Movie Theaters Want to Play ‘Knives Out’ Sequel ‘Glass Onion.’ Does Netflix Care?

Rebecca Rubin
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Since the pandemic, it’s been feast or famine at the box office. And after dining out in spectacular fashion for much of the summer, movie theaters are bracing for a starvation diet this fall.

With a series of question marks on the calendar through the remainder of the year, there’s at least one movie that exhibitors expect to triumph. The bad news? It’s coming to Netflix.

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The highly anticipated “Glass Onion: A Knives Out Mystery” will debut Dec. 23 on the streaming service, as well as “in select theaters on a to-be-announced date,” Netflix reported on Monday.

But, much to the chagrin of movie theater operators, the film is not expected to secure a significant theatrical rollout, at least not the kind that would have greeted the sequel to director Rian Johnson’s 2019 sleeper hit “Knives Out,” had Lionsgate been distributing the starry murder mystery. Lionsgate and Media Rights Capital backed the first movie, which made a killing in theaters with $165 million in North America and $311 million worldwide. Then in early 2021, Netflix made an irresistible offer by plunking down $450 million for the rights to two “Knives Out” sequels to land on the streamer.

“‘Knives Out’ was exceptional, and Rian Johnson is a sensational storyteller,” says David A. Gross, who runs the movie consulting firm Franchise Entertainment Research. “It’s understandable that exhibition would want this movie. Even with a drop from the first film, it would be welcome business.”

Given its new home at Netflix, it may not be surprising that “Knives Out 2” will not make much of a splash on the big screen. But it’s a collective bummer to theater owners, who don’t have a ton of exciting options to offer their patrons as the summer movie season grinds to a halt. At this point, the overall box office is lagging 30% behind 2019, the last year before COVID, according to Comscore. And barring a miracle, box office analysts do not believe ticket sales will be able to make up much ground — even with blockbuster-hopefuls “Black Panther: Wakanda Forever” and “Avatar: The Way of Water” coming around the holidays.

For cinema operators in Augusta, Seattle and every North American city in between, the gripe is the same: there simply aren’t enough new movies to get revenues back to pre-pandemic levels. They were hoping a buzzy Netflix release could help fill the void at a time when studios have released 36.5% fewer films this year compared to pre-plague times. It’s not entirely Hollywood’s fault; the decrease in output comes down to several reasons. Namely, COVID outbreaks have delayed shooting dates, visual effects companies have been struggling to keep up with demand, and some movies have gone to streaming services.

Moreover, exhibitors are disappointed because “Knives Out” was a rare mid-budget theatrical hit, one that didn’t require superheroes, rogue dinosaurs or hyperactive yellow henchmen to sell tickets. With stellar reviews and the buzzy cast of Daniel Craig, Chris Evans, Ana de Armas and Jamie Lee Curtis, the whodunit “Knives Out” succeeded by appealing to adults with its smart humor, giving families with grown children something to see in theaters around the holiday season. Other than Johnson, who is writing and directing the sequel, only Craig is returning for “Glass Onion,” as his irreverent detective Benoit Blanc investigates a new mysterious event populated with characters played by Edward Norton, Janelle Monáe, Leslie Odom Jr., Kathryn Hahn, Kate Hudson, Dave Bautista and Ethan Hawke.

Prior to the pandemic, Netflix offerings rarely played in cinemas nationwide — particularly the two biggest chains, AMC Theatres or Regal Cinemas — because the streamer rejected the traditional theatrical window. (Cinemark, the third-largest circuit, has hosted a few Netflix movies in COVID times.) Netflix is first and foremost a streaming service, so it did not have a compelling reason to prioritize the big screen. Unlike traditional players, Netflix is focused on gaining subscribers, not racking up box office dollars. When the company does put its new films in select theaters, it’s to qualify for awards season rather than to make money. But any productive talks between Netflix and major exhibitors, most of whom are still struggling to recover from pandemic-related closures, have stalled as of late.

AMC Theatres and Regal Cinemas each declined to comment, as did Netflix.

“There is still a big chasm between Netflix and most exhibitors with regard to the exclusive theatrical window,” says Eric Handler, a media analyst at MKM Partners. “I also think you aren’t maximizing profit using shorter windows.”

Yet film exhibition industry insiders suggest it is not just about the theatrical window, which already shrank dramatically during the pandemic. Cinema owners are more concerned about the marketing power behind Netflix films. An exclusive theatrical window means little without a direct push to get customers to theaters, and exhibitors don’t want to fill their marquees with titles that didn’t get a concerted promotion for silver screens. And those campaigns do not come cheap; they can cost around $30 million to $35 million for a mid-budget film like “Knives Out.” For mega-budget tentpoles, it would require at least $50 million domestically.

More recently, Netflix has started to ramp up marketing efforts with multi-million dollar campaigns to boost awareness for its Chris Evans and Ryan Gosling two-hander “The Grey Man,” Jamie Foxx’s fantasy adventure “The Day Shift” and “Red Notice,” with Dwayne Johnson, Ryan Reynolds and Gal Gadot. But, of course, they aren’t catering to movie lovers of the ticket buying variety.

Even with a proper theatrical marketing campaign, executives require a certain expertise to secure screens at theaters across the country. It’s not as easy as downloading a file and dropping a new movie in 3,000-plus locations, analysts say. Apple, for example, is paying a 10% distribution fee for Paramount to release Martin Scorsese’s next film, “Killers of the Flower Moon” in theaters.

“It’s enormously expensive and complicated to distribute and market wide-release movies,” says Gross. “You can’t just push a button and say, ‘Let’s distribute ‘Glass Onion’… and then we’ll figure out our next movie.'”

Netflix doesn’t feel theaters are necessary to justify its spending habits, a stance it’s held since the beginning. The company underscored its streaming-first mission in its second quarter shareholders letter, writing that “as a pure play streaming business, we’re unencumbered by legacy revenue streams.”

The letter continues, “This freedom means we can offer big movies direct-to-Netflix, without the need for extended or exclusive theatrical windows, and let members binge watch TV if they want, without having to wait for a new episode to drop each week. This focus on choice and control for members influences all aspects of our strategy, creating what we believe to be a significant long term business advantage.”

But Netflix has wavered in the past. In April 2022, after steadfastly promising it would not resort to in-app commercials, the streamer announced plans to launch an ad-supported package in early 2023. At a time when subscriber growth is slowing and its stock has taken a nose-dive, the company is looking for additional revenue streams.

And analysts note that contrary to popular belief, studies have shown streaming doesn’t necessarily cannibalize theatrical business. However, others maintain that people wouldn’t pay $20 for a single movie ticket if they could spend less money to see the same movie — and hundreds of other TV shows and films — per month on Netflix.

“I don’t think [subscribers] would gravitate away from Netflix because they can see a movie in theaters,” says Eric Wold, a senior analyst with B. Riley. “I don’t see it harming the subscriber base.”

A long-standing critique of Netflix’s approach, at least from movie theater purists, is that streaming-only releases aren’t as likely to make a lasting cultural impact. Sure, Netflix originals like “Purple Hearts” or “Spiderhead” may dominate Twitter chatter over the weekend while racking up millions of views. But how many Netflix subscribers remember “Triple Frontier? You know, the $115 million-budgeted action adventure with Ben Affleck, Oscar Isaac and Charlie Hunnam?

“Netflix has painted themselves into a corner. They’ve tried different things to somehow present themselves as producing movies that are just as exciting as the biggest movies in theaters,” Franchise Entertainment Research’s Gross says. “But as long as they are on the sideline, they aren’t going to get there.”

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