Is Netflix Trying to Kill the Movie Theater Once and for All With ‘Crouching Tiger, Hidden Dragon 2’?

Next time you’re in Los Angeles, check out the historic Broadway theater district downtown: At the turn of the century, before the studios and theater chains were split apart, the stretch of Broadway between Third and Olympic boasted the highest concentration of cinemas in the word, the jeweled crown of L.A.’s burgeoning film industry. On any given night, studios premiered their latest films at sumptuous movie palaces like the Orpheum and the Million Dollar Theater. More recently, these temples of cinema, which wouldn’t look out of place at Versailles, have hosted Sunday revival churches and Spanish-language swap meets. Now they’re mostly ghosts of a bygone era when the theatrical experience was the undisputed king of American mass culture. It’s that ghost that streaked through modern-day multiplex owners’ nightmares Monday when Netflix (aided by the prince of darkness himself, Harvey Weinstein) announced that for the first time it would stream a major feature film, Crouching Tiger, Hidden Dragon: The Green Legend, simultaneous to its IMAX theater release next summer.

Predictably, by Tuesday morning a film business already battered by the worst box office summer since 1997 went apeshit. In fact, that nightmare freaked out theater owners so bad that Regal, Cinemark, and AMC — the nation’s three biggest theater chains — dropped the popcorn gauntlet Tuesday and announced they would refuse to carry the Crouching Tiger sequel at their theaters.1 In other words, as Netflix was announcing a historic new era when on-demand truly means on-demand, the nation’s theaters collectively said, “Over our swap-meet-hosting dead bodies.” Obviously, your local cineplex isn’t going to shut down after next summer, but let’s answer some questions about what’s going on here before the revolution arrives.

Could this truly be the beginning of the much-foretold end of the moviegoing experience? And should you even care?

Yes. And yes.

You can minimize it all you want. You can say that Crouching Tiger is about as relevant these days as an Al Gore SNL sketch, and the sequel doesn’t even have Chow Yun-Fat, Zhang Ziyi, or Ang Lee involved. But Crouching Tiger made $200 million worldwide in 2000. This isn’t a pirated, low-budget Jackie Chan movie from the ’80s. It’s a known property with a $60 million budget. So what it definitely is, is symbolic. Netflix, heady on the successes of House of Cards and Orange Is the New Black and tired of being screwed by business affairs offices all over town in its attempts to buy the rights to stream the hottest new releases, is saying to studios, “Fine, we’ll go around you.” In a way, it’s not really that odd a move for the company: As a subscription service, Netflix has transformed itself into an ersatz HBO of sorts, and HBO has offered original series alongside movies for years. People have long prophesied the day when every movie would be available to stream on our TVs at the same time it’s released in theaters, but theater owners have been dragged kicking and screaming down that yellow brick road. For them, preserving the sacred 90-day window between a film’s theatrical run and its availability anywhere else is an inviolable principle, the idea being unless you make people wait too long to see a highly anticipated movie at home, that’s just what they’ll do. (In fact, when Universal tried to do a $60 VOD option three weeks after Tower Heist’s theatrical release, the theater chains went ballistic and the studio scrapped the plan.) And up until now they’ve been very successful at holding a line when it comes to big-budget movies. This, however, is a symbolic shot across their bow. Rome hasn’t fallen, but Netflix did cross the Rubicon.

Is this a totally new, crazy, and groundbreaking development?

No. In fact, it’s far from groundbreaking. You’ve probably noticed those VOD offerings on your cable menu flourishing these days. Seeing the future, companies like Magnolia Pictures and the Weinsteins’ own Radius have built a business around releasing smaller, independent films on demand the same day as their theatrical release — or even earlier. That makes sense for niche movies that get praise at Sundance but would have a hard time getting a studio to sink money into promoting them. On a small budget, they can turn an actual profit by beaming effortlessly into living rooms around the country rather than schlepping from art house to art house, opening a weekend in New York, then playing in Austin, etc., hoping people show up.

But the funny thing is that slowly, that’s also becoming an option for what’s known as “tweeners” in industry-speak: movies that aren’t big enough to draw the unwashed masses like The Avengers or prestige-y enough to hope for an Oscar nomination. Because in addition to a film’s budget, the cost of advertising it is a ginormous, backbreaking expense. Even if a film costs $3 million to make it will still cost $20 million to market as a wide release in the hope of a decent opening weekend at the box office. When you do a video-on-demand release, you slash that marketing budget to bare bones, stop worrying about the box office, and (hopefully) just watch the digital dough roll in on VOD and iTunes. In fact, a favorite second-guessing game around town these days is whether a bomb would have been more profitable as a VOD or “ultra VOD” release (“ultra” meaning you drop the film on demand before it hits the theaters). Every so often, as in the case of Snowpiercer this summer, people ask if it was the other way around: Did making Snowpiercer available on demand simultaneous with its theatrical release leave money on the table? Often, the answer is simple: no.

