Netflix has been spending millions on original content in order to finally claim the most coveted prize in showbiz: ‘Best Picture’ at the Oscars.
Jan. 14, 2020
Netflix (NASDAQ: NFLX) seems determined to win the most coveted prize in moviemaking. The streaming platform has been outspending top Hollywood studios with an estimated $15 billion in 2018 on 82 titles, compared to just 23 films by Warner Bros and 10 by Disney. In an age where streaming companies are taking over as the primary source of content consumption around the world, can Netflix disrupt the traditional studio-based system and take the crown?
Why does Netflix want an Oscar??
The main value of a ‘Best Picture’ Oscar to Netflix would be the prestige that comes with it. Five years ago, the thoughts of a streaming service vying for the top spot at the biggest event in showbiz would be laughable. However, ‘The Irishman’ and ‘Marriage Story’ have both been nominated for Oscars this year, with a third Netflix production, ‘The Two Popes’, controversially missing out.
Looking at the competition in the streaming industry, Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) is nowhere close to nominations. Disney (NYSE: DIS) of course has been around for the best part of a century as a production studio, but Disney Plus-exclusive releases are far from Oscar-worthiness. An Oscar win for Netflix would be a pretty big one-up on the competition.
Overall, Netflix scored the most nominations of any studio at the Oscars, with 24, including 10 for ‘The Irishman’ alone. This is an impressive feat not just as a streaming giant, but as a movie studio in general.
So what is an Oscar worth to Netflix?
‘The Irishman’ had a budget of $159 million and its limited cinematic release brought in only $8 million. Meanwhile, ‘Marriage Story’ cost $18 million and drew in $2.3 million at the box office. On paper, that is a loss of more than $166 million. If this was a Hollywood studio, both would be considered massive flops. But Netflix doesn’t operate that way.
As a subscription service, Netflix has concerned investors with declining domestic subscriber growth in 2019. Looking over the past year, Netflix has been the worst-performing FAANG stock — Facebook (NASDAQ: FB), Apple, Amazon, Netflix and Google (NASDAQ: GOOGL) — and with a decline of 2% in stock price, it is far below the S&P 500’s (NYSEARCA: VOO) 25% growth.
Despite this, it is still by far the largest streaming service, boasting close to 160 million subscribers, with expectations of 7 million new subscribers expected from Q4 — mostly international. An Oscar win would attract Hollywood A-listers to make content with Netflix, which in turn would entice subscribers to retain its services and bring in new ones.
To understand the value of this, ‘Marriage Story’ and ‘The Irishman’ feature some of Hollywood’s biggest stars, including Robert DeNiro, Al Pacino, Scarlett Johannsen, and Adam Driver. By bringing even more stars into original movies, or even TV shows, the company can lock down the biggest names in long-term contracts, thus encouraging more subscriptions.
Over the past decade, it has been the biggest winner on Wall Street, but with Amazon’s failed attempts to gain significant market share, Netflix has never faced such stiff competition. What has been a time of growth is now wartime for CEO Reed Hastings and Netflix, and it’s time to arm up.
‘Vanity’ projects such as the company’s ‘Best Picture’ drive may not be the most efficient use of Netflix’s time or resources when taken at face value. However, this is unprecedented territory, and perhaps if the ‘Holy Grail’ of Hollywood is acquired — and ‘The Irishman is in with a real chance — we will see the benefit to Netflix as it begins to bring in some big-name actors.
Who knows, maybe if Netflix does win ‘Best Picture’, we can expect Tom Hanks to sign up for Netflix-produced sequel to ‘Forrest Gump’?
Read more about Netflix and the Streaming Wars here:
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.