used an expletive to refer to the company.)”
Change Is Coming
Of course, tastes are subjective. (If I could wave a magic wand, Once Upon a Time . . . in Hollywood would win all the awards for which it is nominated.) But it’s only a matter of time before New Hollywood productions win Best Picture awards regularly. That’s because the Academy voters, whose composition is already changing, will eventually be composed of people who have grown up in New Hollywood. Meanwhile, the power holders of Old Hollywood will eventually pass away. As they do, they’ll take to the grave their animosity toward New Hollywood. As a result, streaming companies will establish a new normal for filmmaking. The question won’t be, “Can Netflix upstage the establishment?” but “Who is going to beat Netflix this year?”
Netflix, the leading New Hollywood entertainment company, secured 17 nominations in film categories, an all-time Golden Globe Awards high for Netflix. The noms include Best Motion Picture – Drama for Netflix originals Marriage Story, The Irishman, and The Two Popes.
No one achieved as many film nominations as Netflix did. The runner up, Sony Pictures, got 10. New Hollywood rival Amazon Studios got two noms.
These nominations are important because the Golden Globes are considered a preview of Academy Award nominations. (The 77th Golden Globes are broadcast on January 5, 2020. The 91st Academy Awards happen February 9.)
Netflix Creates a Home for New Hollywood Artists
Netflix has accelerated its growth by becoming a home for New Hollywood artists. New Hollywood storytellers create daring, original work that challenges audiences instead of comforting them with predictable tropes. New Hollywood artists are willing to work outside the traditional studio system and finance their films with New Hollywood entertainment companies such as Amazon Studios and Netflix. In turn, New Hollywood companies stream their movies (complemented by limited runs in theaters), thus disrupting the traditional way of distributing movies through theaters exclusively.
Martin Scorsese: New Hollywood Master
The first wave of New Hollywood storytellers, such as Martin Scorsese, have emerged from Old Hollywood. Scorsese’s latest film, The Irishman, is a risky, expensive epic clocking in at more than 3 hours. It’s a demanding and emotionally draining tale of gangsters facing the consequences of their violent lives. Old Hollywood studios wouldn’t finance The Irishman. So he partnered with Netflix.
But what choice did Martin Scorsese have? Despite his career achievements, and despite his obvious mastery of the gangster genre, this legendary director couldn’t get a studio to finance The Irishman. It’s the same situation Alfonso Cuarón faced when he made his critically acclaimed Roma, distributed by Netflix in 2018. As Cuarón said of Roma,
My question to you is, how many theaters did you think that a Mexican film in black and white, in Spanish and Mixteco, that is a drama without stars — how big did you think it would be as a conventional theatrical release? I just hope the discussion between Netflix and platforms in general should be over. I think those guys, platforms and theatrical, should go together . . . They both together can elevate cinema, and more important, they can create a diversity in cinema.
As Scorsese said recently at the BFI London Film Festival, “There’s no doubt that seeing a film with an audience is really important. There is a problem though: we have to make the film. We’ve run out of room, in a sense; there was no room for us to make this picture, for many reasons.”
Netflix gave him room.
Fernando Meirelles and The Two Popes
Another Netflix movie that scored multiple Golden Globe Awards nominations, The Two Popes, may not have received as much attention as The Irishman. But securing two acting noms, a writing nom, and director nom should help. The movie’s director, Fernando Meirelles, is another storyteller noted for making original art, including his acclaimed City of God. When The Hollywood Reporter asked him about creating The Two Popes with Netflix, he said,
With Netflix and the platforms, it is a great moment for cinema because five years ago the studios would have to make films that were for a broader audience. So for whatever story you made, you wanted big names to make the story more appealing for a bigger audience. With Netflix they have a much broader potential audience. So if you do a niche film, say on LGBT or a film on the church, or a film like Roma, no studio would have produced a black and white film in Spanish without known actors. But with a platform it is possible. I know Netflix in India is producing 18 films plus 22 series. This wouldn’t happen with the other system. Now we can have very specific films for specific audiences. I am very excited about this new moment in cinema.
The Two Popes is certainly a specific film for a specific audience, focusing on Pope Benedict and future Pope Francis finding a common ground as they chart a future for the Catholic Church – not exactly an Old Hollywood crowd pleaser like a Marvel movie is.
