Netflix To Continue Eating Into Cinema Takings

Netflix To Continue Eating Into Cinema Takings
NFLX Photo by Matt Perreault

The movie industry has been arguably the most glamorous commercial sector on the planet for over a century. In fact, the way that it is presented to us means that it is often easy to forget that its primary function is to make money for some massive corporations. The media is certainly fixated, perhaps understandably, with the beautiful and charismatic people who are central to cinematic productions, and in this regard Hollywood remains as central to popular culture as it ever was.

This glamor associated with the industry of course disguises the real reasons that movies are made. Naturally, while making movies is a creative undertaking, it is also one which is fundamentally commercially driven. In line with what Robert de Niro’s character explains in Casino, that “all the bright lights, and the comp trips, and all the champagne, and free hotel suites, and all the broads and all the booze [has] all been arranged just for us to get your money”, so the glitzy image which is attached to the movie industry is intended to get us into the cinema.

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A fundamental shift in culture, exemplified by Netflix

Except that it’s not working at well as it once was. It hardly needs to be pointed out that cinema now forms but a mere part of an incredibly diverse entertainment industry. It is now pretty common knowledge that video games make more money than movies, even if they don’t produce anything like the same quantity of eye candy. People are now much more willing and able to make their own entertainment than they were in the days when Monroe, Wayne, Sinatra and Dietrich used to draw huge audiences as a matter of course.

While people generally have far more disposable income than back in the golden age of Hollywood, the quality of home cinema systems and entertainment packages mean that many are no longer choosing to go to the movie theater. Despite the existence of staggering technologies such as IMAX, it’s harder and harder for movie producers to drag people out of their comfortable homes and into the cinema.

This is reflected by a statistic which has appeared widely in the British media in the last few weeks, namely that the 2013 calendar year saw UK and Republic of Ireland box office takings in fall by the largest amount in more than 20 years. This failure was linked to the fact that certain big franchises such as the James Bond series did not release movies during the last twelve months, but it would seem to strongly reflect other market realities as well.

The reality is perhaps rather different than that. Apart from the aforementioned video games, the cinema is, not for the first time in its history, also facing a challenge from a competitor in people’s homes. This time, though, it’s not the video recorder, the somewhat more sophisticated DVD player, or even cable television which is eating into cinema attendance. It’s an entirely more threatening competitor, which arguably delivers something that even cinema cannot.

Streaming services for movies are increasingly popular, with Netflix, Inc. (NASDAQ:NFLX) the market leader, and a name that many people have become familiar with. Many people would argue that the service provided by Netflix is simply superior to the movie theater, particularly in an age in which full HD screens and surround sound cinema systems are no longer the preserve of people with inflated salaries.

To have a huge library of movies at your fingertips at all times obviously offers consumers incredible convenience, and with broadband speeds increasing exponentially in recent years, streaming HD has become much more feasible for large numbers of people. This makes Netflix, Inc. (NASDAQ:NFLX) a no-brainer for a lot of movie fans, and there is no question that the subscription service is very much on the up, with revenue of nearly $4 billion last year.

Streaming now an indivisible part of media landscape

Such figures don’t yet compare with cinema just yet. For example, the highest grossing film of all time, James Cameron’s sci-fi epic Avatar, took nearly $2.8 billion at the box office worldwide. But Netflix, Inc. (NASDAQ:NFLX) is becoming a hugely popular service, and part of the language of the general public, much in the same way that Playstation, Xbox, iPod, iPhone and iPad are now part of the everyday lexicon. With other film subscription services available such as LoveFilm, BlinkBox and NowTV also available, this is clearly a marketplace that is here to stay.

Aside from the existing movie streaming services, other big players such as YouTube and iTunes are well placed to provide access to films for people at home. And with smart TVs now becoming a significant technology, the potential to stream HD movies straight onto full HD flatscreen TVs is increasing on an almost monthly basis.

Now Netflix, Inc. (NASDAQ:NFLX) is aggressively pushing for the idea of premiering movies on Netflix the same day that they’re opening in movie theaters. This idea was put forward by Ted Sarandos, Netflix’s Chief Content Officer, during his keynote speech at the 2013 Film Independent Forum in Los Angeles. And Sarandos made it clear that he wasn’t referring to small, independent productions, but the biggest Hollywood blockbusters.

Most people have fond memories attached to the cinema, and there is no doubt that multiplexes will be around for a long time to come. Big movies still make billions of dollars at the box office, and the huge IMAX technology is not imitable at home for most budgets. But the reason that the cinema industry is pushing for glasses-free 3D is so that they can offer something truly distinct from home cinema. It is clear that Netflix, Inc. (NASDAQ:NFLX) is becoming an ever more popular way for people to watch movies, and will probably get its wish of joint premiere dates with cinemas sooner rather than later.

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