netflix probably left hundreds of millions of dollars on the table by not keeping Rian Johnson’s “Glass Onion” in theaters.
The sequel to Johnson’s critically acclaimed “Knives Out” opened in nearly 700 theaters, the biggest release of any Netflix original film to date, last Wednesday before Thanksgiving weekend. “Glass Onion” leaves theaters on Tuesday. It will arrive on Netflix on December 23.
The film pulled in between $13 million and $15 million over the five-day period, a solid opening for a film released in a limited number of theaters.
Box office analysts, however, say that figure could have been much higher if Netflix had opted for a traditional wide release of 2,000 to 4,000 theaters. The truncated airing of “Glass Onion” has also prompted industry insiders to question the streamer’s theatrical release strategy. Netflix has reversed its previous policies, including introducing an ad-supported subscription option, leading many to question whether the company should rethink its resistance to the traditional Hollywood movie release model as it seeks new ways to increase income.
“With traditional wide release, premium screen play, and a comprehensive marketing campaign, I believe ‘Glass Onion’ could have generated at least $50-60 million to lead the overall market,” said Shawn Robbins, chief analyst at BoxOffice.com.
Instead, Disney and Marvel Studio’s “Black Panther: Wakanda Forever” continued to dominate the box office, grossing $45.9 million in domestic ticket sales during the regular three-day weekend and $64 million dollars for the five-day vacation period.
Netflix refused to provide box office receipts for the film, breaking with standard procedures other studios adhere to every weekend, so it’s unclear what “Glass Onion” generated in ticket sales on Friday. , Saturday and Sunday.
But in 2019, “Knives Out” grossed $312 million worldwide on a budget of just $40 million. The first film’s box office performance has sparked questions about why Netflix limited the release of “Glass Onion” to just one week in a limited number of theaters. After all, the streamer reportedly paid $400 million for the rights to two sequels.
Box office analysts predicted the film could have grossed over $200 million in ticket sales before it ran out had it enjoyed a wider worldwide release.
“It’s exactly the kind of movies adults want to see in theaters right now,” Robbins said. “The family element made ‘Knives Out’ a perfect Thanksgiving outing for audiences across the country three years ago. Daniel Craig’s return as Benoit Blanc, Rian Johnson’s sharp narration and another series of positive reviews for ‘Glass Onion’ builds on the excellent goodwill of the previous film as this half-sequel reaps the rewards, but it arguably could have done even more.”
Word of mouth was a huge factor in the success of “Knives Out”, as evidenced by the film’s small drop in ticket sales week-over-week after its release. Typically, movies will see weekend sales drop by 50% or more each week after it opens. But the drop in “Knives Out” ticket sales remained consistently below 40% until Christmas, when sales rose 50%, then fell only between 10% and 30% per week until Christmas. february.
This indicates that audiences were talking about the film and encouraging others to come out and see it, resulting in a strong hold on ticket sales.
“Glass Onion” earned a 93% “Fresh” rating on Rotten Tomatoes from 238 reviews and an Audience Score of 92%, suggesting it could have generated the same kind of word of mouth as well.
Some Netflix executives reportedly pressured co-CEO Ted Sarandos earlier this year to consider longer stays in theaters and wider releases for some films, but Sarandos dismissed the idea. The company’s top brass have repeatedly said that the future of entertainment is streaming.
The company’s strategy in the past with limited theatrical releases — such as with Martin Scorsese’s “The Irishman” — has been to create buzz for subscribers before the film hits its service. That’s the game here, too, the company said during last quarter’s earnings video.
“Our business is to entertain our members with Netflix movies on Netflix,” Sarandos said on the call.
He said Netflix brought movies to festivals and gave them limited theatrical runs because the filmmakers demanded it.
“The [are] all kinds of debates all the time, back and forth, but there’s no question internally that we make our movies for our members and we really want them to watch them on Netflix,” he said.
Netflix declined to comment further.
While Sarandos and co-CEO Reed Hastings have remained adamant that subscribers don’t want Netflix content in theaters, some Wall Street analysts don’t think that’s the case.
“Subscribers don’t care at all,” said Wedbush analyst Michael Pachter. “Talent, on the other hand, cares a lot. … Talent needs it to help negotiate future deals and thrives on the prestige of award nominations.”
“Netflix didn’t do this for the money,” he added. “They did it because of talent pressure.”
For others, like streaming expert Dan Rayburn, Netflix’s cross-platform promotion of putting “Glass Onion” in theaters for a week to tease its release on the streamer a month later “makes a lot of sense.”
The streaming giant also should have shelled out more in marketing costs to promote the film over time. Additionally, Netflix’s business model relies on new movies and TV shows to reduce subscriber churn and attract new audiences to its platform. The fact that “Glass Onion” has picked up customers in theaters is a sign for Netflix that there is demand for the film and that it will likely do well once it debuts on the streaming service.
Still, it’s hard for investors to see all the money left on the table, especially when Netflix continues to spend big on content as subscriber numbers slow.
In recent years, the streamer has spent big on flashy blockbuster-style action movies like “The Gray Man” and “Red Notice,” which cost the company $200 million each. Films are the first steps in deals aimed at triggering event-level franchises. But they’re expensive, and it’s unclear how positive they’ve been for Netflix’s bottom line.
Unlike competing studios Universal and disney, Netflix does not have a wide range of sources to generate revenue. Until recently, his only option to recoup his expenses was subscription growth. The company hopes its level of advertising will help generate more funds to subsidize its $17 billion annual spending on content.
Box office and Wall Street analysts see theatrical releases as a smart way for Netflix to market its content and drive revenue growth.
“We hope ‘Knives Out 3’ has the chance to capitalize on this watershed moment of cooperation between Netflix and theatrical exhibitors,” Robbins said. “It would be a win-win situation for the whole industry.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Rotten Tomatoes.