Netflix isn't killing movie theaters: Viewers who stream more also go to cinemas more

Key Points
  • Streaming services are not disrupting movie theaters.
  • At CinemaCon in Las Vegas last week, movie distributors and theater owners alike say there is little to fear from a growing population of streaming services.
  • The U.S. box office is expected to grow about 1 percent to a record-breaking $12 billion this year.
Gabby Jones | Bloomberg | Getty Images

Netflix isn't killing movie theaters.

While streaming services have fundamentally altered how consumers watch TV, the idea that if audiences are spending more time watching content at home they are spending less time at theaters is a myth.

At CinemaCon in Las Vegas last week, movie distributors and theater owners alike said there was little to fear from a growing population of streaming services, which will soon include Disney+ as well as platforms from Comcast, Warner Bros. and Apple.

"Our takeaway is that Netflix and the expansion of [streaming video on demand] platforms will have minimal impact on box office given the vast supply of content, plenty of which is ideal for theatrical release (and most talent fiercely and contractually objects to a straight-to-streaming release)," Michael Pachter, analyst at Wedbush, wrote in a research note Monday.

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Last year, the domestic box office had a record-breaking year, hauling in $11.9 billion, there was a 5% rise in the number of movie tickets sold, and 263 million people — 75 percent of the population — saw at least one movie in theaters.

At its current pace, Pachter expects the U.S. box office will grow about 1% to $12 billion this year, another record.

"Everyone has a kitchen, but everyone still goes out to eat," Charles Rivkin, CEO of the Motion Picture Association of America, said, quoting Sterling Bagby, the late co-founder of B&B Theatres, during a "State of the Industry" panel last week.

Rivkin said that with each new innovation in the entertainment industry, there has been worry that it will kill the movie industry. Talking pictures, technicolor movies, television, basic cable and smartphones were all seen as disruptors.

"And yet we're still here," Rivkin said.

Rivkin took the helm of the MPAA in 2017 and has embraced Netflix. The streaming platform was the first of its kind to join the MPAA and now sits alongside Disney, Paramount, Sony, Fox, Universal and Warner Bros.

"The theatrical and home entertainment sectors both grew strongly in 2018, and that's great news, because we are all part of the growth together," he said.

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In fact, according to a study by EY's Quantitative Economics and Statistics group, the people who go to see movies in theaters more frequently are also the people who consume more streaming content.

Still, there are tensions between Netflix and theater owners. Netflix has notoriously opted for shorter release periods at the box office than movie theater operators typically expect.

Traditionally, Hollywood studios, and even Amazon, have adopted a 90-day theatrical release window, which means the film will run in theaters for that time period before being available on video-on-demand or on a streaming service's site or app.

A longer window means more money for theater owners.

"The exhibitors were all very clear at CinemaCon 2019 that they are happy to continue working alongside Netflix as they have been, as neither has been negatively impacted by the other," Pachter said. "Alternatively, the exhibitors would be happy to screen Netflix content should Netflix abide by the existing theatrical window."

But financial gain isn't the only reason filmmakers and theater owners want movies to be screened at cinemas.

"We had to make a choice whether to tell 'Crazy Rich Asians' on a streaming service or theatrically. It wasn't an obvious choice to some, but to us it was very obvious," Jon Chu, director of "Crazy Rich Asians," said during a panel last week.

"If we wanted to affect culture on a global scale, to become part of the dialogue that had to be had and urgently, we knew there was only one way to present our movie, and that was theatrically," he said.

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Disclosure: Comcast is the parent company of NBCUniversal and CNBC.