Netflix Takes Aim at Hollywood's Theatrical Window for Movies

Hollywood's carefully controlled system of movie rollouts is officially under siege.

Windowing — the practice of opening a movie first in theaters and then in other stages of home video, streaming and television release — has been under increasing pressure as smaller screens fight against the prominence of the theatrical big screen. Now, Netflix (NASDAQ:NFLX) has fired the most notable missive across the bow of windowing, announcing plans to release a sequel to "Crouching Tiger, Hidden Dragon" on the day it hits Imax theaters next August.

The film, produced by the Weinstein Co., isn't a studio production, so it's in many ways only marginally more significant than the plethora of independent films regularly released on video-on-demand. But the announcement constitutes the biggest move yet by a major digital outlet to blow up Hollywood's traditional release pattern.

"This is a very unique opportunity for somebody from the outside coming in to shake up what appears to be an increasingly antiquated release strategy," says Rich Greenfield, a media analyst for BTIG Research. "They had to get into the movie business to reduce windowing, and I think this is an important Step 1 for Netflix."

Exhibitors, in tandem with the major studios, have long sought to guard the theatrical window. On Tuesday, two of the country's largest theater chains, Regal Cinemas and Cinemark, which both included some Imax theaters, promptly refused to carry the film.

"We will not participate in an experiment where you can see the same product on screens varying from three stories tall to 3 inches wide on a smartphone," said Regal spokesman Russ Nunley. "We believe the choice for truly enjoying a magnificent movie is clear."

The same chains also declined to screen Warner Bros.' day-and-date release "Veronica Mars" earlier this year. Warner Bros. instead bought up the 270 AMC theaters it played in while it was also released on VOD.

The sequel "Crouching Tiger, Hidden Dragon: The Green Legend" is no sure bet despite the sensation of its 2000 precursor. "Crouching Tiger, Hidden Dragon" won four Oscars, including best foreign-language film, and earned $214 million worldwide. The film's international appeal surely also motivated the ever-expanding Netflix, which has recently made inroads into Europe.

But sequels released so long after the original often struggle to keep audience interest. And, perhaps most importantly, "The Green Legend" will not be helmed by the acclaimed director of "Crouching Tiger," Ang Lee. Instead, it's directed by Yuen Wo-Ping, the martial arts choreographer of "The Matrix" and both parts of "Kill Bill." It's currently being shot in New Zealand.

Weinstein Co. co-chairman Harvey Weinstein said in a statement, "The moviegoing experience is evolving quickly and profoundly, and Netflix is unquestionably at the forefront of that movement."

Netflix has dabbled in releasing movies before, including distributing the 2013 documentary about the Egyptian revolution "The Square," which was nominated for a best-documentary Academy Award. And its most celebrated entry into original television, "House of Cards," too, has had a widespread effect in the movie business, alerting the industry to a new avenue for big-name talents such as Kevin Spacey and David Fincher.

Netflix's entry into the movie business comes at a potentially fragile time for the movie industry, following a summer in which the box office was down 15 percent from last year. But one of the summer's buzziest successes was a smaller science-fiction thriller, "Snowpiercer," released by the Weinstein Co.' boutique label, Radius. It made nearly $11 million on VOD, more than double its theatrical revenue.


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