This Box Office Disaster Is Bad News for Netflix
As the video streaming wars continue to heat up, companies such as Amazon.com and Netflix are increasingly trying to find ways to differentiate themselves from their competition.
And for the industry leaders in video streaming over the past two years, those efforts have increasingly involved building a world-class repertoire of original series.
For Netflix, anyway, this move seemed to be paying off in a big way up until last week, after its programs received no less than 14 Emmy nods, including nine for House of Cards, two for Hemlock Grove, and even one for Arrested Development, which the company recently revived for an exclusive fourth season.
Then again, that didn't exactly help Netflix stock Tuesday, which is when it fell more than 6% after the company disappointed investors with weaker-than-expected second quarter subscriber growth.
What's more, as fellow Fool Blake Bos pointed out in March, original content can often prove undeniably expensive, so there's much to be said for the merits of signing deals for lower-cost existing programming -- of which Netflix incidentally also boasts plenty.
Netflix placed this bet too early
But what happens when some of that expensive original content doesn't perform as anticipated?
Thanks to last weekend's dismal box office debut of DreamWorks Animations' Turbo, we may get the chance to find out.
Remember, as part of Netflix's huge content deal with DreamWorks announced back in February, the animation specialist agreed to create an original kids' series exclusively for Netflix, based on the feature film, and aptly named Turbo F.A.S.T.
So what's the problem?
If Turbo's horrific $21.3 million opening weekend take is any indication, kids may simply not be all that interested in the snail-racing flick.
And considering Netflix probably promised DreamWorks a hefty sum to ensure that the series would be offered only alongside its signature red logo, something tells me the company won't be allowed to back out of the deal, as the animator undoubtedly wants to continue milking every possible penny out of the brand in an effort to recoup its estimated $135 million production budget.
Then again, perhaps Turbo is exactly the kind of show that could do exceedingly well on a streaming $8-per-month service like Netflix, so maybe this won't be a huge problem for the King of Streaming in and of itself.
The silver lining
On that note, Netflix's presumptuous bet on an unproven movie could also serve as the perfect wake-up call it needs to finally become more careful about how it spends its money promoting.
After all, from an investing standpoint, hosting all the streaming content in the world won't mean much to shareholders if Netflix can't master the seemingly simple task of keeping expenses in check.
Of course, we also need to remember Netflix isn't the only company involved in the battle for your living room.
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The article This Box Office Disaster Is Bad News for Netflix originally appeared on Fool.com.Fool contributor Steve Symington owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, DreamWorks Animation, Google, and Netflix and owns shares of Amazon.com, Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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