Netflix doesn’t need good ratings to win the streaming wars

Netflix (NFLX -0.50%) has invested in its own content palette for some time and has produced critically acclaimed films as well Roma and The power of the dog. Conversely, the streamer also supported movies like extraction and The Adam Project — Netflix Originals is reportedly more concerned with stars and stunts than awards.

And the streamer quoted it The Irishman and other prestigious content as a key to attracting and retaining subscribers, such as glasses 6 underground and donor confidential are just as important, even if they are less appreciated by critics.

A person sitting on a couch and watching TV with popcorn in hand.

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Netflix competes in a different arena than other studios

studios such as Warner Bros. Discovery and Walt Disney typically, their best-known films debut in theaters before making them available to streaming audiences. There were some concessions during the height of the COVID-19 pandemic, but the checkout model has returned in 2022. movies like The Batman and Doctor Strange in the Multiverse of Madness enjoyed theatrical releases and grossed approximately $770 million and $955 million worldwide, respectively.

Netflix also returned to US cinemas this year, mainly with spy thrillers The gray man. The film was released in around 450 theaters on July 15, just a week before it landed on Netflix’s streaming service. Until now, The gray man has grossed approximately $250 million in worldwide box office receipts. For a film that cost almost $200 million before anything was spent on marketing, such results would normally be considered a failure. But that’s Netflix — its primary audience is streaming subscribers. And from this perspective The gray man is a complete success.

Reviews are less important for streaming movies

The gray man watched 88.5 million hours in the first three days on Netflix. This compares to an action-oriented Netflix original Red notice watched nearly 149 million hours in its first three days on Netflix and currently holds the record for the company’s most-watched film of all time. But perhaps most curiously, both films were widely mocked by critics: Rotten Tomatoes gives The gray man an overall critical rating of 48% while Red notice has a low 37%.

If we go back to theatrical releases, big studios usually rely on positive reviews to win over audiences. After all, people consciously choose to go to the cinema to see the latest release, so it helps to know in advance if it’s really worth it. As such, it’s not uncommon for marketing messages during opening weekends to talk about a film being “Certified Fresh” – distributors signal to moviegoers that Rotten Tomatoes has found a majority of well-known film critics liking the film.

Netflix viewers don’t have to leave home to watch the latest Netflix original. And if they don’t like it, they can just turn it off. This low barrier to entry means that even for films with poor reviews, the sunk cost for subscribers isn’t the same as it is for those watching a film.

And it’s possible that many will still like a critically planned film — as was the case with both The gray manwhich has a 91% viewer rating on Rotten Tomatoes, and Red noticewhich is 92%.

Netflix lets subscribers decide what’s worth watching

Given the money other studios make from theatrical releases every year, Netflix could be missing out on a lot of potential revenue if it doesn’t pursue this market more aggressively. However, by treating cinemas largely as casual dalliance, the company limits its risk of a critically-scheduled film dragging its bottom line.

A famous example of this is Walt Disney’s John Carter, a 2012 science fiction film that cost the company over $360 million in production and marketing expenses. Upon release, it was poorly reviewed and attracted a relatively meager audience. Things ended so badly for the film that Walt Disney wrote off $200 million related to the venture.

For Netflix, the benefit of focusing on streaming is that subscribers can decide for themselves if something’s worth their time, even if the critics don’t love it. And so far the results are promising: both Red notice and The gray man are getting the franchise treatment — which only helps the company compete against its streaming competitors.

Tom Wilton has business relationships with Netflix but has no financial position in the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends Warner Bros. Discovery, Inc. and recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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