In an arrangement that could have a significant impact on traditional theatrical release windows, Netflix (NASDAQ: NFLX) has signed on to release on SVOD the follow-up to filmmaker Ang Lee's Oscar-winning global box office smash, Crouching Tiger, Hidden Dragon. This release, which will require no extra payment from Netflix subscribers, will occur concurrently with the global theatrical premiere of the sequel by big-screen exhibition chain IMAX.
Crouching Tiger, Hidden Dragon: The Green Legend is slated to be released on Netflix and in IMAX on Aug. 28, 2015.
The deal with IMAX and studio The Weinstein Company extends Netflix's disruptive reach beyond pay-TV and broadcast and into the theatrical distribution realm, where release onto home entertainment formats has traditionally been "windowed" to follow theatrical premiere of major films. Studio executives have long feared that collapsing these windows will result in cataclysmic revenue declines.
"What I am hoping is that it will be a proof point that the sky doesn't fall," said Ted Sarandos, chief content officer at Netflix, to The New York Times. "These are two different experiences, like going to a football game and watching a football game on TV."
According to the Motion Picture Association of America, global theatrical revenue grew 4 percent in 2013 to an all-time high of nearly $36 billion. However, that growth is being driven primarily by emerging territories like China and Russia. Box office was up 1 percent in North America to $10.8 billion, but that was due mainly to a 2 percent rise in ticket prices--domestic movie theater attendance has been declining for years.
"We fundamentally believe that the only way to attack the windowing system--that is the centerpiece of the business model of the movie industry versus what consumers want--requires an outsider," said Rich Greenfield, a media analyst with BTIG Research, to the Times. "Netflix already changed the TV business in a very, very significant way. The movie business is teed up next."
The mystical, martial-arts-themed Crouching Tiger, Hidden Dragon grossed $213.5 million worldwide, and $128 million in the U.S. and Canada. It also won four Academy Awards, including Best Picture.
All of that, however, occurred in 2000-2001, a millennia ago in the high-risk movie business. Having a distributor like Netflix deliver revenue certainty in the North American market will allow the Weinstein Company to aggressively pursue the Chinese theatrical market, where filmmaker Ang Lee and exhibitor IMAX both have proven track records.
"We are particularly hopeful it will play in our highly successful China market," said Greg Foster, senior executive VP IMAX Corp. and CEO of IMAX Entertainment. In territories where we simultaneously release with Netflix, we are excited to offer consumers the option of deciding how, when and where they want to view the film, and exhibitors the opportunity to participate in this alternative form of content in a new and innovative way."
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