Why Netflix Is Destined to Start Making Its Own Blockbuster Films Soon

Earns Netflix
AP/Elise Amendola

Netflix (NFLX) has been called a lot of things over the years -- some of them unkind. As the leading streaming video service -- serving up 2 billion hours of content a month -- it's going to get that. Critics call it "rerun TV" given its digital catalog that leans heavily on episodes of shows that are no longer on the air, or older seasons of current shows. Fans view it as a hub for "binge viewing" as it makes entire seasons of even new original programming available all at once, so folks can stream episode after episode.

If Netflix has its way, the next name it's called may be "movie mogul."

One of the more interesting tidbits from Netflix's earnings call late last month was the suggestion that it could soon start competing with the major Hollywood studios it usually partners with by producing a big-budget blockbuster. "It seems like you have bigger aspirations to do a real -- call it $100 million type -- movie," Netflix was asked. "Could you discuss why that's interesting and what that could potentially do for Netflix?"

This is the kind of question that Netflix would have laughed off in the past, but Chief Content OfficerTed Sarandos didn't shoot down the chatter this time.

Tinseltown Rebellion

"Without confirming or denying the range or the aspiration, I would say that to the consumers the line between a movie and a TV is getting pretty blurry," Sarandos responded, going on to say that a TV show like "House of Cards" with 13 episodes is more like a 13-hour movie. A movie, then, is along the lines of a two-hour TV show.

%VIRTUAL-article-sponsoredlinks%This would seem to indicate that Netflix thinks investing in an original series along the lines of "Orange is the New Black" or bankrolling that fourth season of "Arrested Development" is a better financial gamble than joining Hollywood's gamble in backing a costly film. But Sarandos didn't stop there.

He went on to complain that the movie industry's system of putting out a movie in the multiplexes, and then waiting nearly a year before releasing it in other distribution outlets is a broken model.

"What we like to do is look at ways -- different ways -- that we can accelerate that window," he said. "Maybe like with original programming, the most effective way to work that is to do it yourself."

That makes it sound as if Netflix will be producing a major theatrical release sooner rather than later as a way to reinvent the release cycle of movies, the way its full-season-at-once system is reinventing the release cycle for new TV shows.

Coming Soon to a Theater Near You

Last month, Netflix received its first Oscar nomination for "The Square," a critically-acclaimed documentary that details the Egyptian revolution that began in Tahrir Square three years ago. Another Netflix-produced documentary -- "Mitt," which focuses on the failed 2008 and 2012 presidential campaigns of Mitt Romney -- began streaming on the service late last month.

Documentaries are safe investments for Netflix. They are far cheaper to produce than scripted films, and Netflix knows that they generate a lot of interest for a fair amount of time.

Making a Hollywood-style movie will come with risks. Will it fare well at the box office? Will moviegoers stay away if they know that it's going to be streaming on Netflix sooner than most theatrical releases? These will be important questions to answer given the amount of money that Netflix may have to invest unless it teams up with other parties. However, a huge benefit for Netflix would be something that was mentioned at the beginning of this article.

Netflix is streaming 2 billion hours of content a month, and it began the year with 44 million streaming customers worldwide. None of its competitors comes even close to those numbers. Netflix knows just what these 44 million people are watching -- information that will be invaluable in deciding what movies to get behind. It knows which genres, directors, writers, and actors viewers are drawn to with a precision even the most successful Hollywood studios can't match.

Netflix is going to make a movie -- a big movie -- and when it does, you're probably going to want to see it.

Motley Fool contributing writer Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our newsletter services free for 30 days.