culture

‘Roma’ Lost Best Picture at the Oscars, but Netflix Is Still Winning the Money Game

Is Netflix's distribution model ushering in a golden age for filmmakers, or bloodletting an industry?

netflix roma oscars mobile
Carlos Somonte/Netflix

Have you ever wondered what it would be like to have too much money? Well, if you ever run into that kind of wealth, you might want to call up Netflix’s head honcho, Ted Sarandos, for sage advice. After all, he and his streaming service are really, really good at burning through ludicrously large sums of money.

 

By the end of 2018, Netflix reportedly spent more than $12B on content, forever changing the calculus of film economics. Unsurprisingly, that spending number is projected to spike as high as $15B in 2019, and the streaming service’s prodigal habits were no more apparent than during a $25M Oscars campaign for its cinematic darling, Roma—an all-out blitz that cost twice the film’s production budget. When Alfonso Cuarón’s Roma made history as Netflix’s first Best Picture nomination, Sarandos wasted no time lobbying Academy voters with luxurious parties and generous gifts.

 

Even for Netflix, the campaign was exorbitant, but how often does Netflix have a chance to snag four Oscars? Since Netflix seems intent on leveling the traditional distribution model, many have speculated that the Academy’s decision to award Green Book instead of Roma was a defensive play; the last thing the studios want is to legitimize Netflix’s formidable position as an industry leader with their most prestigious award. Netflix is their biggest and baddest competitor, a seemingly invincible one at that.

Did Netflix Really Need ‘Roma’ to Win?

Netflix doesn’t just want to be recognized as a legitimate filmmaking operation—it wants to convince the industry’s big guns that it is the lodestar of Hollywood’s future. Although Roma won three Oscars on Sunday for Best Cinematography, Best Foreign Language Film and Best Director, Netflix stood to gain more had Roma walked off with the coveted Best Picture award.

 

A win could have convinced more of Hollywood’s top-tier talent to sign 360 deals with Netflix, as well as given a boost to its subscriber base. Still, benefits were to be had: Netflix stock rose significantly following the Oscars. With that in mind, Sarandos wasn’t just being frivolous with Netflix’s checkbook. As Amazon and Disney have started to ramp up their video streaming efforts, Netflix needs to do everything it can to prepare for more market saturation. 

The Distribution Dogfight

Compared with Netflix, many of the industry’s players operate like beached whales. Movie attendance in the United States is dismally low. Traditional network ratings are collapsing. And despite high net international grosses generated by blockbuster films, the ubiquity of such films is overcrowding release-date schedules, resulting in friction among the big six majors: Paramount, Warner Bros., Sony Pictures, 20th Century Fox, Disney and Universal.

 

Since Netflix distributes all of its content online, it ingeniously avoids the fraught issues that come with being a physical studio. Moreover, Netflix can afford to produce more cinematic lemons than its competitors because failure costs them less. Although there is a slog of subpar Netflix Originals within its extensive catalog—movies like Bright and The Cloverfield Paradox are examples of films that were critically panned—the streaming service can still get eyes on these projects by targeting precise niches through data mining and algorithms.

 

Another major difference between a bad Netflix production and, say, one created by Warner Bros., is that the former charges its audience only $10 a month for that lackluster viewing experience; if the subscriber doesn’t like one film, they can simply sift through Netflix’s endless coffer to find another one. It is a matter of selection versus curation, and as evinced by ebbing theatrical attendance in North America, audiences have chosen Netflix’s cheaper, democratic ecosystem over a $15 movie ticket.

 

Much of the hatred encircling Netflix has been aimed at its unsavory distribution methods. Contrary to industry standards, Netflix decided that a scanty three-week run of Roma in November qualified it for awards season. Eventually, they expanded to 600 theaters in mid-December, but they decided to debut Roma on the online platform at the same time, adding to the general confusion about where moviegoers could see Cuarón’s magnum opus. In Hollywood, there is an unspoken agreement that studios and networks must play films at an exhibitor’s venue for 90 days before it is available on streaming services. As a result of Netflix’s consistently failing to comply with this window rule, it has become the bane of many theater owners.

