Netflix Is Making Movies Shunned by Studios

‘Beasts of No Nation’ is example of company’s push into feature films

Netflix Inc. has proved itself a competitor to established networks in the world of high-quality television series.

As it moves into feature films with the release of “Beasts of No Nation” on its streaming service and simultaneously in a small number of theaters this past weekend, it showed it is taking a different approach: making the type of movies that studios no longer do.

An African war drama about a child soldier starring Idris Elba, “Beasts” was initially unable to find a studio home and was produced with independent financing, after which Netflix bought world-wide rights for $12 million, about double its production budget.

Although other distributors expressed interest, Netflix, with its 69 million global subscribers, appeared likely to reach the most people and made a compelling financial offer, said Jonathan King, an executive vice president at co-financier Participant Media.

While major studios are focusing on international-oriented tentpoles like “Jurassic World” and “Avengers” and cutting back on everything else, Netflix and competitor Amazon.com Inc.’s entry into the movie business could signal a revival for prestige dramas and mid-budget star vehicles, albeit more on the small screen than the big one.

After “Beasts,” its lineup includes a quartet of comedies starring Adam Sandler, a political film starring Brad Pitt, a satire from director Christopher Guest, and a sequel to martial arts movie “Crouching Tiger, Hidden Dragon.”

In part because major exhibition chains won’t play movies also available to watch at home, “Beasts” was in only 31 theaters in the U.S. this weekend. Even on that basis it fared poorly though, grossing just $50,699—a sign that perhaps few people are willing to buy tickets to a film they can watch at no extra cost if they already pay for Netflix.

Still, one of Netflix’s goals was simply to make “Beasts of No Nation” eligible for Academy Awards, which is why it had to be released in some theaters, not just to watch at home via streaming.

Amazon is said to be taking a different approach, promising filmmakers their work can play in theaters for several weeks before streaming on its Prime Video service. Its first project, from director Spike Lee, may have its premiere before the end of the year.

Mr. Sandler’s movies, meanwhile, won’t play in theaters at all since awards consideration is not a factor for him and small ticket sales could only hurt the star’s public image.

“It actually takes a lot of pressure off when you don’t have to worry about the box office anymore,” said a person who has worked on a Netflix movie.

The company’s goal is to produce a diverse film slate that, in total, keeps its existing subscribers happy and draws new ones. On Wednesday, Netflix reported that it added fewer U.S. subscribers than expected in the most recent quarter. Its stock fell 8% Thursday on the news.

As with television shows, Netflix’s movie selections are largely data-driven. Mr. Sandler, for instance, is coming off a series of box office flops including “Pixels,” “Blended” and “Jack and Jill,” but his movies are very popular on Netflix. In the case of “Beasts of No Nation,” Netflix observed that the similar “The Last King of Scotland” has performed well on the service, said chief content officer Ted Sarandos.
The vast majority of movies made outside the studio system fail to garner much attention or money, making financing them “almost like philanthropy,” noted Mr. Sarandos. Netflix’s new willingness to buy them could help change that equation.

Its different economic model, along with the desire to make a strong statement to the creative community as it enters the movie business, has led to Netflix paying more for certain movies than studios were willing to pay.

In the case of Mr. Sandler’s satirical Western, “The Ridiculous Six,” which makes its premiere in December, Netflix spent about $60 million, said people close to the production. Sony Pictures Entertainment, Viacom Inc.’s Paramount Pictures, and Time Warner Inc.’s Warner Bros. all previously considered the picture but declined to make it for that cost, knowledgeable people said.

Mr. Pitt’s “War Machine” was initially shopped to studios, which were wary of its cost and risky commercial prospects, said people involved in the discussions. Netflix, however, agreed to pay $75 million, according to a person close to the movie.

In reaching that figure, people behind “War Machine,” a satirical comedy in which Mr. Pitt will play a character based on former U.S. commander in Afghanistan Stanley McChrystal, considered that the minimum production budget would be about $30 million, the knowledgeable person said. The rest of the money covered the cost that so-called above-the-line talent like Mr. Pitt, other actors, the producers and director would make if the film performed well commercially.

“Then there was a little premium because Brad working at Netflix is a big deal for them,” the person added.

Typically, talent like Mr. Pitt are paid in part through a percentage of the revenue generated at the box office, on DVD, and other media. But because virtually everyone who sees “War Machine” will do so via their Netflix subscription fee, such revenue-sharing isn’t possible.