Lionsgate CEO Jon Feltheimer Believes in Netflix But Its ‘Pivot’ Is Inevitable; For starters, he might reconsider his ‘Knives Out’ proposal
Lionsgate CEO Jon Feltheimer believes Netflix still has a “great business” but they “didn’t pivot fast enough” as their subscriber momentum stalled.
Observations on Netflix’s efforts to right the ship after losing $200 billion in market value provided just one of many mouth-watering morsels of industry analysis and career musings offered during a hour-long conversation at Denver SeriesFest. The conversation between the Lionsgate boss and Liberty Global CEO Mike Fries provided a first highlight of the festival’s return to in-person mode in its eighth edition, which runs until Tuesday.
Feltheimer and Fries have known each other well for decades and Fries sits on the Lionsgate board, and that familiarity has spawned a number of candid moments. (Fries deftly got Jeffrey Katzenberg and Ted Sarandos to open up in recent years at SeriesFest.) Feltheimer even offered up a few trade decisions he regretted, including greenlighting the disastrous chaotic walk and send that of Damien Chazelle Babylon after scoring big The Earth.
Pushed by Fries to assess Netflix’s challenges, Feltheimer noted that the company made a decision nearly a decade ago that came back to apply significant financial pressure. After the success of the first originals (including the Lionsgate produced Orange is the new black) and the terrain largely to itself, “they decided they were just going to do a slash and burn and hit more subs than anybody and no one would ever catch them,” said the executive. “They were just spending and spending, and if anyone else tried to spend that much, they would go broke. That was pretty much their strategy. But they got to a point where they started to slow down, and we had the pandemic. And I think maybe they didn’t pivot fast enough. But they will pivot. They still have a great business.
When Netflix released its quarterly results last month, its management team said it was taking a close look at its cost structure. Spending $20 billion a year on programming, as the company is supposed to do in 2022, won’t be sustainable.
Fries said he doesn’t think “the bubble has burst, but the air is escaping a bit” after years of gradual growth in content investment. “I think they’re going to have to pivot in their overhead,” Feltheimer said. “They constantly chased people, maybe a few of our own, and paid them twice, sometimes three times what we were paying them. It won’t work forever, will it? »
The company will also have to change its “infrastructure, probably the way it runs the business as well,” Feltheimer said, with budgets and bonuses that have become “ridiculous” likely to be cut. Assessing their original footprint will be essential, as well as a different position on the windowing.
Knives out is an example of how the company can be forced to rethink its path. Feltheimer said that prior to the recent corporate crisis, he approached her about a franchise deal for the rights to Knives Out. (Netflix launched two sequels to the 2019 Lionsgate original, paying at least double the Lionsgate limit, the CEO said.)
Feltheimer said he was offering to “loan” the original film to Netflix in exchange for some rights to the sequels. The planned trilogy could be packaged for streaming and other lucrative ancillary markets. “’We’re going to make a lot of money; we’ll distribute it, we’ll take a distribution fee, we’ll ship it back to you,” Feltheimer recalled when telling the company. “It’s an interesting organic idea for them. They thought about it and they said, ‘No’. With a smile, he concluded, “That was then and this is now. So I will go back to them. Same idea, Ted.
While he wasn’t specific about the particular markets such a deal would impact, the theater is glaring. The first film grossed $311 million at the worldwide box office. Under Netflix’s current model, sequels won’t get more than a few weeks of playtime and not in the top theater circuits.
While Netflix is the topic of the day, the conversation also touched on a number of successes for Feltheimer, who recalls learning about business from his father who grew up in Brooklyn. He said he modeled his behavior on that of his father. “I try to treat everyone with the respect they deserve,” he said.
After getting his start at New World in the 1980s, directing hit shows like The Wonder Years, Feltheimer then moved to Sony before taking over as head of Lionsgate. Much of the session focused on the unique aspects of corporate culture that Feltheimer sought to cultivate. Loyalty is a core value, with many of his colleagues having worked with him for 35 years.
While the race had its storybook elements, Feltheimer confessed to wishing he hadn’t done chaotic walk, with Tom Holland and Daisy Ridley. He ironically said he had been “bullied” by the sellers of the project, which crashed last year. “I wish I had followed my guy and gone the other way.”
Babylon has not yet been released, but Feltheimer said he already had anxieties about having to pass for financial reasons. “We have a great relationship and we killed it with The Earth,” he said. Fries then teased him about selling part of the Oscar-winning actor. “You covered!” he said as the audience laughed. “They are very creative financially, these people. I like it.”