Netflix Adds To Its Feature Film Distribution

Netflix is taking on more than just cable television distribution.  With their latest movie deal, Netflix wants to compete with movie chains as well.  The New York Times tells us that following their move to premiere its first feature film through The Weinstein Company, Netflix has signed a deal to distribute the next four of Adam Sandler's films through his Happy Madison production company.  "Netflix declined to comment on specific terms of the deal, but said the films would have the characteristics of theatrical releases, with similar-size budgets."

While recent films from Sandler have not been hugely profitable, he has a large following.  And his older films continue to delight audiences.  His reach seems to fit the market demo that Netflix wants to serve and Sandler's films tend to have a family enjoyment factor, like "Grown Ups" and "50 First Dates".  This arrangement between Netflix and Sandler looks to be a strong strategic fit.

HBO and other premium cable nets have been producing original features for a while.  Movie chains cannot afford to sit back as Netflix further disrupts their business model.  Today it may be one or two deals, but more will certainly be on their way.  Chains can compete by making the experience of going out to the movies that much more enjoyable.  Larger screens, better seating, improved refreshment offerings, etc.  And yet, at home viewing continues to improve as well.  And when cost is a factor, the home experience is a winner.  Movie chains must continue to adapt or face some extinction from alternative distribution offerings. 

Movie Chains Fight Back Netflix Plans

Congratulations to Netflix on the great PR they are getting.  For a move not expected to occur for 10 months, Netflix has caused an uproar in the movie industry with their latest move.  Their plan to offer a theatrical release of a film at the same time it plays on IMAX movie screens.  And movie theater owners are fighting mad. 

According to The New York Times, "Two major theater chains, Regal Cinemas and Cinemark, said Tuesday that they would not screen next year’s sequel to “Crouching Tiger, Hidden Dragon,” the first major motion picture that will make its debut simultaneously on Netflix and on a select number of Imax screens."  So their IMAX screens will not show the film.  Netflix probably doesn't care in the least.  Exclusivity only makes their distribution platform stronger. 

Still the question remains how this move affects the other partner, The Weinstein Company, who is producing this sequel.  How will this collaboration with Netflix play out in future releases for the film company?  Will Regal, Cinemark, and others decide to not screen another Weinstein film to show their displeasure toward the company?  Or will other film companies follow Weinstein and offer a similar distribution deal with Netflix?  We may just see this move as the start of a new distribution strategy.  Regardless, disruption is at work and Netflix awareness is growing.

Netflix Will Premiere Feature Films Too

Netflix has proven itself to be a disruptor.  Its announcement of a distribution agreement with The Weinstein Company changes the framework of the movie distribution business.  Walls are collapsing as we speak.  A film would normally go to the movie houses first then to premium cable, then basic.  Some bypass premium and some bypass basic cable and go to broadcast.  Netflix has decided to go to the top and bypass the movie screen for the home. 

Next August, Netflix will premiere the sequel to the Ang Lee film, "Crouching Tiger Hidden Dragon".  The film will play simultaneously on Netflix and on IMAX screens.  It is an interesting strategy and one that depends on consumers continuing to subscribe to Netflix and staying loyal to the service.  I wonder how else Netflix can monetize such a push into original theatrical content to continue to invest in more productions.  At the very least, it is another disruptive move that will put cable television on the defensive.   

SoftBank Interest in Dreamworks Animation

I have a pretty high regard for content and as much as I believe that content is king, I also know that acquiring content is not always the best move for some platforms.  Case in point is international telecommunication giant, Softbank, owner of Sprint.  While their move to acquire T-Mobile was thwarted, a merger that did seem to make sense, an acquisition of DreamWorks Animation does not.

DreamWorks Animation was once part of DreamWorks SKG before spinning out into its own animation business.  And while it has had some great theatrical animated hits like the Shrek and Madagascar series of films, it has most recently struggled.  A cash infusion would help DreamWorks Animation to develop more projects, but how it fits into the Softbank business is less clear.  Given their size and place in the mobile space, that would need a much larger bank of content to pursue an exclusive niche of content offerings.  That might not be appealing to customers who like to access their content across different platforms, some mobile, some not.  Sprint and Softbank would need to make a sizable investment in this infrastructure to grow.  Perhaps partnerships with Microsoft or Apple to make sizable inroads.

