P.S. – By Netflix, I mean streaming platforms be it Prime, Disney Hotstar, or any other.
We hardly see ads on some of these platforms, and a percentage of our annual membership fee seems insufficient considering how much some use it and share it with friends and family too, who otherwise would have to pay for the tickets if they were to watch it in the theater. I wonder how are they turning a profit or breaking even with this model
In: Economics
The film’s producers charge licensing fees to the streaming platforms in return for ability to stream the film. The streaming platforms pay the fee in order to have attractive content to draw in or retain paying customers.
But streaming rights to one platform is only part of their revenue stream. They may still release film in theaters at some point, can sell DVD/Blueray, international rights, cable channel (HBO, Showtime, etc) rights, etc.
Releasing first on a streaming platform may not be the most profitable way to release a film in normal times, but the need for funds to pay back loans and other contracted expenses sooner than later may trump maximizing profits in these times. $50m from Netflix is better than waiting another year to release in theaters and hope to earn $100m when bills are past due.
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