The Hot Blog Archive for January, 2013

Netflix 2013

Netflix grew massively in its first years as it created its own leadership in the streaming business.

And here’s the problem. It went from a $2.3b revenue company in 2011 to being a $3.2b revenue company in 2011 to being a $3.6b revenue company in 2012. But costs of revenues went from $1.4 billion in 2010 (the early, cheap era of streaming) to $2b in costs in 2011 to $2.6 billion in 2012. Netflix didn’t break out streaming subscription revenues or costs until July 2011, so those early days are blurry. But basically, Netflix was doing streaming as an added value on deals like Starz… deals which have all evaporated since.

The hot stat being sold as we officially enter the We Want To Be HBO era for Netflix is that they have $2b a year to spend on programming. But the truth is, most of that money (more than $1.5b) is already spent and more than 4 – 7 episodic series a year will require significant thinning out the current available programming on the service.

In one of the media love letters to Netflix (GQ), there is a playful bit about how uncomfortable Fox may be with doing “Arrested Development” for Netflix and not traditional television. But while the smirking suggestion is that producers like Fox are afraid of the network walls of Jericho falling, what is left out completely is the real reason why partnering with Netflix for new series is iffy. it’s simple. Producing shows for Netflix means throwing away all other domestic revenue windows, at least as Netflix is currently positioned.

Do people remember one major reason why HBO going to original programming worked so well? Post-run DVD sales. And if they wanted it—HBO Go is the current strategic choice—HBO could lease its catalog to stream on Netflix or a competitor for at least $100m a year. And HBO has occasionally sold into cable net syndication as well.

And please note… the production company at issue on “Arrested Development” is Fox… which also owns the network on which “AD” first aired, not to mention FX, which has a lower standard for ratings success. And Fox never went ahead to revive “AD” for either network. Yes, there is a great big cult of people who cannot wait to get back to the “AD” experience. But realistically, how many of those people aren’t already on Netflix?

Thing is, what Netflix needs is network-level smashes. They need to expand their subscriber base from 24 million paid streamers to 50 million in the next 3-5 years to make this really work. The holy grail—and I do think this will happen, probably for others, not an independently-owned Netflix—is 80m households. That’s when the entire industry shifts. But will a great Fincher series do that? Or are they preaching to the already converted?

This is the great irony of “We Want To Be HBO.” If the numbers at Netflix, as they currently do, compete with HBO subscription numbers, they will not be able to sustain the overhead of being an original-content creator.

So, you ask, how does HBO do it? Well, the HBO Originals era of “Tales From The Crypt” and “Dream On” is now over 20 years ago. “The Sopranos” and “Sex & The City” started over a decade ago. Netflix needs to turn this corner in 5 years or less. HBO had decades… the same way that Netflix as a cheaper, easier form of DVD rental had free room to run for years before Redbox stepped up.

God bless “Homeland,” but Showtime has been chasing HBO, in terms of originals, for over a decade and has not caught up. Most of their originals—not unlike early originals on HBO—are hard-R content of middling quality. Don’t get me wrong, Showtime has done well for itself over time. But it’s not HBO and it’s not the bar for which Netflix can afford to aim.

This is not an anti-Netflix thing. Not in the least. It is about the rest of the industry… an industry that keeps Netflix in business, not, long-term, the other way around. The film industry has direct investment in every revenue arm, with the exception (though that seems to be changing) domestic exhibition. Why would streaming be any different?

And Netflix’s $2b a year for 2013 already seems to be spent. $100m for “House of Cards,” $300m for Disney lease… how much for “Arrested Development?” I did seem to be the only one writing about content constriction in terms of Netflix’s overall business model, but there seem to be many others who are seeing it (independently, I’m sure) and writing about it now.

There are circumstances in which Netflix can thread the camel through the eye of the needle. But given that a company like Disney has 10x the revenue, is not averse to purchases, and will be more than 15% of Netflix’s content costs this year and for the next couple, their eventual purchase seems almost inevitable.

Look… the dream of Netflix is already dead. It is no longer a source of a high percentage of existing and new film and television content. For $8 a month, it is still a great bargain and worth subscribing to if you have broadband and a little extra money each month, but that was not the big excitement over Netflix. No one expected every single film and TV show. But 18 months ago, the service had a lot more content. And it’s only going to get thinner.

There is nothing wrong with what Netflix will become. It’s just not the dream. There is money to be made… especially when the company is sold. But people—especially media—have to get over the glory days. We need to stop re-reporting the self-flagellation about the conversion to streaming as primary, which was neither a mistake or misstep, but a long-considered choice to reset the foundation of the company for the future. Only then will their eyes be able to see the beautiful, smaller future for this once-singular company.


Weekend Estimates by Klady & Mama: Box Office Hunters

I don’t know that there is much more to say about this weekend.

I don’t suspect it will get much better next weekend. The weekend after, the spring movie seasons starts with Identity Thief, followed a week later by the latest Die Hard.


Friday Estimates by Hansel & Klady

What can one say about a $5.9m Friday winning the day? Hmmm…

You don’t have to go too far back to find a similar thrilling moment. The Rite, which opened January 28, 2011, opened to $5.3m, won the weekend with $14.8m, and totaled out at $33m domestic and $96m worldwide. Time will tell whether Gemma in bondage gear with Renner as a strap-on will draw internationally better than at home.

Meanwhile, Parker rolled over. (Bread fans can thank me for that joke later.) And Movie 43 is a movie so bad, apparently, that even the talent that is in it don’t remember making it.

