Industry Insider: Theater to Streaming, What Makes A Netflix Film Successful?

Netflix

Before the age of digital media, there used to be a simple benchmark of a film’s monetary success: the box office. For a theatrical release, the metric to measure if a film was a hit requires looking at the distribution deals, production budget, print and advertising budget, and other miscellaneous costs compared to the film’s gross. While a film’s box office may look profitable, it has to double or triple its initial budget in order to be considered a box office success. For example, Jordan Peele’s Us garnered a $255 million worldwide gross with a $20 million budget, making it an obvious hit. Martin Scorsese’s Killers of the Flower Moon, however, grossed $223 million with a cost of $200 million. While it made over its initial budget, it did not break even because of the various overhead fees. Ultimately, the box office has provided a standard metric to value a film’s profitability; however, as Netflix and other streaming devices force their way into Hollywood, a new question arises: How does one value a film on a streaming platform? 

Netflix differentiates itself from the box office by looking at the number of hours viewed on a film rather than tickets sold. This metric system makes it difficult to obtain hard data on a film’s success. Netflix films, such as The Mother, starring Jennifer Lopez, attracted more than 250 million hours of viewing in 2023. Although the numbers seem extraordinary, its reported viewership can be deceiving. If an individual only samples a few minutes of the film, it will be counted towards the time log. Additionally, if a film has a longer run-time, it will be favored in the viewership charts over a shorter film. This obscure viewership model makes it difficult to determine if a Netflix film ‘breaks even’ or is profitable. 

Ultimately, to determine how Netflix values the success of a film, it is imperative to look away from the standard box office system. Netflix operates on a monthly subscription, offering unlimited content, including catalog and original films and series, for consumers if they pay a fixed fee. Unlike various subscription platforms or cable television, there are no commercials or airing schedules. Netflix must retain the profit it makes from its monthly subscription fees to fund future projects. In other words, they need to keep their churn rate down. This prompts the idea that Netflix doesn’t value the success of each film but rather focuses on its content holistically, hoping consumers renew their subscriptions. 

While this might be the case, it is also obvious that Netflix turns stand-alone films into lucrative series. For example, Netflix released Extraction, starring Chris Hemsworth, in 2020, which became the most-watched film series with 266 million viewing hours, prompting a sequel, Extraction 2, which gained 278 million viewing hours. So, does Netflix value a film based on its engagement with consumers? The simple answer: is yes. In a recent statement, Netflix stated that their metric system is “anchored in engagement — our best measure of member satisfaction and a key driver of retention (which drives our business)…”

Moreover, Netflix changed how it ranks its Top 10 list on the platform, allowing for the content to be more accurately depicted in its rankings. Before, the ranking was based on the total amount of viewing hours, not taking into account the length of the film or series. Now, they divide the number of hours viewed by the total run time. Additionally, they have introduced a longer qualifying time from 28 days to 91 days, allowing content that engages consumers for longer to take higher spots in the ranking. The amount of people who watched a film is still not clear; however, this newer system allows for a more definitive answer to how Netflix values the success of film. Following the controversy surrounding the Netflix's ambiguity regarding streaming metrics, they released the statement: 

“Our hope is that by being consistent and transparent about what people are watching, Netflix can give everyone — consumers, creators, analysts and press — better insights into what success in streaming looks like more generally. We will continue to share more granular, title-specific data with creators, and as always, we’ll continue to listen to feedback.” 

Although the amount of viewers or hours watched can determine if a film is a success, there are many other factors to consider. In traditional theatrical releases, prestige can contribute to a film's success. For example, Olivia Wilde’s Booksmart made $25 million with a budget of $6 million. While it is obvious that both viewership and profit are comparatively low, the awards recognition and strong reviews made the film a huge success — a success metric like this can greatly contribute to Netflix’s strategy of keeping consumers engaged. 

Netflix continues to produce high-budget action flicks starring talent superstars, such as the Red Notice with Dwayne Johnson, Ryan Reynolds, and Gal Gadot, but these films are lagging in reviews and awards recognition. If Netflix continues to diversify its content as well as make quality films, it is safe to assume that it will continue to retain its consumers. For example, Martin Scorsese’s The Irishman does not have the highest viewership on Netflix’s platform but it received strong critical acclaim and was at the forefront of many awards, ultimately attracting users to the streaming service. Other streaming services, such as AppleTV, have been following this path, producing films such as CODA, which won the Academy Award for Best Picture beating out other Netflix nominees. 

In the evolving age of streaming, the traditional box office model clashes with the streaming era, leaving a cloud of mystery behind Netflix’s metrics of success. This shift challenges the industry’s established system, prompting a reevaluation of what defines a successful film. Netflix focus on subscriber retention suggests that a film’s success is based on engagement; however, the streaming platform’s engagement relies on a multitude of reasons, ultimately hinging upon a blend of viewership, critical acclaim, and audience engagement.