Does Netflix new deal to make movies and stream them to home entertainment centers threaten movie chains?

Netflix has just inked a four-movie deal with Adam Sandler that threatens to shake up the big theater chains by radically altering the way movies are distributed and viewed. It will allow Netflix to produce movies and to stream them directly to customers’ home entertainment centers and computers, completely bypassing exhibit houses. The online Washington Post put this ominous headline on the story: ‘Why the Adam Sandler deal with Netflix could doom theaters…’ Exhibitors, especially big chains like Regal Cinemas, Cinemark and AMC, are understandably upset.

But  huge investment in digital projection systems will give the exhibitors the ability to transform the movie business even more radically than Netflix has transformed it already. At a cost of about $65,000 per projector, movie houses have installed digital systems that have all but eliminated Kodak prints. The savings to distributors have been enormous – on the order of a billion dollars a year in mailing and insurance costs alone. Now, instead of making and shipping 1,200 prints to open a blockbuster movie “wide,” the studios send out ultra-high-definition discs that cost just a few dollars to create and ship. Digital projection systems have also allowed theaters to broadcast special “live” events, such as performances by the Bolshoi Ballet, the London Philharmonic Orchestra and the New York Metropolitan Opera. The theaters have a big advantage over home systems here, since such performances benefit greatly from giant screens (including IMAX) and spectacular sound systems that far outclass even the best home entertainment systems. And there’s yet one more very important factor that will continue to favor theaters over home entertainment systems: the eagerness of all but die-hard couch potatoes to get out of the house on a Friday or Saturday night.