(And speaking of Marvel: like Martin Scorsese, Fernando Meirelles has a low opinion of Marvel. As he toldThe Hollywood Reporter: “I know that they are big but I don’t watch them. I mean, I like the technique, sometimes I watch fragments and trailers and all the VFX and the production is really spectacular, really first class people are involved. But I can’t engage with the story, I get sleepy. Sometimes I watch those at the cinema and after half an hour I am sleepy. It’s very overwhelming. It doesn’t interest me at all.)
Noah Baumbach: “People Have a Choice”
Marriage Story, with six nominations, achieved more Golden Globe nominations than any other movie, period. Here is another demanding and difficult film from an original voice, Noah Baumbach. He is known for making intensely personal stories such as The Squid and the Whale – a quintessential New Hollywood voice. With Marriage Story, Baumbach takes on the topic of divorce, drawing from his own life.
My movies have always started small and then rolled out. So this release will be very similar to what I’m used to. I love that people are going to get to see this movie in theatres. After that, it’s going to get an audience on Netflix that my movies in the past would not get, no question. People have a choice: they can wait to see it on Netflix or go and see it first on the big screen.
All of Netflix’s nominations face formidable competition, including Joker, 1917, Once upon a Time in Hollywood, and Parasite, all of which scored nominations in major film categories. But regardless of what happens when the Golden Globe Awards winners are announced on January 5, New Hollywood has won. Netflix has scored a major victory: 17 nominations are not a fluke. And when Netflix wins, New Hollywood artists win. Each Netflix nomination is an affirmation for storytellers who want to make personal, risky films that might not appeal to everyone — works that might take time to build a fan base beyond the Marvel Cinematic Universe. Filmmakers are competing not only with blockbuster movies. They’re also competing with games, music streaming, podcasts, user-generated content (e.g., TikTok), and many other distractions across online and offline media.
Disney+ has The Mandalorian. Netflix has Stranger Things. What does Apple TV+ have to capture our imaginations and light the internet on fire?
Well, nothing approaching Stranger Things or The Mandalorian-level ofwidespread excitement. But the Apple TV+ show Dickinson is quickly building momentum and delivering what Apple TV+ needs: cultural relevance.
Why Cultural Relevance Matters
Cultural relevance is essential for any entertainment company to succeed in the long run. Brands become culturally relevant when they connect with an audience through their attitudes, beliefs, and behaviors. Sometimes cultural relevance means shaping attitudes, beliefs, and behaviors, too. When brands achieve cultural relevance, they become so inextricably linked with our lives that we become lifelong members of their tribes.
Disney Masters Cultural Relevance
Disney is the master of cultural relevance. Mickey Mouse is more than a popular animated character. Mickey Mouse is an international symbol of childhood. Frozen is a pop culture phenomenon. The Lion King introduced the words “Hakuna Matata” to millions of people. The Little Mermaid inspired cosplayers for generations to come. And now, Disney+ is having a culturally relevant moment with The Mandalorian.
This is what culturally relevant shows do. They inspire conversation that transcends the show itself. Among the streaming companies, Netflix has created the gold standard for cultural relevance (although Disney may catch up and then some). Stranger Things has become a pop culture sensation by tapping into 1980s nostalgia (and arguably engineering that nostalgia). Tidying up with Marie Kondo connects with an American materialism (and its consequences) so profoundly that the show actually created a spike in donations to thrift stores. This is the entertainment company that changed how we watched TV and is responsible for vernacular such as “Netflix and chill.”
Along Comes Apple TV+
Now, what about Apple TV+, which launched on November 4? Well, the results are mixed, and Apple TV+ has been outflanked by The Mandalorian. The much hyped The Morning Show has failed to catch fire. Apple has delayed the release of theatrical film The Banker amid allegations of misconduct against one of the movie’s producers. But on the other hand, a lesser known series, Dickinson, has been steadily building a fan base.
On the surface, Dickinson focuses on the life of poet Emily Dickinson. But what makes Dickinson culturally relevant is that it’s more than the story of a poet. It’s a perfectly timed statement about female and LGBTQ+ empowerment. In addition, the casting is smart. For instance, Hailee Steinfeld, who portrays Emily Dickinson, connects effectively with Gen Z and the LGBTQ+ community. Wiz Khalifa, who portrays a personification of death, is highly relevant to music, fashion, and weed culture. And the show’s soundtrack, featuring artists ranging from A$AP Rocky to Billie Eilish, is a Millennial’s dream. As such, Dickinson is rapidly creating a fan base who call themselves “Dickheads,” and the show has inspired the term “Sexy Dickinson.” Now this is what cultural relevance looks like:
Dickinson has already been renewed for another season.
