What Netflix’s $200M bet on The Gray Man says about the future of the streamer’s film franchise

Netflix desperately needs a hit movie franchise, and it’s obvious why they’d turn to directors Anthony and Joe Russo (“Avengers: Endgame”) to find it, with “The Gray Man” set for a weeklong The cinema release opened this weekend before going to streams on Friday.

But a franchise hit might not be all Netflix needs to jump-start its fortunes, and with a budget in excess of $200 million, The Gray Man needs a lot to show that Netflix’s strategy as a… The film studio is right track.

The Russo brothers always envisioned Mark Greaney’s 11 Gray Man books as a long-term action franchise long before the project ended up on Netflix. However, analysts and pundits speaking to TheWrap questioned whether big-budget tentpole sequels actually result in significant subscriber growth and whether the huge production costs make financial sense without a broad theatrical strategy coupled with streaming.

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I think their hope is that eventually they will go gold,” Bruce Nash, an analyst at The Numbers and Nash Information Services, told TheWrap. “Netflix’s biggest weakness compared to Disney+ and HBO Max is that they don’t have exclusive rights to any major movie franchises, so I think it makes sense that they continue trying to bridge that gap.”

“What impression does it give to the people at Netflix as to what’s going to happen next? Is it more of a direct to video streamer where you have a high output of lower quality titles? Or is it a service where they can see the original intellectual property being debuted,” countered Paul Erickson, a senior analyst at Parks Associates. “I think it’s the latter. It will focus on fewer titles but higher quality IP. And that’s no stranger to the industry, because we’re already seeing that with HBO Max.”

But finding this franchise is a struggle. In the fourth quarter of 2021, Dwayne Johnson’s Red Notice, which also grossed over $200 million, quickly became Netflix’s most-watched original film in its history. But the viewing figures for that film, and the combination of its second-biggest movie, Don’t Look Up, and the ongoing Squid Game buzz weren’t enough to help Netflix meet subscriber expectations for the quarter.

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An expert from a production and financing firm noted that Netflix has proven willing to take a risk on big-budget, non-IP based films that even other studios wouldn’t do. They didn’t doubt Netflix’s willingness to spend money, but said Netflix’s mandates change frequently.

Netflix declined to comment on the story, but the streamer’s film executive Scott Stuber gave an overview of his strategy when interviewed at TheWrap’s Grill conference:

“I came here with the realization that I was starting from the bottom, that we’re in last place, which means in the film industry we have to build a film studio and prove ourselves… We don’t have a library, we don’t have IP, what are we going to do do we do to define ourselves?” Stuber told TheWrap last fall. “It has always been a long-term plan for me. How are we going to get to where everyone is going to say, ‘This is the best movie studio in the world, at some point in the next five years?’ And that’s what we’re trying to do.”

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Jeff Bock, senior media analyst at Exhibitor Relations, said it’s difficult to really gauge the success of any of these films or their high spending without using box office as a comparison.

In the case of The Gray Man, the film opened on Friday, just a week before its streaming debut, in more than 1,500 theaters in 25 countries, including about 450 in the US and Canada in over 120 markets, primarily in multiple Cinemark locations as well as other theater chains. Netflix doesn’t report box office numbers, but Deadline reported that “The Gray Man” grossed less than $200,000 in its first weekend domestically.

Compare that to the theatrical release of “Red Notice,” which hit about 750 screens domestically last fall and reportedly grossed between $1.25 and $1.5 million when it opened, with Cinemark eventually announcing that it was the top-grossing Netflix film ever played in its theaters.

“They haven’t made a lot of money for Netflix, but they’ve filled the theaters they’ve played in, and I think it’s a viable strategy for Netflix to spread awareness about their films and potentially make some money from them.” alternative source,” Nash said. “The point of contention will always be the size of the cinema window, especially for streamers like Netflix that have such a large subscriber base. A week of theatrical exclusivity wouldn’t be enough in my opinion, but I envision ‘Knives Out 2’ being in theaters over Thanksgiving, for example, and debuting on Netflix on Christmas Eve.”