In OscarLand, it is now apparent that Silver Linings Playbook could outgross Zero Dark Thirty domestically, though not until next weekend and not by a lot. Still, ZD30 appears to have taken a big hit for all the controversy and focus on torture in the film…. even though most of the early anger has slipped away in a flood of people who actually participated agreeing with virtually every fact offered in the film. Too late.


BYOB 130124


Friday Estimates



Sundance ’13: Day One

The tone seems to be being set by opening night this year.

There is a Pablo Larrain thing going on, as he produced Crystal Fairy & The Magical Cactus and 2012, and his star from No co-created the doc, Who Is Diyani Cristal ?. Pablo’s Oscar-nominated No is also here. Of course, part of the “Pablo thing” is a South American thing, as the indie world continues to lean harder and harder on international films and not American Indie. A.I. is still in the house, in the Dramatic Competition, but I feel like there is a sense that the awards show is becoming the ghetto here and the real interesting stuff is elsewhere. (Crystal Fairy is in the World Dramatic Competition.)

Blue Caprice is going to be a hot topic as the festival moves on (it opens Saturday), combining the cool distance of European cinema with a very American issue – especially right now – of gun violence as a solution for the disaffected. Add on top of that an awards-level performance by Isaiah Washington and there will be talk about why the film is in the “Next” section and not in the main competition over some of the more expected Sundance fare.

And then there is the sex. We’ve already seen Gaby Hoffman running around buck naked – and not highly sexualized – in the title role of Crystal Fairy. But just wait til they get a load of dick. James Franco is the finger in the ass of Sundance this year, with two strong pieces. One is, in theory, about recreating the missing footage from Billy Friedkin’s Cruising. But it’s not. It’s much more about the idea of how much sex of a presumably different persuasion a straight guy can take. And then, Kink.com, which Franco produced, is about a fetish site that produces a lot of content of all flavors. Of course, they are also a business, so almost exactly like Gawker, they rank the response to the material each in-house director creates and everyone is paid accordingly. But both movies are about limits, ultimately. What are they? Should we all be considering broader ones… even if we ultimately reject them? And how much of this is choice – not on a participatory level, but on one’s personal turn-ons or offs – and how much of it is just part of who each of us is.

Let’s hope the entire festival is a bumpy, bumpy ride.


DP/30: Twenty Feet From Stardom, director Morgan Neville

Opening night film at the Sundance Film Festival.

1 Comment »

Evolution of a Blog

Boy, has this blog suffered.

I’ve just been doing other things. Twitter is a big one. DP/30 has certainly eaten into the schedule.

Truth is, I am, quietly, trying to figure out what is next. Not in the work as a whole, but in the format.

Too many blogs. Too fast. Too much. Sound and fury signifying… you know.

Thinking. Sorry.


The Hot Blog


Quote Unquotesee all »

“We now have a situation where audiences very often prefer commercial trash to Bergman’s Persona or Bresson’s L’Argent. Professionals find themselves shrugging, and predicting that serious, significant works will have no success with the general public. What is the explanation? Decline of taste or impoverishment of repertoire? Neither and both. It is simply that cinema now exists, and is evolving, under new conditions. That total, enthralling impression which once overwhelmed the audiences of the 1930s was explained by the universal delight of those who were witnessing and rejoicing over the birth of a new art form, which furthermore had recently acquired sound. By the very fact of its existence this new art, which displayed a new kind of wholeness, a new kind of image, and revealed hitherto unexplored areas of reality, could not but astound its audiences and turn them into passionate enthusiasts.

Less than twenty years now separate us from the twenty-first century. In the course of its existence, through its peaks and troughs, cinema has travelled a long and tortuous path. The relationship that has grown up between artistic films and the commercial cinema is not an easy one, and the gulf between the two becomes wider every day. Nonetheless, films are being made all the time that are undoubtedly landmarks in the history of cinema. Audiences have become more discerning in their attitude to films. Cinema as such long ago ceased to amaze them as a new and original phenomenon; and at the same time it is expected to answer a far wider range of individual needs. Audiences have developed their likes and dislikes. That means that the filmmaker in turn has an audience that is constant, his own circle. Divergence of taste on the part of audiences can be extreme, and this is in no way regrettable or alarming; the fact that people have their own aesthetic criteria indicates a growth of self-awareness.

Directors are going deeper into the areas which concern them. There are faithful audiences and favorite directors, so that there is no question of thinking in terms of unqualified success with the public—that is, if one is talking about cinema not as commercial entertainment but as art. Indeed, mass popularity suggests what is known as mass culture, and not art.”
~ Andrei Tarkovsky, “Sculpting In Time”

“People seem to be watching [fewer] movies, which I think is a mistake on people’s parts, and they seem to be making more of them, which I think is okay. Some of these movies are very good. When you look at the quality of Sundance movies right now, they are a lot better than they were when I was a kid. I do think that there have been improvements artistically, but it’s tough. We’ve got a system that’s built for less movies in terms of how many curatorial standard-bearers we have in the states. It’s time for us to expand our ideas of where we find our great films in America, but that said, it’s a real hustle. I’m so happy that Factory 25 exists. If it didn’t exist, there would be so many movies that wouldn’t ever get distributed because Matt Grady is the only person who has seen the commercial potential in them. He’s preserving a very special moment in independent film history that the commercial system is not going to be preserving. He’s figuring out how to make enough money on it to save these films and get them onto people’s shelves.”
~ Homemakers‘ Colin Healey On Indie Distribution