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Last week, Netflix Co-CEO Ted Sarandos and Pixar Chief Creative Office Pete Docter gave interviews conceding the difficulty of Hollywood content breaking through to mass audiences. They each offered a different perspective on why “big IP” was having trouble succeeding both at the box office and in streaming.
Sarandos told The New York Times’ Lulu Garcia-Navarro, “globalization of American film has disconnected American film from audiences and I think that the love affair with it is less because of it.”. Netflix has learned that “very authentic” content that works in its home country will travel internationally Netflix has learned nothing “engineered to travel” will travel.
Pixar’s Docter shared that Disney and Pixar’s creative team had learned a different lesson in the same marketplace:
“The world is more crowded. There’s just so much out there, and it’s harder and harder to surprise people. That means we have to work harder.”
After “Lightyear” lost millions of dollars in 2022 and “Elemental” had Pixar’s worst-ever opening-weekend performance in 2023, Pixar decide it would "instead develop concepts with clear mass appeal, many of which—in the case of sequels and spinoffs—had already been proven.”
In short, Netflix is betting its future on hits emerging from local markets whereas Pixar is betting on traditional mass appeal. The bets come at a time when the former is evolving creatively and the latter is struggling creatively. There is a key reason for this difference: Pixar’s business model relies on theatrical-first whereas Netflix’s model is streaming-only with a handful of exceptions making it to theaters.
That said, both strategies emerged after notable failures with “big IP”: Netflix’s failed series “Jupiter’s Legacy” from the universe of comic book writer Mark Millar ($200 million budget before marketing) in 2021, and Pixar with “Toy Story” spinoff “Lightyear” ($200 million budget before marketing) in 2022. The two different strategies reflect two very different takeaways from the same tough market lesson.
Key Takeaway
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“Jupiter’s Legacy”
Three years ago to the date, Netflix announced that it was canceling “Jupiter’s Legacy”—the first major series from its acquisition of the Millarworld library of IP from 2017—after only one season. It was a surprise announcement less than 30 days after the debut of the show. It was “supposed to go on for several seasons” and Mark Millar even was launching a new 12 issue comic tied to it. Instead, Netflix let the talent of the high-profile cast—led by Josh Duhamel and Leslie Bibb—out of their commitments to the show.
It was a high profile failure at the same time then-Netflix Co-CEO Reed Hastings, Hastings was telling investors that Netflix’s long-term aim is to beat Disney at animation: “We’re very fired up about catching them in family animation, maybe eventually passing them, we’ll see. A long way to go just to catch them.”
Even if “Jupiter’s Legacy” was not animated, a related title in the works then was an anime version of the heist comic “Supercrooks” about eight supervillains written by Millar. Both were swings at Disney’s model of many franchises from the same IP.
The failure of “Jupiter’s Legacy” did not mark the end of Netflix’s Disney-esque aspirations. Almost four months later, Netflix announced the acquisition of the Roald Dahl Story Company. Since acquiring The Roald Dahl Story Company, Netflix has released “Matilda: The Musical” (2022) and a Wes Anderson film version of his short story collection “The Wonderful Story of Henry Sugar” (2023) starring Benedict Cumberbatch. “Henry Sugar” was 101st out of 9,401 movies in the recent “What We Watched” report, and “Matilda” was 108th.
Both Dahl movies are successes. But, as Sarandos implied above, neither are the engine of a competitive strategy for Netflix. Polish drama film “Forgotten Love // Znachor” ranked 28th with 2.3x the views of “The Wonderful Story of Henry Sugar” and 2.5x the views of “Matilda”. Ten foreign films rank above “Henry Sugar” in views and eleven rank above “Matilda”. Local is both more economically efficient (local productions are cheaper than asset purchases) and more likely to resonate globally on the Netflix platform.
“Lightyear”
Disney’s promises to investors for “Lightyear” in 2022 were ambitious. Then-CEO Bob Chapek attempted to dazzle investors on the FY Q2 2022 earnings call with the pitch that the release of “Lightyear” illustrated Disney’s “ability to reach people with our uniquely engaging content across an array of touch points to make our portfolio of businesses and brands a bigger part of their lives.”
The movie grossed $226.4 million—$118.3 million in the United States and Canada, and $108.1 million in other territories— or 56% of the total budget with marketing. The explanation for this expensive failure in Bloomberg was “the film’s dour tone failed to impress critics and moviegoers, while a scene with a same-sex kiss resulted in its being banned in most countries with predominantly Muslim populations.”
“Lightyear” also emerged a year after Pixar made three original films—”Soul”, “Luca” and “Turning Red”—available to subscribers on Disney+, instead of holding them for release in theaters. The decision was intended to “to give consumers some flexibility” during the pandemic, according to Chapek. Docter admitted in later interviews that trained audiences to expect Pixar pictures on Disney+ instead of in cinemas, and without premium video-on-demand pricing.
CEO Robert Iger told the Dealbook Summit last November, "“We have to entertain first. It’s not about messages.” To paraphrase Sarandos, Lightyear was “engineered to travel” with its messaging, and for that reason it went nowhere. Lightyear "proved that the franchise’s relationship with audiences can be fickle.”
A Tale of Two Pivots
Ultimately, what Disney and Netflix learned in the pandemic is that both the stories they tell their consumers and investors have changed. Only Netflix seems to have evolved both stories.
The angle of the Bloomberg piece on Pixar was “After duds and missteps, the famed animation studio sees Inside Out 2 as key to restoring the magic.” But, the piece instead reveals that Disney’s ecosystem for “big IP” has been fundamentally transformed by the addition of streaming. Iger's "entertain first" is as much about the creative in the movie as it is the complex calculus of IP that audiences will pay to consumer across the Disney ecosystem's many touchpoints (e.g., streaming, Parks, merchandise).
So, if “Inside Out 2” has been “engineered to travel”, it will inevitably fail both theatrically and within the Disney ecosystem. As Netflix learned with its bets on "big IP", neither a fan's relationship with the IP nor the marketing of the IP to a broader audience is enough to drive a media business anymore. The implication is that with so much choice, audiences do not always need or want to pay for a movie. The implication is that fans of "Inside Out 2" may watch the movie or engage with the characters, but no longer need the movies.