As subscriber growth slumps, Netflix offers cinema chains a truce

Could this bring Netflix movies to bigger theater chains?
Could this bring Netflix movies to bigger theater chains?
Image: Netflix/Scott Garfield
We may earn a commission from links on this page.

Netflix is extending an olive branch to cinema chains with which it has been at odds.

The streaming service has alienated major theater operators by premiering its movies online the same day they hit big screens. US chains like AMC and Regal have boycotted the company’s titles. Mostly to make its movies eligible for Oscar nominations, Netflix has had to partner with luxury theaters like iPic on limited theatrical releases instead.

But, in light of big forthcoming movie releases like Will Smith-starring sci-fi film Bright, Netflix is laying the groundwork for better relations.

“Since our members are funding these films, they should be the first to see them. But we are also open to supporting the large theater chains, such as AMC and Regal in the US, if they want to offer our films, such as our upcoming Will Smith film Bright, in theaters simultaneous to Netflix,” said Netflix, in a letter to its shareholders (pdf). “Let consumers choose.”

That might be because it needs more consumers. The streaming service gained just 5 million subscribers globally in the last quarter, it said yesterday, missing the 5.3 million additions FactSet analysts predicted and the 5.2 million Netflix itself forecasted last quarter. There weren’t as many major TV and film releases during the quarter (A Series of Unfortunate Events, Santa Clarita DietUltimate Beastmaster, and Iron Fist), which likely drove the lackluster growth.

That brings Netflix’s total subscriber base about 1.2 million shy of the 100 million mark.

Netflix’s stellar stock performance has so far hinged on its ability to continually add new subscribers. The company’s shares dipped as much as 3.5% to $141.99, after the closing bell when the quarterly results were posted last night, but opened slightly higher this morning at $147.29.

Netflix said it expects to add 3.2 million subscribers in the second quarter—more than analysts forecasted—thanks, in part, to popular new programming that premiered near the end of the first quarter, like 13 Reasons Why and Dave Chappelle: Collection 1, which is Netflix’s most-viewed comedy special ever. The company also boosted profits to $178.2 million, or 40 cents a share during the quarter, up from $27.7 million, or 6 cents per share during the same period a year earlier.

It said it plans to spend $1 billion on marketing, on top of a $6 billion programming budget, to promote its titles in 2017. And those titles include more original blockbuster films.

Chief content officer Ted Sarandos said that Netflix is pursuing more projects like Bright that look and feel like movies you would watch in theaters. The company recently hired former Universal executive Scott Stuber to lead the foray into feature films.

It’s not the first time the streaming service has pivoted its stance toward a media partner. It sparred with Comcast over net neutrality, but made peace with the US cable operator when it behooved Netflix. Comcast began offering Netflix to its customers through its X1 set-top boxes last quarter.

This proposed truce comes as cinema owners in France, where two Netflix movies were recently admitted to the prestigious Cannes Film Festival, have questioned the validity of Netflix films. Amazon, meanwhile, has been happy to play nice with cinema chains.