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'A one-time thing': Analyst details Netflix's risky $200 million bet on 'The Gray Man'

·Senior Reporter
·3 min read
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After beating its Q2 subscriber drop forecast on Tuesday, Netflix (NFLX) now has its eyes set on "The Gray Man."

The movie's $200 million budget makes it the most expensive Netflix film to date.

"Movies are a one-time thing — and some of these costs have gotten so large," Shawn Robbins, chief analyst at Box Office Pro, told Yahoo Finance.

He described the current streaming landscape as a "Wild West" with platforms scrambling for top-tier content in order to keep up with their competitors.

"Budgets have been getting bigger," Robbins added. "The talent is there. It's just a question of which service is going to streamline the ability to put out quality product consistently and maintain subscribers."

"The Gray Man" (Courtesy: Netflix)
"The Gray Man" (Courtesy: Netflix)

Netflix, which shed nearly 1 million subscribers in Q2 and revealed softer-than-expected guidance for Q3, has battled an uptick in subscriber churn — i.e., the number of customers that drop off the service.

That comes amid increased competition, with some industry watchers warning that a "streaming recession" is on the horizon. The original streaming giant plans to introduce an ad-supported tier next year to ease some of these woes.

Another monetization opportunity is theatrical partnerships, which is why some industry watchers are questioning why "The Gray Man" did not receive a wider theatrical rollout.

Theatrical "gives you a window where you can make a lot of money on top of your subscriptions — that could even pay your cost of some of these franchise tentpole titles," Jon Christian, EVP of digital media supply chain at Qvest, the largest media & entertainment-focused consulting company, previously told Yahoo Finance.

Christian also recommended that Netflix start to shift its focus to franchise businesses — a strategy that's easily transferrable to the big screen.

"With franchise comes fandom," he said, citing Amazon Prime Video's (AMZN) upcoming "The Lord of the Rings: The Rings of Power" series (which the streamer coughed up a reported $465 million to produce) as well as Disney+'s (DIS) powerful Marvel and Stars Wars franchises.

Although Netflix has played some original features in theaters, including 2018 breakout hit "Roma" and the more recent hits "The Irishman" and "Don't Look Up," those debuts (similar to "The Gray Man") had very short theatrical windows with much more limited releases.

"Those movies prove that the quality can be achieved, but they didn't have the same opportunity in theaters and could have done very well," Robbins said, anticipating that the integration of theatrical content with streaming will take time.

Immediate competition for 'The Gray Man'

"The Gray Man" will battle the latest box office darling — Jordan Peele's "Nope" — this weekend, and both films are expected to make a splash, despite lackluster reviews for "The Gray Man."

The action flick starring Ryan Gosling, Chris Evans, and Ana De Armas has just a 50% critic rating on Rotten Tomatoes (although the audience score is much higher at 90%.) In contrast, "Nope" is sitting on an 81% rating, with some critics calling it a "sci-fi spectacular."

Universal Pictures (CMCSA) estimated that the film will draw in $45 million over the weekend. Box Office Pro is a bit more bullish with an estimate at approximately $50 million.

"Nope" (Courtesy: Universal)
"Nope" (Courtesy: Universal)

And while Netflix's film is an action-packed thriller, the fact that "Nope" is more science-fiction/horror could give the movie an upper hand.

"It's something that people are looking for in between all of the superhero movies and the 'Minions' movie — this is a big original movie that they don't know anything about, and they don't know what to expect," the analyst said. "That's exciting for moviegoers."

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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