The entertainment landscape is evolving at a lightning-quick pace these days, and Netflix is leading the charge. In just a few short years, the innovative company has evolved from growing DVD distributor, to video streaming giant, to bona fide TV studio garnering awards, critical acclaim, and a frenzied fanbase for original series like House of Cards, and Orange is the New Black. More recently Netflix and other streaming services have begun to venture into the deep waters inhabited by only the biggest leviathans of the entertainment world: Movie distribution.
Netflix stopped the presses last September by announcing plans to distribute the sequel to Crouching Tiger, Hidden Dragon both in IMAX theaters and online — at the same time. The unprecedented move has been followed by smaller acquisitions with similar ambitions, twice prompting theater chains to stage a boycott of the films. But while theaters have treated Netflix’s transition as the latest reason to proclaim the sky is falling, others (including us) see it as just another evolutionary step in entertainment.
Follow us below as we outline why theaters should embrace the future — not run from it — as we all enter the next age of entertainment together.
1) Streaming services need theaters
Streaming services don’t want the theater industry to fail — in fact, Netflix and others need the theater industry. For movies like the Crouching Tiger sequel, an IMAX release would mean a serious source of additional revenue for Netflix, especially considering that it’s the movie studios, not theaters, that make the lion’s share of revenue during a movie’s initial launch. In other words, Netflix has every reason to want the movie to do well at the box office, and an IMAX release means additional ticket revenue that would benefit both parties.
But more to the point, Netflix and other streaming services need theaters in order to prove their films are the real deal, both to the public, and to the Hollywood brass — which is likely why the big chains are playing hardball. Netflix’s most recent purchase was for the Idris Elba vehicle, Beasts of No Nation, which was boycotted by four theater chains (Regal, AMC, Carmike, and Cinemark) less than 24 hours after being acquired for $12 million. The film is already getting Oscar buzz, but it will require a theater release to qualify for the run. While there may eventually be a point at which movies don’t depend upon a theater release to be legitimized, that moment is still very far down the road.
2) Boycotting Netflix makes theaters look bad
Boycotting a small indie film about African warlords does send a message, but maybe not the one theater chains were intending. Instead of striking some sort of compromise, chains like Carmike and Regal have set themselves as an opposing force to a service that many Americans invite into their homes on a daily basis. It doesn’t take much to paint big conglomerates as unreasonable tyrants. Netflix is no doubt playing chicken with the release date here — Amazon, which has its own movie distribution plan, is delaying the release of its films for a month or two to stay out of the fight. But the big chains shouldn’t take the bait. It’s not like Beasts would’ve gotten a wide release anyway, meaning there would be very little impact on theater revenue.
In taking such a strong stance, theaters are making big headlines for defending what many see as an archaic practice from the bygone days of VHS. Further, a smaller theater chain called The Alamo Drafthouse made headlines right alongside the big chains when it agreed to show the movie. The resulting bad press makes Netflix look like the victim, and big theater chains the villains, which plays right into Netflix’s hands.
3) Theaters are doing better than ever
Even as Netflix has gone from a streaming companion for a few savvy movie lovers to an industry-spawning phenomenon that takes up as much as 35 percent of our Internet bandwidth, theaters are thriving. While overall attendance has slumped in recent years, theaters have continued to make money as we enter the streaming age: A LOT of money.
If someone really wants to watch a movie before it hits the big screen, that’s already pretty easy to accomplish thanks to torrent sites.
The Standard Examiner reports that 2015 is expected to be the biggest year for movie theater revenue ever, estimated at $11.5 billion. While theaters had a down year in 2014 (“down” meaning $10.36 billion in revenue), the industry previously broke records in 2013, pulling in $10.92 billion. If we look further back to the fledgling years of Netflix streaming, theaters actually posted a billion dollar increase from 2008 to 2009, according to the National Association of Theaters, and since then they’ve held steady in the $10 billion range for the last 5 years … not exactly an industry in decline.
Owners will argue that theaters’ exclusive run of new releases, which normally extends to around 90 days, is what keeps people coming to the movies, but is that actually the case? After all, if someone really wants to watch a movie before it hits the big screen, that’s already pretty easy to accomplish thanks to torrent sites. Citing research firm Iderto, the Examiner report claims pirating syphoned around $40 million in the month leading up to the 2015 Oscars, while theaters continued to set a record pace.
And even in the face of lower ticket sales, theaters have increasingly leveraged new ways to increase revenue, including adding alcohol and better food concessions, as well as jacking up ticket prices. In return, theater experiences have gotten much better under the threat of new competition, as major chains have begun adding frills like reclining seats, and face melting new audio and visual technologies — which brings us to our next point.
4) Real theaters kick your home theater’s ass
Watching at home has major advantages, and there’s no doubt many will stay home for some titles if given a choice — just like some people will always wait for movies on Blu-ray. But the fact remains that nothing beats the theater experience — especially when it comes to big-budget movies, which is where theaters make their nut. From 3D movies like Avatar, to IMAX spectacles like the original Crouching Tiger, Hidden Dragon, there’s just no comparison.
Granted, TVs are improving each year with new technologies like HDR (High Dynamic Range) and wide color gamut, but for each stride they make, theater tech makes its own advances, and at a much grander scale. While we’re marveling at our new 4K TVs, projector technology is moving to 8K resolution, and beyond. And resolution is just the beginning.
Thanks to state of the art projectors with freakin’ laser beams from Dolby Labs and other companies, HDR technology will soon help to create contrast between light and dark so striking and realistic, it will blow minds. In addition, the latest audio technologies are pushing surround sound into new dimensions — literally. Systems like Dolby Atmos use an encompassing barrage of speakers and channels set at virtually every angle to allow for each image on screen to become its own sonic object, with up to 128 different independent “sound objects.”
Now, and into tomorrow, there’s always good reason to visit the big screen.
5) You can’t fight the future
The future is coming, like it or not. And when it comes to the entertainment industry, streaming services like Netflix are helping to draw up the blueprint. As much as the big chains might hate to admit it, simply boycotting Netflix at every turn won’t work forever. And looking like the bad guy never helps your cause with the public — you know, the people who buy movie tickets. Instead of butting heads with a young up-and-comer like an aging bully afraid of losing his turf, the theater industry would do well to work with Netflix diplomatically to move forward amicably.
The entertainment landscape is littered with cautionary tales of industries that failed to see the writing on the wall until it was too late.
There’s probably a way to get Netflix to soften its position a little, maybe through some sort of mutual profit sharing — money always talks the loudest, after all. Netflix could share streaming profits for certain movies, or cut theaters in on a bigger share of ticket sales revenue early on. In exchange for wider releases of its movies, Netflix could even potentially follow Amazon and delay its online release for a month or two — as brash as Netflix is, the leadership isn’t unreasonable.
More broadly, the entertainment landscape is littered with cautionary tales of industries that failed to see the writing on the wall until it was too late. Take the music industry, for instance. Drunk on the sweet syrup of CD sales, the major labels tried to fight the MP3 revolution, mostly by suing their own customers for illegal downloading. And what happened? Apple stepped in with a little MP3 downloading program called iTunes, and a brilliant device called the iPod. For those who haven’t followed how that played out, the music industry dove into a revenue free fall from which it has never recovered, and Apple cornered the market.
Granted, you can’t compare such contrasting industries directly, but if history has taught us anything, it’s that you can’t stop change. The best you can do is hold on tight and commit to riding that next wave. If the theater industry can do that, it’ll remain prosperous and relevant for years to come. If not, well…Got any CDs?
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