Netflix Rian Johnson’s “Glass Onion” could have left hundreds of millions of dollars on the table by not making it into theaters.
The sequel to Johnson’s critically acclaimed “Knives Out” opened in nearly 700 theaters, the biggest release of any Netflix original to date, last Wednesday ahead of the Thanksgiving holiday weekend. “Glass Onion” leaves theaters Tuesday. It will arrive on Netflix on December 23.
The film received a rating of $13 million to $15 million A solid opening for a film that only released in a small number of theaters during its five-day stretch.
However, box office analysts say the number could have been even higher had Netflix opted for a traditional wide release in 2,000 to 4,000 theaters. “Glass Onion’s” truncated run prompted industry insiders to once again question the streamer’s theatrical release strategy. Netflix has backed away from its previous policies, which included the introduction of an ad-supported subscription option, leading many to wonder if the company should reconsider its opposition to the traditional Hollywood movie release model.
“With a traditional wide release, premium screen distribution and a full marketing campaign, I think ‘Class Onion’ could have earned at least $50 million to $60 million to lead the entire market,” said Shawn Robbins, chief analyst at BoxOffice.com.
Instead, Disney and Marvel Studios’ “Black Panther: Wakanda Forever” continued to lead the box office, with $45.9 million in domestic ticket sales over the regular three-day weekend and $64 million over the five-day holiday period.
Netflix declined to provide box office receipts for the film, breaking with standard practices other studios follow each weekend, leaving it unclear what happened to the “glass onion” in Friday, Saturday and Sunday ticket sales.
But in 2019, “Knives Out” grossed $312 million worldwide on a $40 million budget. The first film’s performance at the box office prompted questions as to why Netflix limited the release of “Glass Onion” to a limited number of theaters for one week. After all, the streamer reportedly spent $400 million on the rights to two sequels.
Box office analysts predict that if the film had been released worldwide, it would have generated more than $200 million in ticket sales by the end of its run.
“This is the kind of movie that adults want to see in theaters right now,” Robbins said. “The family element made ‘Knives Out’ a great Thanksgiving release for audiences across the country three years ago. Daniel Craig’s return as Benoit Blanc, Rian Johnson’s sharp storytelling and another round of positive reviews for ‘Glass Onion’ are shaping up well. Goodwill from the previous film This semi-sequel reaps some rewards, but it could have achieved more.”
Word of mouth was a big factor in the success of “Knives Out,” with ticket sales dropping each week after the film’s opening. Typically, weekend sales drop by 50% or more each week after movies open. But “Knives Out” ticket sales declines were consistently below 40% until Christmas, when sales jumped 50%, and then fell only 10% to 30% week-to-week through February.
This indicates that audiences are talking about the film, encouraging others to go out and see it, and making a strong hold on ticket sales.
“The Glass Onion” received a 93% “Fresh” rating from 238 reviews and a 92% audience score on Rotten Tomatoes.
Some executives at Netflix reportedly pressured co-CEO Ted Sarandos Earlier this year, they considered longer theatrical runs and wider releases for some films, but Sarandos rejected that idea. The company’s top executives have repeatedly said that streaming is the future of entertainment.
The company’s strategy in the past — with limited theatrical releases like Martin Scorsese’s “The Irishman” — has been to create buzz for subscribers before the film hits its service. That is the play here as well. The company said during last quarter’s earnings video.
“We’re in the business of entertaining our members with Netflix movies,” Sarandos said during the call.
He said Netflix has brought films to festivals and given limited runs in theaters because filmmakers requested them.
“There [are] All the time, all kinds of back-and-forth discussions, but there’s no doubt that we’re making our movies for our members, and we want them to watch them on Netflix,” he said.
Netflix declined to comment further.
While Sarandos and co-CEO Reed Hastings have been adamant that subscribers don’t want Netflix content in theaters, some Wall Street analysts think that’s not the case.
“Subscribers don’t care,” said Wedbush analyst Michael Bacher. “Talent, on the other hand, cares more. … Talent needs it to help negotiate future contracts, and thrives on the prestige of awards nominations.”
“Netflix isn’t doing this for the money,” he added. “They did it because of talent pressure.”
For others, like streaming expert Dan Rayburn, Netflix’s cross-platform promotion of putting “The Glass Onion” in theaters for a week to tease its release on the streamer a month later “makes a lot of sense.”
The streaming company may have to spend more on marketing to promote the film over time. Additionally, Netflix’s business model relies on new movies and TV shows to reduce subscriber churn and attract new viewers to its platform. The fact that “Class Onion” drew audiences to theaters is a sign for Netflix that it will do well once it debuts on the streaming service.
Still, it’s hard for investors to see money left on the table — especially when Netflix’s subscriber base is slowing and it’s spending heavily on content.
In recent years, the streamer has spent heavily on flashy, blockbuster-style action movies like “The Gray Man” and “Red Notice,” which cost the company $200 million each. Movies are the first steps in bidding to entice event-level franchises. But they’re expensive, and it’s unclear how positive they’ll be for Netflix’s bottom line.
Unlike competing studios Universal And Disney, Netflix doesn’t have a wide range of resources to generate revenue. Its only option, until recently, was to recoup its costs through subscription growth. The company hopes its ad tier will help generate more revenue to subsidize the $17 billion in annual spending on content.
Box office analysts and Wall Street view theatrical releases as an effective way for Netflix to market its content and drive revenue growth.
“We hope that ‘Knives Out 3’ will be an opportunity to further build on this watershed moment of collaboration between Netflix and theatrical exhibitors,” said Robbins. “It’s going to be a win-win for the entire industry.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBC Universal is owned by Rotten Tomatoes.