Keep an Eye on Apple TV+
Creating cultural relevance requires an insight into consumer behavior, the agility to rapidly create content that taps into this behavior, and a platform to share that content at scale. Apple has the platform for Apple TV+ through Apple TV (and a new Apple TV app). As a media brand, Apple is getting better at tapping into consumer behavior and creating the right content. We all remember how Apple stumbled badly with its ill-fated forced download of U2’s Songs of Innocence album in 2014 – a miscalculation of consumer behavior (streaming was overtaking downloading, and people resented being forced to download music they did not ask for) and taste (U2 was out of fashion). But since then, Apple has adapted by launching a streaming service that now dominates the industry along with Spotify.
Apple played catch-up and then became a leader in music streaming by becoming more culturally relevant with content that connects to millennial tastes, such as the Up Next program for developing artists and first-look album drops by artists such as Chance the Rapper and Drake. Original content alone was not the answer to the rise of Apple Music – culturally relevant content that connects emotionally was.
Apple TV+ has a long way to go before it attains cultural relevance. But Dickinson is a clear win. In addition, Apple has plenty of cash – and a lot of patience. You can be sure Apple is figuring out how to create its next Dickinson.
Steven Spielberg has seen the future, and he doesn’t like it one bit.
At the 91stAcademy Awards, Netflix took home four Oscars including three for Roma, which had been nominated for Best Picture. In addition, Amazon Studios and Hulu both achieved Oscar nominations. Spielberg dislikes the notion of the Academy of Motion Picture Arts and Sciences nominating movies from companies that stream movies in homes. So he reportedly wants to change the rules to block Netflix and its streaming competitors from nominating movies for the Oscars.
And Steven Spielberg is dead wrong.
Spielberg believes in the purity of the big screen and the joy of experiencing a movie in a theater. He wants to keep a sharp distinction between movies shown in theaters and movies made by streaming services. As he told British TV network ITV News in 2018, “Once you commit to a television format, you’re a TV movie. I don’t believe films that are just given token qualifications in a couple of theaters for less than a week should qualify for the Academy Award nomination.”
With Amazon Studios, Hulu, and Netflix landing multiple nominations at the 91stAcademy Awards, apparently he’s feeling threated. A spokesperson for Spielberg’s Amblin Entertainment told IndieWire’s Anne Thompson, “Steven feels strongly about the difference between the streaming and theatrical situation. He’ll be happy if the others will join [his campaign] when that comes up [at the Academy Board of Governors meeting]. He will see what happens.”
Defenders of Old Hollywood believe the Academy’s nomination rules are too lax. A movie need not be distributed exclusively in a movie theater to qualify; a movie simply needs to appear in theaters. In addition, Hollywood studios follow an unwritten rule that movies should appear in theaters for at least 90 days before becoming available on video or streaming. Netflix doesn’t play be those rules. For instance, Netflix’s Roma appeared exclusively in theaters for only three weeks. A rule change could, say, require Oscar nominees to make movies available for a minimum period of time.
Reports of Spielberg wanting to change the Oscar nomination rules have been disputed, but the controversy has drawn attention to his opposition of streaming services – an opposition is on the wrong side of history for a number of reasons, including:
Viewing Habits Are Changing
There’s a reason Netflix has become one of the biggest brands in the world. Audiences want the flexibility of seeing movies on their own terms: at home, on the go, and in theaters. Streaming services are accommodating them. When recently I moderated a discussion about Old Hollywood versus Netflix on my Facebook page, Facebooker Brian Schultz summed one of the reasons why viewers want choice:
The theatrical experience isn’t what it used to be. Projection quality differs from theatre to theatre, too many previews, rude ass moviegoers, and high ticket prices make staying at home a better option.
You can see some movies from streaming companies in theaters, too. You could have seen Amazon Studios’ Cold War (nominated for Best Foreign Language Film) and Roma in theaters, on a TV screen, or on a device. (I prefer seeing movies on big screens. But I don’t always have the time and money to go to the movies. I saw Roma at home and Cold War in a theater. Both experiences were equally satisfying.)
And streaming is becoming even bigger. Disney will soon launch its own service, Disney+. AT&T will launch its own streaming service, capitalizing on its ownership of Time Warner to feature content from WarnerMedia, a newly formed entity that includes HBO and Turner Broadcasting.
