The Film Industry’s Post-Barbenheimer Future, Netflix Ads Reconsiders Microsoft

1. The Film Industry’s Post-Barbenheimer Future

So Barbenheimer happened last weekend. Box office records were broken. People dressed up to go see a movie in a manner unseen since the heyday of midnight Rocky Horror showings. People now know it’s pronounced “Kill-ian” not “Sill-ian.” And the Lena Dunham-making-a Polly-Pocket-movie thing is part of a larger trend and, unfortunately, not just a bad internet meme.

So there’s all that and the fact that the narrative has now been flipped to “Oh wait, people actually do want to go to the movies.”

Or do they?

That’s really the $64,000 question the industry is facing right now. Was Barbenheimer a summer fluke or are people ready to head back to the movies again?

It’s a question we will have to wait a while to see the answer to, given the writers and actors strikes and all, but it’s worth noting that none of the things that turned people off to the movies have changed: theaters are still dirty and crowded (possibly even more so now that there are so many less of them), much of what Hollywood is putting out is IP-based genre movies, and everything is available on streaming, indie films in particular.

Let’s drill down on that last point though, because I think it’s pretty important.

Why It Matters

Cha Cha Real Smooth, a film from a 22-year-old wunderkind named Cooper Raiff won the audience prize at Sundance in 2022 and was promptly snapped up by AppleTV+ for $15 million, where it now lives, having had a very brief run in select theaters in June 2022, when theaters were mostly still empty because of the pandemic.

The movie is a classic coming-of-age story about a kid from New Jersey (played by Raiff) who graduates from Tulane and flails about, becoming a DJ/party starter on the bar/bat mitzvah circuit while figuring out love and life along the way. It is set in the town adjacent to mine and I can all but guarantee you that had it been released the old-fashioned way, in movie theaters, it would have filled seats here in the Jewish heartland of New Jersey for weeks on end.

Its likely success in Livingston, Millburn and Short Hills aside, Cha Cha Real Smooth is the sort of old-school indie film that would likely have filled seats all around the country. The bar/bat mitzvah thing is background—it’s a sweet coming-of-age story with the sort of linear plot line and neatly wrapped-up ending that helps attract the types of audiences who don’t normally go and see small indie films.

But instead, it is sitting on Apple TV+ where it’s not heavily promoted and is only accessible to subscribers.

I’m telling you this, not as a ploy to get you to see the movie (though I would recommend it) but rather to illustrate the impact that streaming has had on the movie industry, smaller indie films in particular.

Netflix, Amazon, Apple and others have all gone on a buying spree, haunting film festivals and snapping up independent films left and right.

On the one hand, this has been a boon for the filmmakers themselves, as the streamers are paying them a lot of money, often much more than they would have made in years past.

On the other, the movies disappear into their vast libraries, never to be heard from again. 

This, more than anything, is the complaint I hear from indie filmmakers, that while they make good money from streaming, the services do nothing to promote their films and so no one ever sees them.

Which is sort of why the movie industry is in the mess it’s in.

There are other factors for sure— ”IP” films (and who ever would have thought a legal term like “intellectual property” would enter the popular lexicon) are easier to sell overseas, and Marvel and other comic book universe films come with a built-in audience.

But the lack of any real options beyond IP type blockbusters hurts more than the industry seems ready to acknowledge.

There’s also the flip side of that, which is that there are a whole lot of people who will never go see any of the IP movies because that’s not their thing. And where prior genres allowed for more nuance (“Westerns” range from John Wayne movies to No Country For Old Men), there’s not as much in IP. 

So there’s that too.

What You Need To Do About It

If you are one of the streaming services, invest in movie theaters. New upscale Netflix- or Apple-branded theaters would serve multiple purposes: 

• Distribution: They’d provide an alternate distribution mechanism for the films you buy, thus increasing both revenue and exposure

• Promotion: They’d allow you to promote your new series and your other movies. More than that though, they’d allow you to promote yourself—you’d be in the community, with your name on an asset that people viewed favorably. That would go a long way to making you seem less like an Evil Tech Company.

• Social Good: Many of the theaters that closed during the pandemic were local theaters, independents, or parts of small regional chains. Bringing those back could help revitalize downtowns. They also have other purposes, such as providing a gathering place for the community, whether that’s as a graduation venue, a senior movie night venue, or a home for local film festivals.

• Diversity of Content: Using these theaters to show films outside the franchise IP universe would go a long way to making movie going an option for many people again. And if they were the sorts of places you actually wanted to go to, they could go a long way towards making Watching At Home a less attractive option.

