Netflix earnings hit last night and I’m going to ping on my usual summary headlines later in the week. This newsletter is going to be fully dedicated to the one thing that wasn’t mentioned, animated movies.
But first, some shameless plugging…
’Tis the season for kids media conferences, and I’m excited to be sharing some topline insights from my latest project, the Netflix Kids Content Performance Report, at the following events.
Firstly, I’m taking part in the TV Kids Festival from World Screen which happens in a few weeks. I love this event because it is fully free and virtual, and brings stunning insights from high-level execs. Grab your spot here.
Kidscreen FOMO avoiders, please skip to the next paragraph… For those of you headed to San Diego, please join us at our How to Win in the New Streaming Normal Panel on Monday February 10th at 3pm. We will be hearing from folks that have seen series success across the full spectrum of streaming. From giants like Mattel and Hasbro, to indies like Snafu Pictures and more to be announced. Discussion about content strategies will be at the forefront. If you’re there, come and say hi afterwards!
And now back to our scheduled programming…
Last earnings round we were left with no question, animated feature Spellbound from Skydance Animation was to be a major focus for Netflix in Q4. The film was given prime programming real estate across Thanksgiving Weekend in the US, nestled in nicely for the run-up to Christmas and holidays. So what happened?
Let’s start at the start… Skydance Animation has been helmed by ousted Pixar vet John Lasseter for five years now. On that basis, we can very much assume that his fingerprints are on this film. Disney-style muscle in the form of Alan Menken was brought in on soundtrack, alongside an all-star voice cast. These two elements are sure to have cranked up both performance expectations and budget. Don’t those bedfellows always go hand in hand!
The Skydance Animation output deal gazumped to Netflix in 2023, unceremoniously flipped there by Apple TV+. At the time, my question was whether a Lasseter/Disney/Pixar-size animated movie could really thrive without the full Disney machine driving on marketing and franchise. It seems the answer to this question may be emerging.
To kick things off, analyst Rich Greenfield and LightShed Partners asked in their unmissable Netflix earnings pre-read:
What went wrong with Spellbound? When you announced your partnership with Skydance Animation, Spellbound was expected to be the crown jewel kicking the relationship off. However, Spellbound’s Thanksgiving 2024 release had lukewarm reviews (48% and 51% Rotten Tomatoes critics and audience score, respectively, link) and there appeared to be no buzz or zeitgeist created by the film. Did the film underperform expectations? If so, what are you doing to ensure the rest of Skydance’s slate performs better, especially relative to the high cost you paid to license their films?
Beyond buzz or zeitgeist, we can actually see from the content performance numbers that the movie was below anything we’d consider a big swing by Netflix: the leagues of The Sea Beast or Leo. In fact, low-key success That Christmas, from Locksmith Animation, ended up pipping Spellbound at the post on more than one engagement metric. This was directed by Richard Curtis, has seasonal theming and a distinctly British vibe that is less of a sure thing in terms of travelability.
First off, Netflix Global Top 10s, where performance for Spellbound was slightly below average and nowhere near Leo or The Sea Beast:
The story isn’t much better for Spellbound when we look at US Nielsen Streaming Content Ratings. Here we can see the picture across streamers, and Disney+ dominates with major features from Walt Disney Animation Studios and Pixar. The wave of awareness and engagement created by big cinema releases propels these movies to bring home major bacon on Disney+ despite the fact the platform is less penetrated than Netflix.
Adjacent to this, Netflix themselves have a long-standing, sweetheart deal with Universal, covering Pay 1 streaming rights to theatrical movies coming from DreamWorks and Illumination. These tend to take a cheeky window on Universal’s own smaller streaming service, Peacock, before quickly moving to Netflix. Here’s an overview drafted by the great folks at What’s on Netflix:
So Disney animated theatrical films on Disney+ and Universal animated theatrical films on Netflix all do excellent business on streaming. And that’s across the board; some of these big hitters will easily outpace movies targeted at other/older demos. Against this backdrop, Netflix has managed one stunning straight-to-streaming home run last year with Leo starring Adam Sandler. With this, they proved that it was possible for a Netflix Original animated feature to compete. Unfortunately, the way 2024 has gone, this success has been proven an anomaly rather than the start of a trend. Spellbound, which was certainly being lauded as a priority and a swing, only made US Nielsen Streaming Content Ratings for one week. Below scratches together some extra data I managed to acquire:
Pipped by That Christmas once again. Nowhere in the leagues of the type of engagement Netflix can deliver with The Super Mario Bros. Movie, Leo or The Sea Beast. You can really see the power animated movies from theatrical bring to Disney+, with even acknowledged disaster Wish still having engagement levels that Netflix would be delighted with.
This begs a few questions...
1. Can this size of animated feature thrive without the marketing of a theatrical release or the machine of franchise? Leomanaged it but it looks like a one-off.
2. Should Skydance have kept the animation deal at Apple TV+ where there might have been more scope for a complementary theatrical window?
3. Is the Skydance Animation deal simply off the priority boil at Netflix because the Skydance parent company is shacking up with Paramount, making the future of the collaboration uncertain?
4. Sneaky theory #4 (also endorsed by LightShed): might Netflix eventually hatch a similar cheeky Pay 1 deal with Paramount for these movies post cinema release? Jeff Shell oversaw the genesis of the original Universal agreement when he was there. Having been ousted, he’s now president at Paramount, which would suggest there’s scope to implement the same thing. Netflix might have done well to demonstrate the value they can add in that case though; you’d have wanted to see Spellbound showing some sort of legs, rather than languishing below average.
All that being said, none of this was acknowledged or discussed anywhere in last night’s earnings call. The streamer talked about its big successes of the quarter: Squid Game, Carry-On, Jake Paul vs. Mike Tyson. This shows a diversity of dunks among their Originals: foreign drama, direct-to-streaming movies, and live events respectively. Netflix have been plugging away at their animated kids movies for five years. This was, in fact, the subject of one of the first articles I ever wrote about the streamer. It’s a shame that they can’t find a winning game plan in this genre.
Other headlines on Netflix earnings to come in a few days! I need to conquer London Toy Fair first.