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Netflix Ditches Theaters, Fuels Hollywood Creativity

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Netflix has no plans to transition its film releases to traditional theaters.

Company executives regard theatrical releases as an “outdated” practice, yet for over a decade, Netflix has attracted some of the most esteemed filmmakers in Hollywood to create exclusive content for its platform.

Recently, Netflix secured the directorial talents of Greta Gerwig after acquiring the rights to C.S. Lewis’ “The Chronicles of Narnia” series, signed Rian Johnson for two sequels to “Knives Out,” and became the platform for Kathryn Bigelow’s first film in almost a decade.

While these directors emphasize the significance of theatrical experiences, the majority of Netflix’s films are expected to have limited releases, insufficient for any significant theatrical run. Typically, Netflix titles are shown in select theaters only for a week, primarily to qualify for Academy Award nominations.

Notably, Gerwig’s adaptation of “Narnia” will feature an exclusive two-week IMAX release globally, starting on Thanksgiving Day in 2026—an unprecedented move in the industry.

Insiders within Hollywood, who spoke to Finance Newso on the condition of anonymity, stated that Netflix has successfully lured filmmakers away from conventional theatrical practices by offering attractive contracts, creative freedom, and access to an audience of over 300 million subscribers. The platform has also become a refuge for filmmakers whose projects may not see the light of day due to high budgets or unconventional genres.

“Netflix provides filmmakers with a compelling blend of substantial financial backing and creative freedom,” commented Paul Dergarabedian, senior media analyst at Comscore. “This has drawn some of the top names in the industry, both in front and behind the camera, particularly since most of them built their careers in traditional movie theaters.”

Rethinking theatrical releases

For as long as Netflix has been at the forefront of changing Hollywood’s landscape, analysts and industry advocates have been advocating for a return to a more conventional theatrical model. Periodically, studies emerge suggesting that audiences are more likely to watch films that are released in theaters.

According to Robert Fishman, an analyst at MoffettNathanson: “For many other traditional media companies, there has been a noticeable swing back toward the idea that theatrical releases enhance a film’s value.”

Although Netflix executives have acknowledged the financial opportunities missed by avoiding a standard theatrical approach, co-CEO Ted Sarandos remains steadfast in maintaining the company’s current strategy regarding box-office releases.

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According to industry analyst David Poland, “For Netflix, embracing a conventional theatrical strategy could complicate their model and lead to potential financial losses.”

Sarandos has consistently emphasized that Netflix’s core mission is to deliver content directly to its streaming subscribers, prioritizing immediate access over extended theatrical releases.

The platform has also benefited from its partnership with Sony, which grants Netflix exclusive U.S. streaming rights to the studio’s films after their theater runs, allowing Netflix to offer new content without the accompanying risks of a box office.

Moreover, industry experts suggest that bypassing theaters can lead to substantial marketing savings. Normally, a film’s marketing budget can equal half of its production budget.

For instance, the Russo Brothers’ “The Electric State,” which reportedly had a production cost of $320 million, could have seen marketing expenses soar to $160 million if released in theaters. This represents a nearly $500 million upfront investment before any box office earnings, from which studios would then divide ticket sales with theaters.

Notably, the film was initially set to be produced under Universal Studios but transitioned to Netflix when Universal executives expressed concerns over its hefty budget, insiders claimed to Finance Newso.

For Netflix, a film’s success hinges on viewership metrics that differ significantly from traditional box-office revenue. “The Electric State” attracted 25.2 million viewers within its first three days on the platform, as reported by Netflix’s Tudum site. To put that in perspective, this figure accounts for about one-third of the viewership that Netflix’s “Red Notice” achieved during its debut in 2021, making “Red Notice” the platform’s top-performing film to date with over 230.9 million views.

Netflix’s appeal to filmmakers

Directors and other creatives find it increasingly difficult to overlook the vast audience Netflix offers, as reported by insiders speaking to Finance Newso. This allure has played a significant role in the platform’s ability to attract high-profile directors, writers, and producers over the past decade.

Additionally, Netflix has shown greater flexibility in terms of budget. “The Electric State” is just one example, with Scorsese’s “The Irishman” similarly facing studio rejections due to financial concerns until Netflix offered to take on the project. The film ultimately received 10 Academy Award nominations, though it did not win any.

“Netflix’s commitment to securing awards and nominations has allowed it to fund and collaborate with some of the world’s most accomplished filmmakers,” noted Poland. “The existence of these films is a testament to the platform’s influence.”

The streamer has consistently maintained at least one contender for the Academy Award for Best Picture since 2019.

Moreover, Netflix has not shied away from investing heavily to attract top talent, signing numerous lucrative first-look deals that grant it exclusive rights to evaluate and potentially acquire new projects before they reach other producers. This strategy includes high-profile creators spanning both film and television, such as Tyler Perry, Antoine Fuqua, Shonda Rhimes, and Jennifer Lopez.

In a prime example, Netflix inked a two-film contract with Johnson for sequels to “Knives Out,” reportedly amounting to over $400 million.

“It’s hard for any creative individual to reject the financial backing necessary to bring their vision to life. Even though they ideally wish for their films to be seen in theaters, they ultimately recognize that having their work realized on a major streaming platform is a fair trade-off,” remarked Dergarabedian.

Market analysts display confidence in Netflix’s approach to filmmaking. With stock prices hovering around $1,300 per share, the company’s value has surged by 45% since January and over 90% in the past year.

Netflix is projected to invest approximately $18 billion in content this year, though the company does not specify the allocation between film and television. Estimates suggest that its total revenue for 2025 could land between $43.5 billion and $44.5 billion.

Some insiders predict that such substantial investments may lead to further price increases for consumers. Fishman noted that Netflix will likely continue to assess its value proposition to decide if price hikes will be necessary.

Should Netflix persist in producing content featuring top-tier creators, analysts anticipate adjustments to pricing strategies in the future.

Disclosure: Comcast is the parent company of NBCUniversal and Finance Newso.

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