Ten years ago, no movie would dare try to find mainstream success with an online release. But today, films are turning to digital distributors like Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) in order to reach younger audiences around the world. While directors and producers still turn to big-name studios to finance tentpole blockbusters, digital distributors are poised to fill the gap in mid-budget film financing. Further, the issue with digital distributors is that actors lose back-end deals where they make more money if films turn a profit in theaters. In a surprising move, though, Netflix just closed a deal and ended a bidding war by spending $90 million on Bright, a a Max Landis scripted cop thriller that David Ayer will direct, with Will Smith and Joel Edgerton starring.
The deal is a landmark move for digital distributors, with Netflix giving producers almost everything they could ask for from a major studio except a theatrical release. In buying the rights to produce and distribute the project, the digital streaming company paid $3 million for Landis' script and committed $45 million for the production budget, with the remaining $42 million set aside for talent fees and to buy out their back-end deals. In order to secure the rights to the movie, Netflix had to outbid Warner Bros. studios (NYSE: TWX) who partnered with MGM to offer a $50 million deal, with a traditional back-end revenue scheme. Some speculated Warner Bros. would secure the project since Ayer directed his last project, Suicide Squad, at the studio.
Ultimately, the creative team behind Bright went with Netflix, which is trying to appeal to mid-budget filmmakers hoping to gain international distribution for their projects. In an interview, Ayer noted, "I was after the creative freedom, the ability to make really hard R rated movies with vision and voice, and see them play in the on-demand world. I felt like we were given a hunting license to be truly creative, and to do what I love." Netflix's reputation of offering producers, writers, and directors significant creative freedom is something that major studios find hard to beat, with Netflix's development and production departments offering little criticism to their shows' creative minds. And while Netflix's only prior original film is Beasts of No Nation, which lost a a competitive campaign for an Oscar nomination and other awards season glory, Bright's creative team clearly felt confident enough in the streamer's ability to finance and distribute the project.
For Netflix, this investment helps strengthen its worldwide library. With the company's recent expansion into over 130 countries this January, the service has been looking for ways to bolster its international offerings despite diverse competition in each territory. Obtaining streaming rights internationally is costly and often hard-fought, with Netflix usually only winning the rights to the most lucrative films in a minority of its territories. But by financing Bright, Netflix will receive the global distribution and streaming rights for the film, allowing the company to advertise a US-blockbuster to potential subscribers around the world.
Additionally, the move is a signal for filmmakers and producers that Netflix is serious about producing mid-budget movies. While major film studios have been hesitant to finance films in the $80-120 million range because of the difficulty of getting a return on that investment, Netflix is able to finance these films because they aren't held captive to box office receipts. With 2016 already an increasingly important year for Netflix competing for distribution rights for high-profile independent movies making the festival circuit, this move is a sign that the company is looking to not only acquire previously financed films, but move further into film financing and production.