 

Despite Netflix’s influence and deep pockets, not every theater chain is acquiescing to its demands. In Mexico, Cinépolis refused to show Roma, while Regal, AMC and Cinemark also took a firm stance against Netflix’s erratic maneuvering. Two years ago, Netflix’s widely celebrated Okja was booed at the Cannes Film Festival, causing them to pull out of the competition prematurely. Even Steven Spielberg recently took thinly veiled shots at Netflix during an acceptance speech, implying that Netflix has precipitated a tragedy: the demise of the traditional moviegoing experience.



But what is ironic about Spielberg’s criticism is that he is attacking what has arguably become one of the industry’s only viable platforms for independent cinema. Roma might have been showered with film festival awards, but without the financial backing of Netflix, it is unlikely that the black-and-white epic would have amounted to a major cultural moment, which ultimately pressured the Academy to put the film up for four awards. Netflix is emerging as one of cinema’s incubators for directorial passion projects and independent films, doing away with much of the creative balking and red tape traditional studios have exacerbated in recent years. Maybe we should be supporting that while holding Netflix accountable to continuing the mission that properly honors tragically dying genres.

Scale, Scale, Scale

Netflix’s top priority is to keep consumers away from cable providers and alternative streaming services. In other words, the company cares more about the quantity of hours spent on its platform, not the quality of the time spent. It is why Netflix is so willing to outspend its competition. In a digital age where a surplus of content is merely a prerequisite to getting a consumer in the door, this incredibly expensive tactic is geared toward Netflix’s ultimate dream: to be the all-powerful, one-stop destination for all video content. The cost? Billions upon billions of dollars. One interpretation of this strategy is that by compiling the best and biggest Rolodex of mainstream and niche films, Netflix can fully dominate the market, effectively pulverizing its competition out of existence. A scary thought.

Netflix makes very small profit margins, and its success will only continue if it reaches its projected 201 million subscriber goal by 2023. It’s a risky go-big-or-go-home strategy. 

- Nick Baron

Netflix is often panned for being too greenlight happy, approving shows that are C-rated at best, but its massive subscriber base and ingenious categorization method (e.g., critically acclaimed films, film noir, martial arts movies) allow the company to easily target demographics who will enjoy the “long tail” of its content. Unlike the networks and studios, Netflix doesn’t have to make sweeping gestures to draw in broad demographic groups. In fact, such a strategy would be antithetical to Netflix’s goal: They are people pleasers at their core and want every subscriber to feel like their streaming experience is personalized. It doesn’t matter if some of Netflix’s shows aren’t up to snuff, because there will always be a small group of subscribers they appeal to, making even the most deplorable cinematic desires feel welcomed.

Netflix’s Future and the Meaning of Disruption

What constitutes disruption in the modern film business? Does it look like Netflix’s earning five awards at the Golden Globes last month, the most for any studio or network? Or how about that time Netflix received 14 Primetime Emmy nominations for hit series House of Cards and Orange Is the New Black? Perhaps disruption is Netflix’s market cap value encroaching on Disney’s, forcing the storied studio to funnel billions of dollars into developing its own OTT service. In this context, disruption proves to be a debacle for those not facilitating it. It forces the once principal players into a corner, pressuring them to completely rethink the strategies that guided them toward success in the first place.

 

Since debuting its streaming service Watch Now in 2007, Netflix has drastically transformed the filmmaking industry, creating astonishing shareholder value, profoundly improving television quality, inventing the television bingeing phenomenon, pioneering the standard of personalized viewing through data, forever altering windows for theatrical films and rendering ratings essentially irrelevant. But Netflix still needs to tread carefully going forward. Heavyweights like Disney, Warner Media, Apple, Comcast and, perhaps its biggest threat, the like-minded Amazon are all gunning for the number one position. Netflix also makes very small profit margins, and its success will only continue if it reaches its projected 201 million subscriber goal by 2023. It is a risky go-big-or-go-home strategy, but in an entertainment industry where media companies are consolidating their resources and merging into these colossal corporations, Netflix can’t just swing for the fences.

 

Netflix has to try to buy the whole damn park.

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