The Netflix Effect: Theaters Look for New Ways to Lure Moviegoers
Business + Economy

The Netflix Effect: Theaters Look for New Ways to Lure Moviegoers

Warner Bros

In a double strike on the traditional movie theater experience, Netflix last week announced that it would sign an exclusive four-picture deal with bona fide comedian Adam Sandler, and that it would be releasing an IMAX sequel to the Oscar winning Crouching Tiger, Hidden Dragon simultaneously in select theaters and on its popular streaming service.

The window of exclusivity that theaters have to screen new releases before they become available digitally has been a key way for theaters to lure moviegoers. Netflix’s plan was seen as a challenge to that system. The nation’s largest theater chains, AMC, Cinemark and Regal struck back the best they could, by refusing to screen the Crouching Tiger sequel, throwing a wrench into the master plan of Netflix CEO Reed Hastings.

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The move might annoy Hastings and undercut Netflix’s first foray into cinematic releases, but the days of Hollywood and theater owners reliably counting on filling their coffers from separate releases for theaters, home video, television and online streaming are clearly winding down. Netflix just sped up the process.

The Netflix Value Proposition
Consider: The average movie price in the U.S. was slightly below $8 over the first three months of the year (down 5 percent from last year). For a family of four, just getting in the theater doors costs more than $30. Then there is the concession stand (where the theater itself makes its money, since ticket sales mostly go to the studios). The average cost of a large popcorn is $8.15, a large soda is $6.31 cents, and a pack of candy is $4.25. Even assuming the kids get smaller sodas, that’s still another $35 or so.  That’s nearly $70 for one movie. A monthly trip to the theater would come to approximately $850 a year.  If the family goes twice a month (hardly out of the question), that’s an annual budget bite of $1,700.

Now consider that with the declining cost of flat-screen TVs, a family can set up a totally decent home entertainment center for around $500 to $600. Even throwing in a solid sound system and gaming device can be done for less than $1,000 total. And that’s ignoring the fact that the television would not only act as a home theater replacement, but also as an arcade, a gym, and a device to watch news, sports, weather, sitcoms, mysteries, and — you know, TV shows. Add your own bag of popcorn (that can make many servings) at about $3 and a 2-liter bottle of soda at roughly $2. 

Even at a conservative estimate, that home entertainment equipment would last for 5 years and potentially provide entertainment every night of the week (not just a few hours on Saturday).  Throw in $100 a year Netflix subscription and the marginal cost of electricity and you are still talking about roughly $300 a year to entertain your family at home on a basically limitless basis.

Related: Netflix Isn’t Joking Around with Its Adam Sandler Deal

Cinephiles will obviously argue that it is the intangibles that make the theater experience different, and point to the sense of community that comes with seeing a film in a social setting. But this community is a double-edged sword, with buzzing cellphones, flashing lights from text messages, chatty viewers, crying babies, small bladders that lead to blocked views and stepped-on feet, teenagers in their many, many annoying forms, all detracting from the magic of cinema. For every eruption of laughter, gasp of horror, round of applause, or moment of genuine hushed transcendence there are at least five reasons to run from the theater screaming in annoyance.

By contrast, the home experience is controlled by the family (or at least the family member with the remote). Sound can be adjusted, motion can be paused for bathroom breaks and refills, alcoholic drinks can be enjoyed, cigarettes (or other things, in Colorado) can be smoked, clothing can be optional, and the only annoying people you have to deal with are the ones you are related to by birth, marriage or friendship. You can look up who that actress is that you just can’t place without the fear that some cranky film goer will yell at you to “turn that damn thing off!” If you are a theater talker…well, first, you are a bad person, but you can do it in your own home without annoying anyone who isn’t already used to your chatter.

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So what can cinemas do to fight the obvious appeal of ever-improving home theaters? Well, it’s hardly a new battle for movie houses. Theaters have been threatened by the television since its first reached U.S. living rooms in the late forties. The widespread use of color film, the introduction of wide images, the limited restrictions on sex, violence and profanity were all attempts to offer something that television couldn’t. But TV offers all of those things now. The last “savior” of the cinema, 3-D, has largely landed with a thud, despite the one-off success of James Cameron’s Avatar.

As such, theater owners are constantly looking to get people to come to their establishments, in ways both desperate and creative. In an interview last year, George Lucas predicted (no, no, stay with me) that as the reasons for seeing small films in the theater becomes less and less obvious, that “a trip to the movies” would become more like going to a concert or play — a luxury experience with high prices and an expectation that you will be blown away by the experience.

Increasingly, Lucas’s words look more and more prescient.

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Photo Essay by Marine Cole

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