Why Netflix has a movie problem – and time is not on its side

Netflix is in the midst of a fair few troubles – and it also risks losing the movie audience that’s been crucial to its growth: a few thoughts.

Appreciating that there’s already been a fair amount of ink and space given over to the challenges facing Netflix now that its subscriber bubble appears to be bursting, there’s a significant test that it faces on top of its other troubles to keep film fans invested in its service.

Why? Well, against a well-reported backdrop of subscriber numbers falling, of price increases, of the cancellation of many of its TV shows after one or two seasons, there’s the increasing feeling that Netflix is not a particularly great home for movie lovers any more.

Consider the evidence. Head over to the Netflix menu page now, and try and find – outside of the Netflix Originals (coming to them) – more than a dozen films you’ve not seen on there that you’d consider adding to your watchlist. A year ago, it was much easier, and in fairness to Netflix, many of us devoured its catalogue during assorted lockdowns.

Now though, it faces a race against time to make lots of its own films, whilst hanging onto the catalogue of titles it has access to already. As it turns out, just one of those challenges is tough. Netflix is now facing them both at the time time, and the clock is ticking.

What Netflix thus has to do – and it realised this fairly early – is build a compelling catalogue of films of its own. The problem it faces in doing so is that pretty much everyone else has a huge head start.

Catalogue is a major issue for streamers, and where already it feels Netflix is beginning to suffer against its growing competition.

Just look at the opposition. Disney of course its Disney, a company that’s been making films for the best part of a century and with a film library to match. Universal, with its Peacock service, can dig into over 100 years of moviemaking. Paramount and Warner Bros the same. The streaming company that couldn’t match that went off and bought MGM, with Amazon stumping up billions to ensure a huge catalogue of films, and a bunch of franchises to develop going forward.

The sands have shifted under the feet of Netflix in much the same way it was doing so under those of traditional studios. Six months ago, few would have predicted that such a radical game-changer as Netflix would be looking at headlines about subscriber loss, share price falls, cutbacks and business struggles. And yet here we are.

Netflix was for a long time able to dig into those sizeable catalogues of movie studios who didn’t have a streaming outlet for them. For a studio it was the metaphorical no brainer. Thousands of films that had stopped selling on DVD were duly licenced primarily to Netflix, and extra cash rolled into the coffers.

Thing is, Netflix was making too much cash, and movie distribution was of course changing. It’s said that the reason Rupert Murdoch got out of the entertainment business and sold Fox to Disney was he saw the way things were going, and realised he was behind the curve. Better to cash out with some $70bn or so in the bank than watch things decline.

Other studios were more nimble and wanted the revenues that Netflix was getting for selling their material. Disney of course restructured its entire business around a pivot to streaming. Universal, Paramount and Warner Bros all invested in their own services, that they’re rolling out around the world. Sony is the last studio standing with no plans for a service, and Netflix has been quick to make deals with it (the pair are sharing the upcoming Matilda film, for instance). But Sony is in a different position of strength (although presumably it’d rather have a platform making billions): every other streaming platform is a buyer for its movies, and Netflix will need to dig deep.

It’s not a sustainable long-term strategy. Had Netflix bought MGM, for instance, its future would be a bit easier. Yet Netflix couldn’t. Firstly, its business is built on debt, that it’s going to need to start paying off. Secondly, its competition is cash-rich. Amazon and Apple sit on reserves of money, and could comfortably outspend Netflix on a major acquisition. In this case, that’s just what Amazon did. Every film catalogue that Netflix might be interested in buying, it’s going to face stiff competition from others.

Incidentally, Sky Cinema is facing a similar challenge. It has long term deals in place with Hollywood studios, but come the end of 2025, its deal with Warner Bros and HBO ends. At that point, Warner Bros’ HBO Max service will launch in the UK, and Sky will have a lot of gaps to plug. You can already see the substantive investment it’s putting into its own productions. Netflix is doing the same – but even that strategy isn’t quite going to plan.

The longer term sustainability of Netflix will surely come down to what it makes itself. Notwithstanding its desire to quickly cancel things when the algorithms don’t like them, its television side has been successful. Filmwise? Patchy.

Netflix films are falling into – documentaries aside (that’s for another article) – three main categories.

There’s Oscar-bait firstly, and this is where I think Netflix has excelled. As much as I think it’s sport sometimes to rain fire on huge companies, for whatever reason it’s done it, Netflix has backed films that plainly otherwise wouldn’t have got made. The high profile one was Martin Scorsese’s wildly expensive The Irishman (ironically, his new project – Killers Of The Flower Moon – proved too expensive even for Netflix, and went to Apple instead), but look too at films from Alfonso Cuaron, Jane Campion and David Fincher. Movies that may not have snagged the Best Picture Oscar Netflix clearly craves, but nonetheless exist because of it.

Then there’s the blockbusters, which work on similar ideas. Get big commercial filmmakers in – Michael Bay, Dwayne Johnson, Ryan Reynolds, Adam Sandler, the Russo brothers – and let them spend. Sure, the films have been variable, but Netflix has managed to create ‘event’ movies out of some of those, even persuading the odd cinema to show them.

It’s the middle bit that’s the problem. On the one hand, Netflix’s business model has resurrected the mid-budget film that was ever-present in the 1990s and early 2000s. It’s opened up a raft of movies that, again, otherwise would struggle to find a way through. Yet the problem is that so many of them are, well, forgettable. In many cases, the quality control feels over the shop. It was in the early 1990s that Disney had a strategy of aiming for a new film in cinemas roughly every week. That stumbled, and the studio pivoted. Too many films came and went, and eventually it realised its future was fewer, smarter bets.

Netflix doesn’t really have that luxury though. It needs its own films, the kind you can’t find anywhere else. It’s thus making a lot of them, but precious few are breaking through. Even some of those big blockbusters struggle. For every Don’t Look Up – the rare beast that matches critical acclaim with blockbuster reach – there’s something like Red Notice, that finds broad reach but, following its release, hardly a queue of people talking about it. Contrast that with one of its earlier hits, the Sandra Bullock-headlined Bird Box. When that arrived, it not only got lots of eyeballs, it got people talking. Exactly the kind of hit Netflix needed. With Red Notice, what I’d suggest you got was three movie stars having more fun than the audience.

In its mid-range films, I’ll go further: the quality control is all over the place. As important as it is for Netflix to quickly assemble a library of movies, they’ve still got to be good. As it stands, at the time of writing it’s already released 60 movies around the world in 2022. Some of those are specific to certain countries, but again: how many can you name? How many have stuck with you? The investment across the world in production is a real boon, but Netflix’s top tier package in the UK is now costing £15.99 a month. If you’re in it for the films, not the TV, then that’s looking quite stretched, not least when niche services such as Mubi or BFI Player seem to offer a broader range of films for less.

One aside here: during the lockdowns, studios were happy to sell films to Netflix. Heck, Sony sold arguably the best blockbuster of 2021 – The Mitchells Vs The Machines – to the service. Now? They don’t need to. Cinemas are open, and mitigating the loss of a theatrical release isn’t as important. There may be a few sales along the way, but far fewer.

It keeps returning us effectively to the same point: Netflix needs to be in control of its own pipeline.

At the moment, it is. Yet it’s also facing a perfect storm. It’s losing access to third party film catalogues, it’s in a race against time to build a collection of films to rival its strengthening competitors, and it’s trying to stop the loss of subscribers whilst maintaining price increases.

Something has to give there. At the moment? It feels like it’s the range of interesting movies – and others are on standby to mop up the business. Perhaps for less than £15.99 a month too…

Certain images: BigStock

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