For now, we wait and see if Softbank acquires DreamWorks and what their largest motives will be.  At first glance, it may not be the right piece in entering the content business. 

Univision Next On The Block?

Financial Times has released a story that has been around a while.  They continue to speculate that the private equity investors of Univision are "considering their options after seven years of ownership. A sale or initial public offering could be on the cards."  Considering that shareholders of DIrecTv have approved a purchase by AT&T and that Fox may be interested in acquiring Scripps, such news is simply part of a much larger media merger environment. 

In my opinion, Univision could be a valuable addition to many portfolios. Their core audience represents a growing market base and ratings for Univision programming continue to reach the size of the big 4 broadcasters.  In fact, there are times that they get larger ratings than one of these other broadcasters on certain nights.  With that reach, it seems likely that synergies are easy to achieve. 

Fox May Have Starz In Its Eyes

According to The Los Angeles Times, 21st Century Fox may be interested in acquiring Starz.  "A full acquisition of the company could be valued at more than $3.2 billion based on its share price of $29.58 Tuesday. Fox could also decide to take an ownership stake instead of buying Starz outright."  Given consolidation on both the operator and programmer side, the results are to assure a large size to add to leverage in negotiations.  And content is king as access to it extends not only on cable platforms but on digital screens as well.

Starz continues to compete aggressively in the premium space, most notably against HBO and Showtime.  And like those two, their reliance on acquired content has been muted with a push toward original series.  That strategy has proved successful for all parties. 

Currently, Starz is a standalone company, once part of Liberty Media before being spun off into a separate stock.  Having a future parent like Fox could give it a much larger muscle in creating more content and securing greater fees for its channels.  And that is what makes content king. 

Digital Continues Its Growth Over Traditional Media

Advertising dollars are not limitless.  Total dollars spent may grow every year, but with choice comes more allocation.  And the more that new media demonstrates its value to reach and convey marketing messages, the more that dollars will move out of one pocket into another. 

According to ZenithOptimedia, digital will see an increase in media share while the big losers will be TV and print media.  The rapid increase in digital, due in part by its ability to target and segment by actual user as opposed to household, offers greater cost efficiency and effectiveness.  Its easy to see why. 

With a user having more than one digital device, a smartphone and a tablet, perhaps also a laptop or desktop, they are reachable on a one to one level.  Television may know that the household owns a TV set, or two or even three, but they don't know for sure who in the household is watching the show.  is it the father, the mother, the daughter or son, the grandparent, or combination of any or all.  And while television advertising can be effective in reaching an audience, a table can more accurately count the time spent, the click, the purchase, and more.  And the better the experience gets, the more dollars that will keep flowing to digital ad budgets. 

Consumers Want the iPhone

Apple's latest iPhone incarnation, the iPhone 6 and 6 Plus, seems to have pleased its fans.  Already 10 million iPhones have been purchased and the phone has been out less than a week.  Also good news for Apple fans looking for more functionality, the operating system for it and older phones and iPads has been upgraded to iOS 8.  And while the Apple Watch has been announced, it will not be ready for retail till sometime next year.

So with all these new phone orders, I would love to hear how the iTunes and App store are doing.  Were these new phones sold to existing Apple customers, or did Apple gain new subscribers of their devices and new customers to their store.  I see their store as a money tree with easy opportunities to get larger revenue gains from customers needing content to feed their devices.  More phones, more tablets, more apps and downloads.  Add to that the new Apple Pay business, and Apple will profit from every transaction it services.  It is a business that keeps on giving and giving to Apple. 

Will Yahoo Buy AOL?

The stock market is abuzz this morning with the IPO of Alibaba and as a shareholder of the now public company, Yahoo could have some extra cash available.   Given the enormous rise in value the ROI on the investment could be a major assist in making a play on a company like AOL.  And for Yahoo, potential synergies of such an acquisition or merger could help both grow. 

MarketWatch refers to a note out of BGC Partners seeing upside in such a combination.  In terms of original content and video content syndication, economies of scale can help to further improve profit margins.  At the same time, television is not going away and those same dollars could be used instead to acquire a cable network and extend its digital expertise across another media platform.  A CNN-Yahoo merger perhaps or MSNBC-Yahoo stake?  And if not a news network, a general entertainment company like AMC Networks or Scripps might be appealing too.  The upsides are tremendous and Yahoo is no doubt considering all its options.