Copyright /FILM
Whether we like it or not, streaming is the future for Hollywood. At the same time, the box office remains a hugely important way for studios to generate money. Not just directly from ticket sales, but because movies that are released in theaters tend to do better on streaming. Now, Sony Pictures is hoping to generate more money from its movies via streaming. The catch? They're hoping to extract more value from box office flops, rather than their hits. According to Bloomberg, Sony is studying whether fees it charges to streamers like Netflix should be based in part on how a given movie performs on streaming. Currently, Netflix has an output deal with Sony that sees the studio's movies go to the streaming service after their theatrical and VOD run is up. Netflix pays a fee for each movie based on its domestic box office haul. However, as Sony sees it, ticket sales aren't always the best predictor for streaming success. This is where things get interesting. As the report explains, Sony has discussed asking streaming partners to share how many users start a film or finish it. This is because box office flops like "Madame Web" found great success once they began streaming on Netflix. It was Sony's most-streamed 2024 movie on the platform, overshadowing hits like "It Ends With Us" and "Anyone But You." This is far from the first time that a theatrical flop became a streaming hit and that's something Sony hopes to capitalize on. That plan, however, seems misguided on multiple fronts. The report notes that Netflix would like to renew its deal with Sony. Both Sony and Paramount are currently shopping the rights to their movies after their theatrical runs. Sony is in the unique position of not having its own streaming service. They own the Alamo Drafthouse theater chain, but the studio has opted to sit out the streaming wars. Paramount is looking to have movies go to Paramount+ first, then Netflix, then back to Paramount+. It's all part of the new streaming economy, with every studio trying to find ways to boost revenue from its catalog. In Sony's case, they're attempting to argue that their box office flops are undervalued. The report notes that "Many of Sony's peers — and even some of the people at Sony looking into this idea — are skeptical." Box office numbers are still the simplest and arguably best metric to determine these fees. Just imagine for a second if Netflix tried to argue that a hit like "28 Years Later" was somehow worth less because too many people had already seen it? Sony would never go for it. Universal, for example, has a new deal with Netflix that will see its movies go to Peacock before they go to Netflix, then back to Peacock. Warner Bros. has a similar plan in place for its movies with Netflix and Amazon. Netflix, Amazon, Hulu and HBO Max are all said to be interested in making a deal for Sony's future movies, but it's difficult to imagine them agreeing to set a precedent that would increase the value of theatrical flops, while maintaining the already higher value of box office hits. As it stands, Sony's Netflix deal generates hundreds of millions per year. Any deal with a streaming rival would be similarly enriching. Understandably, Sony wants to squeeze as much juice as they can. This plan though seems like a non-starter. Sony needs Netflix more than Netflix needs Sony. They need to partner with a streaming service, even if they move on from Netflix. Attempting to squeeze more money out of box office flops feels a little desperate. It's also a sign of a growing problem Hollywood at large is desperately trying to solve. VOD may be helping and DVD sales may not have totally dried up, but they're a fraction of what they used to be. Post-theatrical revenue is harder to come by and flops hurt more than they ever have. The box office is wildly uncertain. Would Netflix like to stream "Karate Kid: Legends" after theaters? Absolutely. Are they willing to pay a higher price even though it flopped? Unlikely. The "wait to stream" mentality is part of what contributes to many box office flops, but that's another conversation entirely. The key point is that it's tough for Sony to justify this ask, which feels akin to looking for more money in the couch cushions. What's understandable is that Sony is trying to shore up its future as the box office continues to look rocky, particularly with a possible Paramount/Warner Bros. merger in the cards. Sony has a big relationship with Netflix. They sold "KPop Demon Hunters" to the streamer and that worked out great for Netflix, but not so great for Sony. It's the give and take that sometimes works out better for one side than the other. Both sides have needs and both sides want to be in business with one another. The era of exclusivity is over and for studios, it's all about maximizing revenue. This just feels like a wrong-headed way to go about it.