Old Hollywood’s war against streaming is going to be harder to fight, especially with Disney putting its muscle behind streaming. You don’t mess with the Mouse.
Streaming Services Offer Alternatives for Artists
Roma is an intensely personal movie from Alfonso Cuarón, who previously won multiple Oscars for directing Gravity. When Roma won multiple Golden Globe Awards in January, Cuarón was asked to comment on a perception that Netflix is threatening independent cinema. He replied:
My question to you is, how many theaters did you think that a Mexican film in black and white, in Spanish and Mixteco, that is a drama without stars — how big did you think it would be as a conventional theatrical release? I just hope the discussion between Netflix and platforms in general should be over. I think those guys, platforms and theatrical, should go together . . . They both together can elevate cinema, and more important, they can create a diversity in cinema.
Anne Thompson of IndieWire recently provided some inside baseball on how Netflix ended up with Roma:
The studios could have acquired “Roma.” Participant showed ten minutes of footage to seven companies with global distribution. There were no passes and three offers. Four companies explained that because a black-and-white film in Spanish would not qualify for their Pay-TV output deals, they needed to see the film (which was still in post and not available to screen). Once they could see the film they’d be able to seek a waiver from their Pay-TV output partners, as The Weinstein Co. did on “The Artist.”
Participant explored the three offers and after a month-long negotiation landed on Netflix, which gave the most persuasive (and financially viable) marketing, distribution, and awards commitment. The studios weren’t willing to step up to Netflix’s bid for worldwide rights (a bit more than $20 million), which included a commitment for a substantial global theatrical release (excluding China — which Participant kept and will open in theaters, having just passed the censors).
Alfonso Cuarón is not the only big-name director working with Netflix. Even an Old Hollywood stalwart like Martin Scorsese is leaping into the arms of Netflix. Scorsese’s forthcoming movie, The Irishman, will be distributed by Netflix in theaters and via streaming. The movie is reportedly a long-time passion project of Scorsese’s. Commenting on Netflix’s involvement in the film, he said, “People such as Netflix are taking risks. ‘The Irishman’ is a risky film. No one else wanted to fund the pic for five to seven years. And of course we’re all getting older. Netflix took the risk.”
Given the enormous cost of developing content, Netflix may stay firmly rooted in streaming for the near term, making Amazon a more likely candidate to buy a movie theater chain (also not a far-fetched notion with Amazon expanding into the brick-and-mortar grocery and retail industries).
Something Is Happening Here
Meanwhile, Netflix addressed the Old Hollywood-versus-Netflix story with a thoughtful Tweet:
Which evoked replies such as these:
Instead of trying to move the goal line for streaming companies, the defenders of Old Hollywood need to ask why exciting directors such as Alfonso Cuarón are turning to streaming companies and why businesses such as Disney are changing with the times, too. Old Hollywood can change just as record labels eventually adapted their business models for music streaming. Meanwhile, to paraphrase Bob Dylan, something is happening here, but you don’t know what it is, do you, Mr. Spielberg?
Tidying up with Marie Kondo is more than a Netflix reality television series about an organizing consultant who helps people de-clutter their homes. It’s a cultural phenomenon. Since Netflix aired eight episodes January 1, Tidying up with Marie Kondo has sparked a discussion about Japanese culture, the role of books in our lives, our societal pursuit of happiness, and materialism, among other topics. The show also demonstrates a major advantage Netflix wields against Amazon Video and Hulu: cultural relevance.
Tidying up with Marie Kondo is one of many examples of how Netflix seeps into our everyday culture by creating relevant content and even shaping our behavior. Netflix is not the only streaming service to create content that taps into the cultural zeitgeist – Hulu does so in spades with The Handmaid’s Tale. But Netflix creates cultural relevance more consistently and in more ways.
Prophet Brand Relevance Index
According to the Prophet Brand Relevance Index, Netflix is the fourth-most relevant brand in the United States, behind Pinterest, Amazon, and Apple and ahead of companies such as Google and Nike. Amazon ranks ahead of Netflix not because of its streaming service but because of its ecommerce leadership – an important distinction. Amazon Video creates original content as a means to an end – to gain more Prime members for Amazon. Netflix lives and dies by the strength of its content. And the difference shows.