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Netflix has two Red Notice sequels in development starring Johnson, Gal Gadot and Ryan Reynolds, all of which are expected, but sequels to some of Netflix’s other biggest hits like Bright and 6 Underground have yet to come out . Instead, Netflix is ​​only now working on sequels to some of its mid-budget hits, including The Old Guard 2, Enola Holmes 2, and Extraction 2, also by the Russo brothers. AGBO banner. And it was successful with its low-budget teen films like To All the Boys, The Kissing Booth, and The Princess Switch, among others.

But despite some massive numbers — “Red Notice” clocked up 364 million hours of views in its first 28 days on the service and stayed in its global top 10 list for 10 weeks — analysts argue those films don’t have the same shelf life or culture have cache of their many hit series.

“‘Cocomelon’ has more staying power than their big-budget popcorn pictures. Simply put – they are disposable. ‘Stranger Things’ is still her most successful homegrown, and it’s a series, not a movie,” said Bock. “Rarely is there a movie poster that can hold a candle to the simplest theatrical performance, let alone be hung in a dorm room. These slides not only appear to be disposable, they are. [They’re] not much in the sense of enduring attraction.”

Many analysts are watching if Netflix decides to streamline its theatrical approach for the Christmas release of Glass Onion, Rian Johnson’s follow-up to box office hit Knives Out, which Netflix has spent over $400 million on for both the rights to it and the rights purchase a second sequel. But there’s no indication such a shift will happen anytime soon, and each of Netflix’s theatrical strategies, whether it’s for a tentpole blockbuster or an award contender, remains bespoke.

Duffer Brothers Stranger Things Netflix

Stranger Things creators The Duffer Brothers (Photo by Emma McIntyre/Getty Images for Netflix)

The production and financing expert argued that Netflix needs to overpay for big event footage if it wants to attract talent and keep it in its wheelhouse. They added that it’s something that has made Netflix one of the best at giving creative freedom to talent. That approach only paid off this month when the Stranger Things creators, the Duffer brothers, signed a massive deal with Netflix to produce more shows, movies, and a Stranger Things spin-off.

“There has to be an endgame or the end result has to be putting so much money into a single movie, a movie has to pay off somehow,” said Paul Dergarabedian, senior media analyst at Comscore. “Those dividends could be the loyalty of filmmakers or creative talent, or the creation of goodwill with really important and well-known A-list talent in front of and behind the camera. Included in that calculus may not be the cold hard dollars and cents or traditional metrics.”

And that calculus could change when Netflix finally adopts an ad-based subscription model that can bring additional downstream revenue and offset the loss in box office. The expert believes that if this were to happen soon, it would allow them to continue supporting the manufacture of multiple big-budget tentpoles at their current pace.

However, analysts are divided on whether quality or quantity will make the biggest difference going forward.

“Think of how many low-budget horror movies they could have made for $200 million instead of a ‘The Gray Man’ that won’t even be a box office hit and will probably slip out of their own top 10 in a couple of weeks.” said Buck. “They’re trying to play the old Hollywood game within the confines of new Hollywood. Big-budget Hollywood movies go through a production pipeline that has been evolving for decades — there are no shortcuts, and Netflix is ​​finding that out firsthand.”

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While “Red Notice” and “The Gray Man” each got the green light at different times not just for Netflix but for the industry as a whole, Netflix has remained committed to not slowing down its content spending. Ted Sarandos told a JP Morgan and Chase analyst back in April that he expects content spending to be “about $18 billion” in 2022, up from the $17 billion spent in fiscal 2021 would.

“I think we need to keep investing in content, both in quality and variety of content. And we will continue to increase content spend compared to previous years,” said Sarandos.

With any luck, that would manifest itself in a Gray Man sequel, and Netflix is ​​still particularly committed to action movies, which are some of its top-grossing films. The Cannes streamer spent $50 million to acquire an Emily Blunt package called Pain Hustlers. And even as far as comedy goes, a source says Adam Sandler and Jennifer Aniston’s upcoming Murder Mystery 2 is poised to become the streamer’s most expensive comedy ever, with a budget to rival even some of its biggest tent poles .

“Netflix is ​​very bold in everything they do. If they’re losing a lot of subscribers or there’s still a lot of churn, they’re still going all out on a movie like The Gray Man. Going forward, it will be a matter of weighing the cost advantage,” added Dergarabedian. “It’s an expensive bet, but it can also be about relationships between filmmakers and talent that represent an investment or an annuity for Netflix in the future. And in a year everything can be different.”

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