If you are Hollywood, please remember that hit formulas are rarely replicable, that very specialized genres like “movies where childhood toys come to life” are not really something anyone is asking for, and the end result is going to be that you turn off far more people than you attract.

But given that’s been your MO for close to 100 years now, I am not holding out much hope for change.

2. Netflix Ads Reconsiders Microsoft

Back when Netflix surprised everyone by suddenly rolling out an ad-supported tier, there was a second, lesser surprise when they announced that Microsoft was going to be their partner for their ad deals.

t was sort of a raw deal for Microsoft, who, desperate to get into the ad game, had agreed to provide Netflix with a “revenue guarantee.” Meaning that Netflix was going to get paid no matter what.

While this was clearly a good deal for Team Streamberry, the value to Microsoft has diminished over the ensuing year and now Netflix is said to be rethinking the whole plan so as to allow Microsoft more leeway.

Advertisers, it seems, were not all that keen to pay the megabucks Microsoft was demanding on Netflix’s behalf, and so Netflix is now out there offering up ads itself as well, in an attempt to get some traction going.

One big problem Netflix has is that there aren’t a whole lot of ad-supported viewers, at least not yet. According to Antenna, the ad-tier only represents 3.3% of Netflix’s U.S. subscribers and there’s no stat on how much they’re watching versus the ad-free 96.7%. (Other reports have Netflix’s ad-supported tier at 1.5 million subscribers, also nothing to write home about.)

And yet Netflix is allegedly able to get CPMs of $40 and up. Why would advertisers pay that, you ask.

Two words: Original content.

Why It Matters

As noted in our report on the FASTs and Advertising, the key thing holding many brands back from spending more money on streaming is that at present, most of the inventory available on streaming is on reruns.

Hulu has originals and The Roku Channel and Freevee have a couple each. But by and large, the available ad-supported content on streaming consists of network TV shows and Hollywood movies from years past.

And if you are a major advertiser, the sort of brand that spends nine-figure budgets on TV advertising each year, most of it on big-budget image campaigns, you want your ads running against first-run original programming.

Hence the appeal of ad-supported Netflix.

Now at some point in the not-too-distant future (sometime this decade anyway) the number of viewers on ad-supported SVOD will reach critical mass and all of those big advertisers will say “Okay, now I get it! SVOD is the new prime time and FASTs are the new cable! Here—take my money!”

But until that happens, they are going to spend more heavily on linear and look at ad-supported Netflix and its peers as experimental budget. Or at the very least, training wheels.

Which is why they will pay big bucks for it. 

What You Need To Do About It

If you are a brand, especially a brand that spends big bucks on TV advertising, this is a very good time to try out those streaming training wheels. You can already start using the FASTs as a substitute for cable and you should definitely work with Netflix and the rest of the ad-supported subscription services, e.g. all of them, to get a better understanding of what is possible, both from an ad unit perspective and from a measurement and targeting perspective. (Yes, I get it. Your audience is something like “everyone with a mouth.” But there are multiple ways you can use targeting, even if it is just geotargeting.)

If you are Microsoft, keep the faith. You knew that Netflix was going to have to expand the number of vendors it worked with, and fortunately, you have the cash to burn on your experiment. Now you ideally have creds and you can continue to challenge Google and Comcast. Or you can cash in your chips and go home. Given the size of your business, you will be fine either way.

3. The Threads Thread

Threads rolled out a Following tab this week. Not that they announced it or anything, though.

I have no idea why they wanted to keep it in stealth mode but that seems to be the plan.

The only way I knew it was there was because my friend (and fellow TVREV co-founder) Nick Cicero posted (Threaded?) something about it. I thought he was joking at first but then checked and sure enough, if you scrolled all the way up and tapped on the little @ symbol thing, the two tabs appeared.

Though it constantly defaults to “For You” which is something Twitter used to do.

Or the app formerly known as Twitter, anyway.

Musk wants to call it “X.”

His idea to make it the American WeChat is not a bad one in theory.

It’s not surprising. The notion of talking to strangers in a public forum is just something few people have any desire to do. So if Musk can find other reasons for people to use the app, he might draw in more users.

Might being the operative word though, as I suspect we’ve finally reached a point where there are a whole lot of people who would not engage with X even if they got paid to do so.

And not just all those Bluesky posters either. Yes, they're still obsessed.

Elsewhere in social media land, TikTok is about to launch a feature to sell Chinese-made goods in the US. Which is clearly meant to both take on Amazon and further antagonize both houses of Congress and multiple state legislatures.

Again, what were they thinking?