Why You Shouldn’t Be Shocked by Netflix Inking Sandler

adam-sandlerHollywood was all in a tizzy last week after the folks from up the coast made a play for one of the industry’s long-time stars.

For those of you who don’t know, Netflix inked Adam Sandler and his Happy Madison production company to a 4-movie pact, that makes Netflix the owner of Sandler’s next 4 starring roles. This is different from what Netflix has done in the past, which was typically ordering projects from studios—not going directly to the talent like they are in this case.

To you and me, the consumer, this really isn’t that grand of deal. All it really means is that if you want to see these movies that Netflix has ordered, you’ll have to subscribe to the Netflix, and at $8 a month, that could save a family of 4 money when you consider the price of movie tickets and popcorn.

Hollywood, on the other hand, seems to be very anxious about this deal. Already, Netflix made theater chains angry by agreeing on a deal with The Weinstein Company to make “Crouching Tiger, Hidden Dragon 2” available on its service the same day it is to release in movie theaters. And studios have always been angered by the way Netflix got over on them when they originally sold their rights to the SVOD service. And apparently, Hollywood is angered by this…Netflix securing a 48-year old actor who’s last movie (“Blended”) didn’t even amass $50 million domestically.

But why? To anyone in the media industry, this shouldn’t come as news. Talent can be bought. It has been bought for over a century now, and the only thing that can lock talent up to one entity over another is one red cent more than the old entity was paying them.

And that’s all Netflix did. You don’t think Adam Sandler decided to take a pay cut at this point in his career because he was happy to help the strategic interest of a tech media company that amassed more value in 15 years than the companies he’s worked for have garnered in a century? Of course not! Sandler is going with Nefflix, because they are giving him more money.

Now the follow-up question to that is, how can Netflix afford to give Sandler more money to do something Netflix has never done: produce an original movie…?

I don’t know. And quite frankly, I’m not sure Netflix knows. Can they honestly know how many new subscribers will come to Netflix as a result of Adam Sandler? Can they be sure Sandler is even relevant by the time all of these movies have been completed 3 or 4 years from now? Hell…the movies haven’t even been written yet, so they don’t even have a clue if these movies will be funny!

With all of the unknowns, it’s almost ridiculous to make a big stink out of this deal…unless you’re talking about one of the following issues.

One, does Netflix have a business model that can afford to pay talent more money than everybody else? Because if that’s the case, then Hollywood should start to freak out. If Netflix model allows it to pay Sandler a 10% premium, and still see some kind of ROI on that money (whether it be subscriber increases or future licensing), that’s a problem for studios. They’re already operating on tough margins as it is, so the idea of paying talent more is out of the question. If Netflix ends up being in a better position to pay the best actors, it could spell trouble for the traditional players, even as tentpoles and franchise movies seem to have become the new model.

And two, is Netflix willing to play loss-leader, knowing that its international presence means it can keep growing revenues in a way studios can’t? That might even be scarier than these types of deals being profitable for Netflix. Because if they are just going to buy up all the talent, how can the studios compete? One could make the argument that the studios make the stars, not the other way around, but even if that’s the case, that just equates to spending more money—something Netflix is better equipped to do than the rest. Now I highly doubt that Netflix wants to get into whose war chest is bigger contest with the studios, because as a “tech company”, they’re not about that spending money for spending money-sake life. But strategically speaking, it’s not a horrible strategy if indeed talent is somewhat of a limited supply. I don’t know that it is, but this would be the only way we’d ever find out.

All that said, the status quo isn’t changing over this one move, especially since Netflix will really have to pony up for marketing these movies they are buying. Not to mention, Adam Sandler alone isn’t enough to change the landscape, and neither is “Crouching Tiger, Hidden Dragon”…the sequel. I’ll have to see Netflix put a lot more of its $3 billion content budget to original programming and movies before I can believe that it will entirely disrupt the theater game. This first step will serve as a good test for what the future options may be, but for right now, a test is all it is.

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