Tuesday, 28 October 2014

Are streaming services set to become major film studios?

Back in 2000, former rental giants Blockbuster passed up the chance to buy a fledgling movie subscription concern based in small-town California for $50 million. It was a catastrophic error. These days Blockbuster barely exists, while Netflix is a global on-demand viewing platform with north of 50 million subscribers. To put it another way, that's one customer for every dollar Blockbuster didn't spend. Riding the quickly shifting industry wave from postal DVD rentals to online streaming, Netflix has now moved into production, reviving Arrested Development, creating Orange Is The New Black, Marco Polo and the Wachowskis' Sense8, reimagining the BBC's House of Cards, and entering into business with Marvel for four interconnected series centred on Marvel's Iron Fist, Luke Cage, Jessica Jones and Daredevil.

"We're now at the scale where we can economically create original content, and we'll continue to grow our slate," asserts Netflix's Head of Corporate Communications Cliff Edwards. His bullishness is understandable. Netflix has made the transition to fully fledged production house almost as quickly as Paramount or Universal did back in 1912. "With each original, we learn more about what our members want [and] about how to produce and promote effectively," adds the PR chief.

But Netflix is not the only game in town. HBO – owned by Time Warner and producer/provider of hugely popular series like Game Of Thrones and True Detective – currently works on a similar subscriber only basis. It also boasts an on-demand service, HBO Go, although HBO adds programming according to weekly broadcast schedules rather than en masse like Netflix. This is helping keep subscription takings high and enabling the cable network to augment its already enviable library with new shows like The Leftovers and Olive Kitteridge.

- HBO's True Detective

Amazon, meanwhile, is flirting with producing multiple pilot episodes for streaming online, which will be picked up (or not) according to audience reaction. All the preview screenings in the world couldn't deliver major Hollywood studios this kind of pre-testing. Hulu, meanwhile, offers American viewers a mix of its own original content (Seth Meyers' The Awesomes and BBC co-production The Wrong Mans included) and access to programmes that have already been tried and tested overseas. Britain's Rev and Line Of Duty sit alongside Israel's Prisoners Of War (the inspiration for Homeland) in its library. Also crowding the party are web giants Yahoo, which recently unveiled plans for four original shows, and Microsoft, which has plans to make programmes to show on Xbox platforms and via mobile devices.

There's no question who the bolter in the pack is, though. "Netflix is nearing device ubiquity", says Edwards, "meaning that if it's got a screen and can connect to the internet you should be able to watch Netflix on it. In terms of technology development, Netflix is based in California's Silicon Valley instead of Hollywood for a reason. At heart, it's a company teeming with engineers who are looking for ways to innovate."

So what does that innovation look like and where will the future lead? Perhaps surprisingly, given the ubiquity of handheld, mobile and tablet devices, the majority of the two billion hours of Netflix content streamed globally every month is still delivered via traditional TV sets, albeit through apps on internet connected Smart TVs, DVD and Blu-ray players and gaming consoles. But can this kind of on-demand model eventually replace broadcast television altogether? "It's a bit of an apple and oranges comparison," cautions Edwards. "Nearly every household in the UK has a television, and the broadcast industry has developed over decades to get to the size it is today." Online streaming providers are still relatively new, but their reach is growing and, with it, their budgets and ambition.

Netflix's recent European expansion is another big step from an enterprise that began in a California garage 17 years ago. Recently Netflix took on pay TV giants Canal+ and Sky Deutschland by launching on their home soil of France and Germany respectively. Both have their own SVOD (subscription video on demand) services; both have already slashed subscription prices as a countermeasure.

- Kevin Spacey and Robin Wright in Netflix's House Of Cards.

If traditional broadcasters' palms are sweaty, the big movie studios might soon share the sensation. September also sees Netflix launch its first theatrically released feature – a documentary looking at the equally groundbreaking topic of 3D printing called Print The Legend – and it could be the start of the network's foray into filmmaking. Movies are certainly on the agenda, although in what size and shape, Netflix has yet to decide. "On the movie side, I'd keep my mind wide open to what those films would be and what they would look like," cautions chief content officer Ted Sarandos. But the appeal of film production is obvious, especially when you consider the licensing fees – $1.355 billion in the first quarter of 2013 alone – that Netflix pays film studios to host their movies.

Netflix is probably right to approach feature filmmaking with a degree of caution. Others have tried and failed to elbow in on the big studios' turf in the past, although few have had its reach, clout or rapport with established directors. That talent drain to television – David Fincher (The Social Network) and Steven Soderbergh (Contagion) have led the charge – should also concern Hollywood. When some of your most distinctive voices are taking their talents elsewhere, there may be a problem with the medium. This doesn't mean Fincher will be making straight-to-television films, but the stigma has already disappeared sufficiently for it to be a viable option. "There are movies I'd like to make that cost between $15 million and $30 million," he recently told Empire. "If Netflix said, 'We'd love to see what you'd do with this...', I'd devise them for home theatre." And if those directors build relationships with Netflix, HBO or Amazon and then get a great idea for a cinema feature, why wouldn't they take these streaming giants back to cinema with them?

And given that the studios sometimes use a cinema release as a sort of loss-leader to push a film into the public's consciousness, relying on home entertainment and ancillary rights over the long term to push them into profit, it might begin to seem economically advantageous for streaming services to follow that example and launch their biggest and riskiest projects in the cinema. That goes even if they want to launch a TV show – ABC launched the very expensive Agents Of S.H.I.E.L.D. off the back of parent company Walt Disney Pictures' huge cinema success with the Marvel Cinematic Universe, so if Amazon or Netflix wanted to launch a big, ambitious science fiction series or fantasy epic, it might pay to lure in those new customers with a worldwide cinema launch of the first instalment. To date, the rise of these streaming services has been meteoric and seem unlikely to limit their ambitions any time soon.

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