Perhaps no shift is as startling as what appears to be the decision to maintain Warner Bros.' theatrical distribution operation
In 2022, Ted Sarandos, a co-CEO of Netflix, said,"We make our movies for our members, and we really want them to watch them on Netflix."And in October, Sarandos said on an earnings call that the company's goal was to"give our members exclusive first-run movies on Netflix.
"On Friday, Netflix announced that it was jumping headlong into the theater world, by buying the Warner Bros.' studio and streaming business in a deal worth $82.7 billion. Netflix said it planned to"maintain Warner Bros.' current operations and build on its strengths, including theatrical releases for films." The deal is a startling about-face in strategy for the streaming giant, which has never wanted to fully commit to the business of putting movies in theaters. The company has also not wanted to do other things -- until it did them. Its former CEO, Reed Hastings, used to call password sharing"harmless" and resisted advertising for years. But in 2022, facing a slumping stock price because of a loss of subscribers, the company established an advertising tier and cracked down on password sharing. It wasn't interested in sports and other live programming until it was. It didn't do large-scale media mergers until now. But perhaps no shift is as startling as what appears to be its decision to maintain Warner Bros.' theatrical distribution operation, which shows some 15 movies a year in theaters -- movies like"Superman,""Dune" and"Barbie." "Despite all of Netflix's success, they have never cracked the movie business," said Richard Greenfield, an industry analyst at LightShed Partners."This feels like a sign of 'We're in a really good position, but we really haven't cracked the movie business, and we can use this to crack the movie business and accelerate what we already do.'"He said Netflix had released 30 movies in theaters this year. What he did not say was that none of those films stayed in theaters very long -- having what insiders call a short theatrical window. In addition, the company did not report box office results and rarely ran a robust marketing campaign pushing audiences to those movie theaters. It's a strategy that James Cameron, the filmmaker behind"Avatar" and other blockbusters, called"sucker bait" in a recent interview. "I wouldn't look at this as a change in approach for Netflix movies or Warner's movies for that matter," Sarandos said."I think over time, the windows will evolve to be much more consumer friendly, to be able to meet the audience where they are quicker, all those things we like to do." And that is why the industry has already begun to panic. Shortened theatrical windows have been proved to be a cause of box office declines. According to an analysis of 30 theatrical releases in 2025, releases of 25 days or fewer"produced neither theatrical benefits nor streaming gains, contradicting the idea that audiences are simply"waiting for home release," according to the Cinelytic Group, an analyst firm. The sweet spot, the company said it had found, is a 26- to 45-day window, which drives"both better box office outcomes and higher early streaming market share." Ex // Top Stories Despite recent rise, The City’s IPO market remains depressed The number of San Francisco and Bay Area startups that have gone public this year is up from 2024, but still hasn’t recovered to historical norms Supes approve SF mayor’s zoning plan to allow much more housing In 7-4 vote, board gives initial approval to policy that would increase height, density limits in northern and western neighborhoods; passage is major step towards mee… San Francisco-Marin Food Bank works to feed families as funding cuts loom It continues to deliver nutrition to tens of thousands of households per week even as major federal reductions threaten the CalFresh program In the past 24 hours, many groups concerned that Netflix will eventually abandon the traditional theatrical release protested against even the possibility of a deal. A group of anonymous producers sent a letter to Congress over their"grave concerns." It read, in part:"Netflix views any time spent watching a movie in a theater as time not spent on their platform. They have no incentive to support theatrical exhibition, and they have every incentive to kill it." Cinema United, a group that lobbies on behalf of theaters around the country, also issued a statement, calling the acquisition"an unprecedented threat to the global exhibition business." Should the movies that Warner Bros. traditionally sends to theaters go away, the statement said, it will amount to"removing 25% of the annual domestic box office." That big of a drop-off could serve as a death knell not only to Warner Bros. films but to the entire theatrical ecosystem, which relies on a steady drumbeat of movies to keep consumers in the habit of moviegoing. "Netflix's stated business model does not support theatrical exhibition. In fact, it is the opposite," Michael O'Leary, president of Cinema United, said in a statement."Regulators must look closely at the specifics of this proposed transaction and understand the negative impact it will have on consumers, exhibition and the entertainment industry." The theatrical movie business has been on a downward spiral since the pandemic. This year has been particularly worrisome, with a couple of long stretches of fallow times at the theaters. The box office will still end the year with higher sales than 2024 but down nearly a quarter from prepandemic numbers. Some people in the industry are ready to declare the theatrical movie business over. Others say there need to be more movies and better movies to draw consumers out of their homes. Over the years, Netflix has dabbled with the idea of setting up a theatrical distribution operation like Warner Bros.', but it didn't have the appetite or the right volume of films to make the case. Other priorities won out. Instead, Netflix often puts its prestige pictures in theaters for a short window to qualify them for Oscar consideration and to appease filmmakers who want their movies on the big screen. Netflix announced in 2022 that it would put the sequel to"Knives Out" in 600 movie theaters for a week, and theater owners called it a"breakthrough." But it did not become a habit for the company, and the theatrical windows for its movies remained limited. On Nov. 26, Netflix released"Wake Up Dead Man: A Knives Out Mystery" on 500 screens for five days, two weeks before it opens on Netflix. David A. Gross, who writes a weekly box office newsletter, said that had the latest"Knives" film received a proper marketing campaign and a traditional theatrical release, it could have earned $275 million worldwide. That was based on comparisons to the first movie, which was released in theaters and grossed $313 million in 2019. The company's"KPop Demon Hunters Singalong" entered theaters this year months after it debuted on the service and was a huge hit. On New Year's Eve and New Year's Day, the finale of the television series"Stranger Things" will screen in over 500 theaters at the same time it's available on the service. Many theater showings are already sold out. "I don't think Netflix is anti-theaters," Greenfield said."I think they will use the movie business as marketing for Netflix rather than as a core part of the business. Look what they did with KPop. That's a really interesting idea. How do you eventize moments?"
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