Netflix to box office comparisons don't make sense because the marginal cost to the Netflix subscriber of trying a piece of content = 0
Here is the right basis of comparison: Netflix first month estimated viewer-hours x 3 ~= equivalent box office sales.
maths in a brief thread
Here is the right basis of comparison: Netflix first month estimated viewer-hours x 3 ~= equivalent box office sales.
maths in a brief thread
When someone decides to watch a Netflix movie the implicit cost they are willing to pay is ~$0.40
(given $10 per month in subscription and watching 1 hour and 40 minutes a night, with the movie lasting 2 hours)
(given $10 per month in subscription and watching 1 hour and 40 minutes a night, with the movie lasting 2 hours)
Point of comparison the implicit value of Cable TV is $0.50 per hour direct plus $0.20 per hour in pay-with-attention-to-inane-advertisements = $0.70 per hour.
So you could argue that from a marginal content value perspective people are willing to $1.40 for that in-home movie.
So you could argue that from a marginal content value perspective people are willing to $1.40 for that in-home movie.
When someone goes to the movies they are paying ~$4 per hour to watch the content, so a like-for-like comparison doesn't make sense--it is a much more expensive choice (and hits a much smaller audience)
In effect experience segmentation and pay-windows within traditional movie distribution monetize content at different price per hour windows.
Movies do (very) roughly 1/3rd of their revenue at the box office, yielding the rest from Pay TV, VOD, Cable, and yes, on-licensing to OTT
Movies do (very) roughly 1/3rd of their revenue at the box office, yielding the rest from Pay TV, VOD, Cable, and yes, on-licensing to OTT
If you do all the viewership math across the different distribution buckets, though movies yield a third of revenue from the box office they only do so on a tenth of their overall viewership.
So a $300mm box office suggests 40mm tickets suggests 80mm cinema view hours suggests 800mm total view hours (spread across a huge number of different platforms formats and airplane seatbacks)
By contrast, Netflix compresses and upfront that all into a ~single distribution release.
Half of a movie's total viewing hours across all platforms (which is ~only on Netflix) may occur in its first month
Half of a movie's total viewing hours across all platforms (which is ~only on Netflix) may occur in its first month
A movie that does 100mm viewer hours in its first month on Netflix (*cough* Irishman *cough*) could be expected to do 200mm view hours total.
Working backwards that's 20mm view-hours box office equivalent at $4 per hour ~~~= $80m in box office.
Working backwards that's 20mm view-hours box office equivalent at $4 per hour ~~~= $80m in box office.
(This is roughly how @GrousARK worked the content production efficiency graph in our Newsletter a few weeks back; follow him, and subscribe!)
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