Whether we like it or not, streaming is the future of Hollywood. At the same time, the box office remains an extremely important way for studios to generate money. Not just directly through ticket sales, but because films that are released in theaters tend to do better on streaming. Now, Sony Pictures hopes to make more money from its films via streaming. The trap? They hope to derive more value from box office failures rather than their successes.
According to Bloomberg, Sony is studying whether fees charged to streamers like Netflix should be based in part on a given film’s streaming performance. Currently, Netflix has an output agreement with Sony that sees the studio’s films released on the streaming service once they have finished releasing in theaters and on VOD. Netflix pays a fee for each film based on its domestic box office. However, according to Sony, ticket sales aren’t always the best indicator of streaming success. This is where things get interesting.
As the report explains, Sony considered asking streaming partners to share the number of users who start or finish a movie. Indeed, box office failures like “Madame Web” experienced great success once broadcast on Netflix. It was the most-streamed Sony film of 2024 on the platform, eclipsing hits like “It Ends With Us” and “Anyone But You.” This is far from the first time a theatrical failure has become a streaming success, and it’s something Sony hopes to capitalize on.
The fact is that this plan seems flawed on several fronts. The report notes that Netflix would like to renew its agreement with Sony. Sony and Paramount currently buy the rights to their films after their theatrical releases.
Sony wants more money for its failures: will the streamers do it?
Sony is in the unique position of not having its own streaming service. They own the Alamo Drafthouse movie theater chain, but the studio has chosen not to enter the streaming wars. Paramount wants films to move to Paramount+ first, then to Netflix, then back to Paramount+. It’s all part of the new streaming economy, with every studio trying to find ways to increase revenue from their catalog.
In Sony’s case, they are trying to argue that their box office failures are undervalued. The report notes that “many Sony peers – and even some people at Sony who are studying this idea – are skeptical. » Box office figures remain the simplest and arguably best metric for determining these fees. Imagine for a second if Netflix tried to argue that a hit like “28 Years Later” was worth less because too many people had already seen it? Sony would never do it.
Universal, for example, has a new deal with Netflix that will see its films go to Peacock before going to Netflix, then back to Peacock. Warner Bros. has implemented a similar plan for its films with Netflix and Amazon. Netflix, Amazon, Hulu and HBO Max are all reportedly interested in striking a deal for future Sony films, but it’s hard to imagine them agreeing to set a precedent that would increase the value of theatrical failures while maintaining the already higher value of box office hits.
As it stands, Sony’s Netflix deal generates hundreds of millions of dollars a year. Any deal with a streaming rival would be equally rewarding. Naturally, Sony wants to squeeze out as much juice as possible. This plan, however, appears doomed to failure.
Sony’s new plan illustrates one of modern Hollywood’s biggest problems
Sony needs Netflix more than Netflix needs Sony. They need to partner with a streaming service, even if they’re leaving Netflix. Trying to make more money from box office failures seems a bit hopeless. It’s also a sign of a growing problem that Hollywood as a whole is desperately trying to solve.
VOD can help, and DVD sales may not have completely dried up, but they’re still a fraction of what they were. Post-theater income is harder to come by and failure hurts more than ever. The box office is extremely uncertain. Would Netflix like to stream “Karate Kid: Legends” after theaters? Absolutely. Are they willing to pay a higher price even if the project fails? Unlikely.
The “wait to release” mentality is part of what contributes to many box office failures, but that’s a whole other conversation. The key point is that it is difficult for Sony to justify this request, which amounts to looking for more money in the sofa cushions. What’s understandable is that Sony is trying to shore up its future as the box office continues to look tough, especially with a possible Paramount/Warner Bros. merger.
Sony has a significant relationship with Netflix. They sold “KPop Demon Hunters” to the streamer, and it worked great for Netflix, but not so well for Sony. It’s a give-and-take that sometimes works better for one side than the other. Both parties have needs and want to do business with each other. The era of exclusivity is over and for studios it’s all about maximizing revenue. This seems like a bad way to go.
