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Adam Sandler will produce and star in four movies that will be seen exclusively on Netflix (NFLX) starting in 2015. The news comes just days after the streaming service infuriated theater owners with plans to release a "Crouching Tiger, Hidden Dragon" sequel for subs the same day it hits theaters next summer.
The math behind the film industry is notoriously flaky. As with anything rooted in art, and, yes, Adam Sandler movies are art, it's impossible to put an exact price tag on the moods, feelings or loyalty it inspires. Movie references are the lingua franca of entire generations. "Greed is Good" defines Wall Street as a concept and film title more than a quarter century after the movie came out in December of 1987, just two months after the crash.
Investors are willing to give Netflix a wide birth in terms of assuming content can be monetized but the company, along with the entire film industry, is pushing the envelope. Eventually someone has to pay for this stuff and based on box office data audiences aren't willing to pick up the tab. September marked the worst month for theaters since the same month six years ago. You don't have to be an economist or cinephile to see the problematic irony of these content deals being signed and the Dow topping out on the anniversary of Lehman Brothers triggering the Great Recession.
Users love free content, Wall Street loves to romanticize itself in film and Hollywood digs money but someone has to pick up the tab. This week the chains that account for about 2/3 of the 400 IMAX screens in the U.S. said they wouldn't take part in "Crouching Tiger..." release. For that matter, Adam Sandler is beloved but that doesn't mean people still pay for his movies. Sandler's production budgets run between $50 and $80 million, give or take. That's real money paid to working people on movie sets. It's hard to see how Netflix is going to actually get a quarter of a billion worth out of this four picture deal.
That's for investors to sweat. Sandler's comment was that he took the deal "for one reason and one reason only... because Netflix rhymes with Wet Chicks. Let the streaming begin!"
Netflix better hope that doesn't end up being the epitaph for this deal 30 years from now.
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