The biggest news out of Sundance so far hasn’t (yet) been a jaw dropping high advance given for the rights to a likely awards feature or buzz about a breakout actor or actress, but that the slightly delayed Paramount film God Particle looks to be headed out of theaters and over to Netflix. Paramount had previously sold streaming international rights to Alex Garland’s newest film, Annihilation, to Netflix. Given how Ex Machina, his previous release and directorial debut, only did around $11mil international (including a very strong $3.8mil in Garland’s home of England), that transaction made a lot of sense. This deal, at least on surface, reeks of short term desperation thinking.
I apologize in advance if this next section comes across as overtly negative, but it's important to understand where Paramount is coming from. I love Paramount. They produced a number of my favorite films of all time including Chinatown, The Conversation, and The Godfather I & II during one remarkable two-year span. But, they have had a rough 2017. And that's coming off a weird 2016 where their equity sale of 49% of the company to the Wanda Group fell apart, and former Fox film boss Jim Gianopulos was installed as the new chairman. Their 2017 was the worst box office year for the studio that Box Office Mojo has on record and they came in 8th among all studios last year with a domestic box office total of only $534m from 18 movies. Their 2017 release slate, outside of Daddy’s Home 2, appears to have been a steady flow of disappointments.
Their release of Ghost in the Shell received a lot of critical press for whitewashing, and Paramount’s head of distribution went as far as admitting the bad reviews were affected by the controversy and those reviews kept people out of the theater. Their release of Aronofsky’s mother!, potentially an awards contender given the talent involved and the original release plan, received the worst Cinemascore possible, an F, inspiring their marketing leader to complain publicly that people shouldn’t be rejecting the film because “everyone wants original filmmaking” and that “everyone celebrates Netflix when they tell a story no one else wants to tell” seemingly forgetting that Netflix is not in the theatrical business. And let us not forget they wrote down their loss on Monster Trucks before it was even released.
So, one can be forgiven for reading this latest development as if it were coming from a place of pure anxiety. Reports are that God Particle has issues and they can’t be fixed due to JJ Abrams' focus on Star Wars IX. Netflix’s usual license fee normally considers the budget (reported to be in the $40m range) and adds some more to account for their platform being the only exploitation the film will have. If that’s the case here, Paramount will have covered their costs and can move on. Paramount wants and needs hits and profits. The whole idea behind the Cloverfield “franchise” is like the Blumhouse model: ultra-low budgets that have significant mainstream appeal. Why spend $50mil when you can get the same results for $5mil? You can imagine Gianopulos' reaction when he first came into the office and saw the budget for God Particle. Again, it’s understandable to want to get out from under the film if it’s a) bad and b) a lot more expensive than it needed or should have been.
Then what’s the issue? I’ve been writing a lot on this site about Netflix and its effect on the entertainment industry. It’s driving a lot of industry strategy, so I’ve been examining Disney’s purchase of Fox and how successful Bright was for them. One point I’d love to impress upon readers is that the problems presented by the studio theatrical model are actually opportunities for Netflix. Dwindling theatrical attendance, lack of non-franchise content, lack of mid-range budget films for adults, movies from diverse voices and cultures, and most importantly, movies that play great to audiences but not to critics are all problems that Netflix can flip to empower where Netflix is and where they want to go. So, when studios lean on Netflix to bail them out of what they see as a bad movie, they make Netflix stronger in the present and future. Netflix is trying to become a full-fledged studio with high concept films featuring internationally known talent. The faster they can have that type of content, the faster they establish themselves as leaders in an industry that is at a crossroads if theatrical trends of downwards attendance continue. The more consumer behavior shifts to watching content (both TV and film) on streaming platforms vs. the theater, the faster the studios diminish the theatrical model they rely on.
Paramount is not in a great long-term position. They own the rights to very little significant franchise content (Star Trek, Mission: Impossible), having based their model in the past on servicing IP content they don’t own (Marvel, Indiana Jones) or collaborating with content owners (Transformers, GI Joe). They also got in bed with EPIX for their pay TV home and MGM recently bought them out of their EPIX stake. Pay TV is the mechanism Netflix, HBO, and Amazon use to license their box office content from third parties, and since that’s emerged as the most valuable revenue stream, Paramount doesn’t currently have an output deal they can rely on for the future. That’s why you’re seeing Paramount/Viacom/CBS in conversations with Lionsgate about a merger. Lionsgate recently bought Starz and a beefed up Starz with Paramount, Lionsgate and Sony behind them (plus their original content) gives them a fighting chance in the future against Netflix, Disney, Amazon, Comcast, and AT&T.
These conversations about the future and the studio consolation that focuses on streaming suggest that the God Particle sale, if it happens, is Paramount is playing checkers while Netflix is playing chess. It means that Paramount is willing the break even on one movie and give Netflix a boost in the present and the future. Maybe that future is already written and it is all Netflix all the time, but thinking in the short term here has long-lasting repercussions that we will likely see play out sooner than anyone expected.