Netflix probably left hundreds of millions of dollars on the table by keeping Rian Johnson’s The Glass Bow out of theaters.
The sequel to Johnson’s critically acclaimed Knives Out hit nearly 700 theaters, the biggest release of any Netflix original film to date, this past Wednesday ahead of the Thanksgiving holiday weekend. The Glass Bow leaves theaters on Tuesday. It will hit Netflix on December 23rd.
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The film collected about from 13 to 15 million dollars within five days – a great opening for a film only released in a limited number of theaters.
Box office analysts, however, say the figure could be much higher if Netflix opted for a traditional wide release of 2,000 to 4,000 theaters. The truncated run of The Glass Bow also prompted industry insiders to once again question the streamer’s strategy for a theatrical release. Netflix has abandoned its previous policies, including introducing an ad-supported subscription option, which has led many to wonder if the company should rethink its resistance to the traditional Hollywood movie release model as it looks for new ways to boost revenue.
“I think with a traditional wide release, premium screening and a full marketing campaign, The Glass Bow could generate $50 million to $60 million to lead the entire market,” said Sean Robbins, chief analyst at BoxOffice.com.
Instead, Disney and Marvel Studios’ Black Panther: Wakanda Forever After continued to lead the box office, grossing $45.9 million in domestic ticket sales over a regular three-day weekend and $64 million over a five-day holiday period.
Netflix refused to provide box office receipts for the film, violating the standard procedures that other studios follow every weekend, so it’s not clear how much Glass Onion brought in Friday, Saturday and Sunday ticket sales.
But in 2019, Knives Out grossed $312 million worldwide on a budget of just $40 million. The arrival of the first film at the box office raised questions about why Netflix limited the release of The Glass Bow to just one week in a limited number of theaters. In the end, the streamer reportedly shelled out $400 million for the rights to two sequels.
Box office analysts predicted that the film could have sold over $200 million in ticket sales before the end of its run had it received a wider global release.
“This is exactly the kind of movie adults want to watch in theaters right now,” Robbins said. “The family element made Knives Out the perfect Thanksgiving release for audiences across the country three years ago. Daniel Craig’s return as Benoit Blanc, Rian Johnson’s poignant narration, and another wave of positive reviews for Glass Onion build on the excellent goodwill from the previous film as this semi-sequel reaps some benefits, but perhaps it could do even more. “.
Word of mouth was a huge factor in Knives Out’s success, as evidenced by the film’s slight drop in ticket sales from week to week after its release. Typically, weekend movie sales drop by 50% or more each week after opening. But the drop in Knives Out ticket sales remained consistently below 40% until Christmas, when sales rose 50% and then fell only 10% to 30% weekly until February.
This indicates that the audience was talking about the film and urging others to go and see it, which resulted in a massive drop in ticket sales.
The Glass Bow received a 93% “Fresh” rating on Rotten Tomatoes from 238 reviews and an audience score of 92%, suggesting that it too may have generated the same buzz.
Some Netflix executives reportedly lobbied co-CEO Ted Sarandos. earlier this year to consider longer stays in theaters and wider releases for some films, but Sarandos scrapped the idea. The company’s senior management has repeatedly said that the future of entertainment lies in streaming.
The company’s strategy in the past with limited theatrical releases – such as with Martin Scorsese’s The Irishman – has been to generate buzz among subscribers before the film hits its service. That plays a role here, too, the company said during a video on earnings for the latest quarter.
“We are in the business of entertaining our members with Netflix movies on Netflix,” Sarandos said during the call.
He said that Netflix brought films to festivals and gave them a limited run in theaters because filmmakers demanded it.
“There [are] all sorts of debates all the time, back and forth, but inside there is no doubt that we make our films for our members and we really want them to watch them on Netflix,” he said.
Netflix did not immediately respond to CNBC’s request for comment.
While Sarandos and co-CEO Reed Hastings remain adamant that subscribers don’t want to watch Netflix content in theaters, some Wall Street analysts don’t think so.
“Subscribers don’t care,” said Michael Pachter, an analyst at Wedbush. “Talent, on the other hand, is very caring… Talent needs it to secure future deals and thrives on the prestige of award nominations.”
“Netflix didn’t do it for the money,” he added. “They did it because of pressure from talent.”
For others, like streaming expert Dan Wrayburn, Netflix’s cross-platform promotion of The Glass Onion in theaters for a week to tease its streamer release a month later “makes a lot of sense.”
The streaming giant would also have to shell out more marketing expenses to promote the film over time.
However, it’s hard for investors to see all the money left on the table, especially as Netflix continues to invest heavily in content as subscriber numbers dwindle.
In recent years, the streamer has spent a lot of money on flashy blockbuster-style action movies like The Gray Man and Red Notice, which cost the company $200 million each. These films are the first steps in trying to create event-level franchises. But they are costly, and it’s not clear how positive they are for Netflix’s bottom line.
Unlike competing studios Universal as well as Disney, Netflix does not have many sources of income. Until recently, subscription growth was the only option for reimbursement. The company hopes its advertising tier will help raise more funds to subsidize its $17 billion in annual content spending.
Box office and Wall Street analysts believe theatrical releases are a smart way for Netflix to market its content and drive revenue growth.
“We hope that Knives Out 3 will have a chance to build on this game-changing collaboration between Netflix and theatrical exhibitors,” Robbins said. “It would be a win-win for the entire industry.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Rotten Tomatoes.