Netflix's next act: feeding the service with its own movies

LOS ANGELES (Reuters) - As Hollywood studios unleash their summer blockbusters into theaters, Netflix Inc is trying to give film buffs a reason to stay home.

The streaming service is on track to release at least 86 Netflix original films in 2018, the company told Reuters. That exceeds the scheduled output of the top four traditional studios combined, as well as Netflix’s previous record of 61 films last year.

The aggressive strategy is aimed in part at addressing complaints that the service’s movie library is stale, an issue likely to be exacerbated by Walt Disney Co’s decision to stop supplying Netflix with new films for its U.S. customers in 2019. Buying movies from other studios also has become more expensive as streaming competition has intensified.

Having more of its own films is paying off, Netflix said. The company told Reuters that the 33 Netflix films released so far this year have been watched more than 300 million times by more than 80 million account holders worldwide. That’s an average audience of more than 9 million viewers per film.

Executives said the large number of movies is a response to the wide range of tastes they are trying to satisfy, and that data they collect on subscriber viewing habits provides insight that helps them choose movies.

Fifty-five percent of Netflix’s 125 million customers live outside the United States, and the company is counting on foreign markets to drive future growth.

“It’s art and science,” said Ian Bricke, who oversees Netflix’s independent film licensing and production. “Our global audience is more and more diverse. We are constantly learning and trying to get smarter.”

The company would not say how much it is spending on its film push, but it has budgeted $8 billion for programming in 2018, a figure that includes original TV series and films as well as content licensed from others.

The heavy spending will lead to negative free cash flow of up to $4 billion this year, the company has said. Investors have so far endorsed the strategy as Netflix subscriber rolls keep booming, sending shares soaring 70 percent this year to $326.13.

The Netflix film slate features everything from low-budget family fare to higher-brow independent dramas such as last year’s “Mudbound,” which earned four Oscar nominations, and an expensive mobster tale due out next year starring Robert De Niro and Al Pacino.

About one-third of Netflix viewership is for movies, company executives have said, while the rest is for television offerings, including the company’s highly acclaimed original series such as “House of Cards” and “Stranger Things.”

The critical reception for Netflix original films has been mixed, and some prominent directors balk at the idea of making movies that will be seen mainly on the small screen.

“My entire life has been spent trying to give audiences something in a large, large forum,” Steven Spielberg told Reuters. “I love the whole feeling of social interaction outside. You leave your house, you park your car, you go somewhere. Those are the kinds of audiences I like to talk to.”

Unlike traditional studios, which have increasingly focused resources on expensive action spectacles and sequels, Netflix is producing and acquiring movies across genres, from teen dramas and romantic comedies to horror flicks and sci-fi adventures.

At least 17 of this year’s Netflix films will be in languages other than English, including French, Arabic, Hungarian, Japanese and Russian. Eight or more will be in Spanish.

The company has promised more big-budget films like 2017’s Will Smith action flick “Bright,” with former Universal Pictures executive Scott Stuber leading that effort.

THE BIG-SCREEN OPTION

Some Netflix films also go to a limited number of theaters. In 2017, Netflix released 33 movies in theaters in 40 cities around the world, Chief Content Officer Ted Sarandos told Reuters, and some played for as long as seven weeks. “Bright” opened in 12 locations while action adventure film “Okja,” from South Korean director Bong Joon-ho, was shown in about 50.

Theater screenings help allay concerns of some filmmakers and actors. But the company insists its movies be available to streaming subscribers the same day they debut in theaters, prompting most large theater chains to reject Netflix films.

Some in Hollywood worry their films will get lost in the sheer volume of new Netflix movies.

“I don’t yet have clarity on how they are going to make a splash with 80-plus films,” said one agent who asked to remain anonymous because of ongoing business with Netflix. “It has led me, in setting up films at Netflix, to question whether that’s the right move.”

Netflix argues that its trove of viewership data allows it to market films directly to customers most likely to appreciate them, and to pull together a large audience from around the world.

Some big stars and directors have embraced the Netflix model. The company’s most ambitious movie gamble to date is “The Irishman,” the coming De Niro and Pacino film directed by Martin Scorsese. The movie cost at least $125 million to make, a price tag that others rejected.

De Niro said he was thrilled that Netflix opened its checkbook for the movie, which includes costly special effects to make the actors appear as younger versions of themselves in parts of the film.

“They could afford it and do it properly,” De Niro told Reuters. “The main thing is to make the movie the way it should be made.”

To view a graphic on Netflix far outpaces its rivals in new film releases, click: tmsnrt.rs/2IkWI5f

Reporting by Lisa Richwine in Los Angeles; Additional reporting by Alicia Powell in New York; Editing by Greg Mitchell and Sue Horton