Netflix’s theater deal is a small step for subscriber growth and a big leap toward an Oscar

By Aarthi Rayapura October 12, 2016

By Fitz Tepper

Yesterday, Netflix announced a new theater distribution deal with iPic Entertainment, a theater chain with 15 locations throughout the country.

The deal will put 10 Netflix original films (a substantial portion of Netflix’s original films this year) in iPic’s New York and Los Angeles theaters. Getting their content into theaters around the country is a smart move by Netflix, for more reasons than one.

Subscriber growth

Everyone knows Netflix is having a hard time with subscriber growth. Last quarter, the company missed both domestic and international subscriber estimates, and the stock suffered. The company had a bevy of excuses — the shift to chip-based credit cards, price hikes on previously grandfathered plans and even the Rio Olympics.

But these excuses didn’t change the fact that growth is slow. So the company is trying other things, like getting its original content into theaters.

Getting into theaters won’t give Netflix an immediate boost in profits, especially on such a small scale. But just like HBO has said they don’t mind if you share your password with friends because you are evangelizing content, Netflix doesn’t mind if their theater deals aren’t making them much money. Because instead of seeing it as a new revenue stream, Netflix likely sees theater distribution deals as a potential source of new subscribers.

Old-school media consumers who cling to their cable subscriptions and regular trips to the movie theater may be wary of committing to a monthly Netflix subscription, especially if they don’t know the quality of Netflix’s original content. By giving them a chance to see it in theaters, Netflix is essentially offering a trial version of their subscription service to a group of people who may have previously had no reason to sign up.

Plus, the original content will be in theaters the same day as on Netflix, so the streaming service won’t risk pissing off paying subscribers who are upset that movie theater customers (who may not even be Netflix subscribers) get to see new, original content before they do.

And it could even be a benefit to customers, say if Netflix decides to do some type of promotion where subscribers could see original content in theaters for a discounted rate. This would benefit all three parties — subscribers get to see content on a big screen for a discount, the theater gets extra concession profits and Netflix gets to have their film on the big screen in theaters around the country.

To win an Oscar
Everyone knows winning an Oscar means you’ve finally made it in Hollywood. But for all of their Emmys for shows like House of Cards and Orange Is the New Black, Netflix has never actually won an Oscar. One potential reason: The Academy has some strict qualification rules that make it hard for content studios that don’t have traditional movie distribution avenues to win an Oscar.

To qualify for an Oscar, original films have to be shown in a Los Angeles theater for seven days starting the same day it is available online. And for the documentary category, films have to be shown in both New York and Los Angeles four times daily with one screening occurring between 6pm – 10pm. These requirements definitely weren’t designed for content studios like HBO or Netflix, which prefer to limit content consumption to their own platform.

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