With almost $10 billion in cash on hand and a voracious appetite for content, Netflix is positioned to inject fresh life into proven genres and rescue flailing productions. The streamer may not have as much gargantuan spending power as Amazon or Apple, but its business interests are singularly focused on production and distribution.
Netflix both originates its own material and licenses third-party content as an aggregator. In a recent conference call with investors, co-CEO Ted Sarandos declared intent to bolster offerings from other film studios. He claims the approach is a “more natural state of the business.” One explanation is cost control, another angle is playing wide offense against other streaming companies. The strategic decision is empowered by that war chest of cash.
Netflix has good reasons to go shopping for fresh material. The entertainment industry is in turmoil because of the ascent of the attention economy. In a just-published report, the trade magazine Variety lambasts conventional players for not embracing the role of video games, podcasts, and short-form videos. Criticism is easy with hindsight. Still, widespread upheaval means volumes of entertainment assets are either undervalued or underappreciated, while legacy studios scramble to reconfigure themselves. Independent production houses may be high on that retrograde list. Netflix probably does not want to own them, but it certainly wants first pass at their intellectual property.
Costner Becomes Case Study
The A-list actor Kevin Costner may be especially fond of Netflix right now. The streaming platform released the first installment of his troubled production Horizon: An American Epic at year-end. The results were surprisingly favorable for a movie that earned abysmal reviews at the box office. Netflix claims that the western landed in its top ten by viewing hours during the first week of January. The likely explanation is the way Netflix uses artificial intelligence to serve movie recommendations.
Costner apparently spent $38 million of his own money to produce two of four installments of this sprawling drama set against the Civil War. The movie bombed at the US box office when it opened at the end of June. In fact, the results were so poor that few, if any, distributors were interested in the second installment, which was pulled altogether from theatrical release. A sidenote: Chapter two earned a standing ovation at the Venice Film Festival in September.
The point is that Netflix has enough proof of success that it may be willing to buy the entire four-part series from Costner, filling the deep financial hole he created for himself with this passion project and underwriting its completion. One industry insider notes, “It’s a big check to write, but if the first movie continues to perform well for Netflix’s viewers, the expectation around town and even within Kevin’s Hollywood circle is that Netflix will eventually step up and buy the rights to the whole series and take Kevin out of debt.”
Viewing Technologies Expand Audience
Independent production houses can be forgiven for having an urgent need to close distribution deals with Netflix. Consider this point: There are only 2,000 or so movie theaters across America at this time, with cinematic arrangements often generating murky results, especially in the post-pandemic years. Netflix may have as many as 70 million domestic subscribers. Such a generous account base opens opportunities for niche movie themes that may not otherwise find a voice in the market.
Two films created beyond the major studios that have found an audience on Netflix include Kneecap and Aftersun. Here is a closer look:
Kneecap > Produced by Belfast-based Fine Point Films. this caustic biopic about an Irish hip-hop group was first lauded at the 2024 Sundance Festival, with recognition elsewhere throughout the year, including a top win at the British Independent Film Awards. Netflix has a licensing arrangement for this film with Sony Pictures Classic, which in turn owns the distribution rights in many global markets.
Aftersun > Produced by Los Angeles-based Pastel, this father-daughter film is savagely emotional. The movie dates to 2022, when it was a mere “indie underdog,” but quickly built momentum to receive an Academy Award nomination for its lead actor Paul Mescal. The popular media site Collider lists it among the top films of the 2020s. Similar to Kneecap, Netflix has a licensing arrangement in place with A24 Films.
There of course are many other examples. As is common across independent features, a Netflix agreement can help these movies soar in popularity. One reviewer claimed Kneecap “has all the energy of a real concert,“ while another wrote Aftersun “should be at the very top of your Netflix watchlist.”
The magic here is artificial intelligence. Netflix has long been known for its advanced machine-learning algorithms, but those models have evolved. The objective is extreme personalization through analyzing habits and preferences. One twist is that Netflix even uses artificial intelligence to choose the thumbnail that users see before selecting a movie. The company is largely transparent in these efforts. Many of its approaches are explained and debated online in a publicly-accessible research hub.
This Party Is Invitation Only
Screenwriters and filmmakers, however talented, may have a tough time crossing the Netflix moat on their own. The company does not accept direct submissions. Rather, it relies on referral sources such as directors and producers who are members of appropriate trade groups. If that sounds like a referral game, it is. The better approach for those looking for an access point may be a variant on inbound marketing: win a film-festival award or cast notable talent. The Netflix creative team will find you. ■
Our Vantage Point: For those mapping capital sources in Hollywood, Netflix is the essential starting point. Its revenue model generates perpetual volumes of cash to underwrite original material and distribute independent works. We expect to see a further tilt favoring third-party content.
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