Of course, unlike actual VOD, Netflix doesn’t charge beyond its monthly subscriber fee. So as long as they keep their subscribers happy with shiny new stuff like the Crouching Tiger sequel, they don’t have to worry whether a movie will make enough money back with a VOD release vs. a theatrical release. If anything, the theatrical release is a form of window dressing — it avoids the stigma of “direct to video,” which seems to be attached to anything made instantly available on your TV.

Why won’t AMC et al. show The Green Legend? Aren’t they just hurting their own bottom lines? Can’t we all just get along?

Netflix may not care about the box office, but the box office cares about the box office. Now, it’s not the actual theatrical grosses that worry theater owners. They split those with the studios on a roughly 50-50 basis.2 But really their money comes from overcharging us for popcorn and soda. (Which is incidentally why suggestions for improving the theatrical experience seem anathema to theater owners. Usually, when people say “improving,” they mean cutting the cost of popcorn.) Obviously, if you’re watching the Crouching Tiger sequel on your couch, you’re not spending $20 on a bucket of popcorn (unless you’ve laced it with truffle oil).

And have you noticed how more theaters like AMC are offering things other than movies? Like Champions League soccer or live-streamed operas at the Met? The small but steady decline in movie attendance does not go unnoticed: They need to keep butts in those seats, no matter what’s on the screen. A movie like The Green Legend, which potentially cannibalizes theatrical profits with availability on Netflix, is dead to them. In fact, boycotting the film isn’t some flashy show of bravado. It’s standard operating procedure. Many theaters already have policies in place against showing a movie that’s playing on iTunes/VOD in advance. That’s inviting empty seats, and no theater wants that — except art house theaters, which are flush with a glut of indie films they can drop and shuffle at a moment’s notice. What’s exceptional in this case, though, is that AMC won’t even let the Crouching Tiger sequel rent the theater to show itself — a tactic some smaller films use to get a theatrical exhibition in highly desirable theaters (i.e., not crappy closets with bad projection) if they’re being made available simultaneously on demand. More importantly, AMC’s owner, Wanda, is one of the major theater owners in the fast-growing Chinese market. Netflix isn’t in China, so it doesn’t affect the theatrical release there. Therefore, Wanda refusing to show The Green Legend on its IMAX screens is a big statement of discontent and solidarity with its corporate child AMC.

So: Is this the wave of the future?

That’s what many are afraid of. For a while, people hoped video on demand would replace the lost revenue of tanking DVD sales. It never quite happened, but what could conceivably occur is that it cuts into actual theatrical money. In our world of instant Internet gratification, the idea of waiting 90 days for a theatrical movie to be available on our TVs seems annoyingly antiquated — if you’re not sentimental about the theatrical experience. Sure, Marvel movies keep us coming out in droves, but if you look at this year, studios made fewer wide-release films. There was even a weekend at the beginning of this month when the only new film was a faith-based faux-Elvis twin movie. Studios are concentrating all of their energy on sure-thing hits like Star Wars 27 and Batman v Superman because these make them money. And they make the prestige movies because awards nominations offer invaluable marketing — the truly killer hidden expense of being a studio/distributor. But that leaves a whole middle range of movies not based on comic books or angling for a Best Picture nomination out in the cold. It’s not just tiny, shoestring indie films that play on ultra VOD anymore. Now it’s glossy movies with $20 million budgets that share that fate, because you can market them for a fraction of the cost and stick them in a couple of art house theaters that won’t protest too much. You still qualify for an Oscar nomination (if you’re lucky — Academy members rarely get off their butts anyway), but you haven’t lost money promoting the film.

Ultimately, the theatrical experience isn’t going away anytime soon. But like the polar ice caps, it’s melting at the fringes. Crouching Tiger, Hidden Dragon: The Green Legend going on Netflix isn’t the end of the world, but it’s another big chunk of Antarctic ice shelf that fell off into the water. Slowly but inevitably, the moviegoing audience is shrinking as only the most devoted viewers loyally go out to the movies and everyone else who thinks TV is better anyway rents a “new release” on demand when they don’t want to be bothered to find a babysitter. The fear is that as time goes on, those old movie palaces of yesteryear on Broadway may be joined by ’90s cineplexes that prove too expensive to refurbish. And going to the movie theater in the future might become a more rarefied treat, like going to the actual theater is today. Steven Spielberg and George Lucas certainly think so. In fact, you’ll probably end up spending a night at the legit theater live-streamed by your local multiplex.

Filed Under: Movies, Netflix, Crouching Tiger Hidden Dragon 2: The Green Destiny, Harvey Weinstein

John Lopez is a Grantland contributor and a writer/filmmaker living in Los Angeles.

Archive @ jedgarlopez

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