‘Glass Onion’ Peels Back Potential Flaws In Netflix Release Strategy

Netflix paid a reported $450 million for two sequels to Knives Out, the hit 2019 mystery starring Daniel Craig and Chris Evans that achieved equal parts commercial and critical success.

So it seemed surprising when the streaming giant yanked the first of those sequels, Glass Onion: A Knives Out Mystery, after only a week in theaters. Yes, NetflixNFLX
had followed a similar strategy before. But with such a high-profile release, and with so many clamoring to see the sequel on the big screen, why limit distribution?

It’s a question that may not be answered in the near term, with Onion slated to be released on Netflix Friday, a month after its brief stint in theaters. But it will certainly be a concern for the company’s shareholders going forward, as Netflix tries to thread the tricky needle between building buzz that drives subscriptions and recouping its investment in the series (all while competitors nip at its heels).

Box office analysts have questioned Netflix’s strategy. They say the streamer left money on the table by limiting the film’s release to just one week and only allowing 700 theaters to carry the movie.

In only seven days, Onion became Netflix’s highest-grossing movie ever, though it tops a very short list of the company’s films that have been in theaters, including The Irishman and Roma, films later nominated for the Best Picture Oscar. Onion earned $9.4 million in its opening weekend and totaled $13.28 million for its seven-day stint in theaters.

It had a very high per-theater earning average, on par with blockbuster Black Panther 2: Wakanda Forever. Analysts believe it could have earned four times as much if it had been released in more theaters and perhaps hundreds of millions if it had stayed in theaters longer than a week.

But Netflix has countered that, essentially, any money earned in theaters is just gravy. It wants to stick with its traditional model of building buzz with highly anticipated releases, which the service believes will also increase its subscriber numbers. After all, it has seen surges in subscriptions tied to releases of mega-hit TV shows like Bridgerton, Stranger Things and Squid Game.

It’s harder to do that with a movie, though. A single season of a TV show can be 11 hours of viewing, with the promise of more to come in the future with additional seasons. It’s quite different for a movie, which is a one-off and only two hours. Do people want to invest in a subscription for just a single film?

In its last letter to shareholders following its third quarter 2022 results release, Netflix seemed to double down on its theatrical strategy. “We’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us,” it said.

But Netflix also recently set a precedent to go back on its earlier business model when it began accepting advertising for the first time. That path has already proven rocky, with some reports that the streamer fell short of guarantees to advertisers following its first full month of service in November and was forced to issue refunds.

The company has said its goal is to maintain double-digit percentage revenue growth, even after losing subscribers for the first time in a decade in 2022. “We are increasingly focused on revenue as our primary top line metric,” the letter noted.

So could Netflix double back on its theatrical release strategy in light of that “increasing focus?” It’s already done it once before. With a second Knives sequel in the works, such a backtrack wouldn’t be a surprise.