According to Prophet, “[Netflix’s] relevance comes from knowing what we want to watch, which means old favorites and $12 billion worth of exciting new projects, including contracts with executive producer Shonda Rhimes, director Spike Lee and former President and First Lady, Barack and Michelle Obama.”
Creating Cultural Relevance
Prophet focused on consumer relevance. Netflix’s cultural relevance goes beyond knowing what we want to watch although content is one important element. Cultural relevance means influencing how we talk, how we behave, how we work, and, yes, what we watch. Here are some examples:
Netflix and Chill
Netflix is part of our everyday vernacular. You don’t hear anyone refer to “Hulu and Chill” or “Amazon Video and Chill” as a euphemism for having sex. And let’s not even consider a world in which “Disney+ and Chill” catches on once Disney launches its own streaming service, Disney+. “Netflix and Chill” has become so common we don’t necessarily equate the phrase with its original meaning. The article “Netflix and Chill . . . and Share it on Instagram Stories” by Geoff Desreumaux certainly does not refer to hooking up. And I’m pretty sure investor Dan Victor wasn’t thinking about getting some afternoon delight when he wrote the Seeking Alpha financial analysis of Netflix, “Buy Netflix and Chill – It’s Going Back to $400.”
“Netflix and chill” is not the only example of Netflix-related phrases that have worked their way into our vocabulary. For instance, “Netflix cheating” is the act of watching episodes of a Netflix series ahead of your partner. Netflexting occurs when two people watch a Netflix show in different locations and text each other at the same time. Netflix block happens when you scroll through your Netflix queue and cannot settle on something to watch. Here are more phrases that demonstrate Netflix achieving cultural relevance through our vocabulary.
The cultural relevance with content occurs two ways:
Creating content from another medium that has already attracted an audience (Tidying up with Marie Kondo was already a well-known book, and Dear White People was a notable movie first).
Releasing content that becomes so popular that its success transcends its original medium, which is what happened with Stranger Things.
In fact, most of Netflix’s original content does not enter the cultural mainstream the way Stranger Things has done. But Netflix hits the mark more than anyone else.
Netflix is actually changing our behavior. When Netflix began dropping all episodes of its new TV shows simultaneously, we responded by changing how we watch TV. Thanks to Netflix, we consume show after show for hours at a time. We now watch what we want when we want it, instead of a network making us wait for a weekly broadcast. The phrase “binge-watch” became the Collins English Dictionary word of the year in 2015. Four years later, we’re still talking about binge watching. Mashable devotes a section of its news content to binge watching. And you can get paid to binge watch. Binge watching is bigger than ever.
Highly Aligned, and Loosely Coupled
Netflix is also culturally relevant to the workplace. Netflix is well known among management consultants and the HR community for the way the company operates. Netflix is known for its “highly aligned, loosely coupled” approach of setting a clear strategy but empowering work teams to act autonomously. We now have PhD-level management consultants extolling the “7 Aspects of Netflix’s Company Culture That You’ll Want to Copy.” Its 2009 Culture Deck is called “the BIG DADDY of culture decks.” Its technology blog is also popular among product developers and engineers throughout the workplace. Amazon is also closely followed for its management practices – but here again, I’m focusing on the streaming business, where Amazon Video doesn’t create the kind of conversation for its business practices that Netflix does.
But cultural relevance is fleeting. You can’t manufacture cultural relevance on demand although you can improve your odds by adapting already-popular content that has been tested in another medium, as with Tidying up with Marie Kondo and Dear White People. So far, Netflix sets the pace. But it will be interesting to see what happens when Disney launches Disney+. Disney wrote the book on cultural relevance and is well positioned to challenge Netflix with its Disney, Marvel, Pixar, and Star Wars brands (Star Wars created the template for phenomenon such as Stranger Things). The key will be how well Disney draws upon these popular names to create new content, which it plans to do with shows such as original episodes coming from Marvel. Disney+ will be an extremely costly venture. But Disney has very deep pockets, while Netflix is under constant pressure from investors for its spending. Netflix CEO Reed Hastings has his work cut out for him. But I think he’s up for the challenge. And he’s operating with a big head start and an ability to do things that no one else sees coming, such as introducing binge watching.
The next frontier for Netflix will be to create cultural relevance in international markets such as India, which is proving to be an enormously difficult task. In India, Netflix also has its hands full with local competitors such as Hotstar. Because of its cash burn rate, Netflix is under more pressure to ramp up faster in markets such as India. The race is on – and the next several months will prove to be exciting.