The Weird Genius Of The "Crouching Tiger 2" Netflix Deal

By releasing a major feature film on the streaming service — and in IMAX — the Weinstein Company has crafted the strangest, and perhaps savviest, ploy yet to shut out movie theaters from the movie business.

Late Monday night, Netflix and The Weinstein Company announced that Crouching Tiger, Hidden Dragon: The Green Legend would be the first major feature film to debut exclusively on the digital streaming service — instead of in a standard theatrical release — on Aug. 28, 2015. Although the announcement also noted that the film would also debut in "select" IMAX theaters worldwide on the same date, it is already clear that the movie won't be appearing on IMAX screens housed in three of the largest movie theater chains in the U.S.: Regal, Cinemark, and Carmike. In a statement to BuzzFeed News, AMC Theaters, which is owned by Chinese conglomerate Wanda Group, did not state unequivocally that they would not exhibit Crouching Tiger 2, but its sharp tone remains perhaps the best encapsulation of how exhibitors feel about this deal in general:

AMC Theatres and Wanda Cinema are the largest operators of IMAX-equipped auditoriums in the world. We license just the technology from IMAX. Only AMC and Wanda decide what programming plays in our respective theatres. No one has approached us to license this made-for-video sequel in the U.S. or China, so one must assume the screens IMAX committed are in science centers and aquariums.

Despite the outcry from theater chains, this announcement could fundamentally reshape the way the movie industry regards the way it does business. More likely, it will serve as simply yet another example of the slow, unstoppable expansion of what it means to watch a movie. Regardless of the outcome, however, it is a showdown that has been a long time coming within the movie business and — let's be clear here — it is kind of weird that it is happening now, with this movie, on this service. And kind of genius.

It is weird that The Weinstein Company, which did not exist when Ang Lee's Oscar-winning film Crouching Tiger, Hidden Dragon became the highest-grossing foreign language film in the U.S. in 2000, is making a sequel 14 years later that does not involve Lee nor any of the first film's creative team, except for fight choreographer Yuen Wo-Ping, who is directing the new film outright. TWC can call the movie a sequel because, for one, John Fusco (The Forbidden Kingdom) is writing the movie based on the same novel series by Wang Dulu that inspired the first Crouching Tiger, and for another, actress Michelle Yeoh is reprising her role as Yu Shu Lien. (Also weird: The film is shooting not in China, but in New Zealand.)

It is weird that TWC would choose the subscription-based Netflix to exhibit this major feature release, rather than the pay-for-play VOD options that have proven successful on a smaller scale with independent film releases through subsidiary RADIUS-TWC, like Bachelorette and Snowpiercer.

And it is weird that IMAX would risk angering its theatrical partners by agreeing to be the exclusive theatrical parter for the Crouching Tiger 2 Netflix release.

But it is also genius that TWC is using this particular film as its weapon, and IMAX as its partner, to slice through the iron-clad resolve of North American movie theaters to maintain their exclusive window for theatrical exhibition.

And the reason, like so many things with Hollywood of late, has to do with China.

Let's take a step back for a moment. The "theatrical window" — i.e., the space of time when a feature film is available only at movie theaters, usually lasting roughly three months — is something that major Hollywood studios have been itching to shorten since at least 2011. That's the year Universal floated a plan to offer the Ben Stiller-Eddie Murphy comedy Tower Heist on cable VOD three weeks after its theatrical release — for a whopping $60. It was met with a swift and resolute rejection by American movie theater chains, which refused to show the movie at all if Universal went through with its plan. The studio quickly backed down, because its plan made no sense: The studio still needed that theatrical run, since there was very little chance Tower Heist's target audience was all that keen to spend $60 to watch a movie they would have spent $8 on at the theater. Universal had no leverage, exhibitors knew it, and they called the studio's bluff.

But closing that theatrical window has remained a priority among Hollywood studios, for the simple fact that for over a decade now there has been a seemingly inexorable erosion of audiences away from movie theaters and into their homes. In 2002, according to Box Office Mojo, nearly 1.6 billion tickets were sold in the U.S. Last year, it was just over 1.3 billion — a loss of almost 300 million moviegoers over 11 years. Theaters have been scrambling to entice audiences back, with amenities like assigned seating, fancier chairs, and in-theater food service, while at the same time boosting ticket prices and especially 3D surcharges to make up the difference. But while they've succeeded in propping up box office revenue — $10.9 billion in 2013 versus $9.2 billion in 2002 — that steady drip of audiences away from theaters has been weighing on Hollywood's mind. (This summer's abysmal box office certainly has not helped matters.) Studios want to start making serious money from the other ways people are watching their movies — on their wide-screen TVs, tablets, and (shudder) smartphones — as quickly as possible.

The one exception: IMAX, which has seen its business and its audiences grow since it started showing theatrical releases and not just nature documentaries. Some major directors — including Christopher Nolan, Michael Bay, and J.J. Abrams — have taken to shooting huge chunks of their movies on IMAX cameras, making their films must-see-in-the-theater experiences for a growing number of moviegoers.

Meanwhile, in China, theatrical business is expanding wildly, so much so that in just three short years, the country has come to dominate the international box office. As of June 30, IMAX had 152 commercial theaters in China, just over 20% of its 735 commercials screens worldwide, and, according to Variety, the company plans to have more than 200 screens in China by next year. Even though studios make far less per movie ticket in China than they do in the U.S., and exhibition deals in the country are nightmares to negotiate and maintain, the rapid box office growth in China has made the country impossible for Hollywood to ignore.

So, to recap: The Weinstein Company will release the sequel to one of the highest grossing Chinese-set movies of all time on Netflix, the biggest subscription streaming video service in the U.S. Subscribers to Netflix will have already paid for the opportunity, making the film much cheaper than shelling out to see it in a theater. If audiences do want a big-screen experience, they will only be able to find it on IMAX, and given how few movie theater chains will allow their IMAX screens to play Crouching Tiger 2, audiences will be that much more incentivized to watch it on Netflix. And since Netflix isn't in China, IMAX will be the exclusive exhibitor there for a movie that was always likely to make the most money in that country anyway — whether the film plays commercially, or solely in science centers and aquariums.

It is a model that isn't easily repeatable, of course, and Netflix has been notoriously unwilling to share the kind of transparent viewership numbers that could make clear whether this experiment is a success. And indeed, the movie could potentially not be good, in which case all the careful positioning and complicated exhibition deals can't save it.

In other words, the whole thing is kind of weird. But it's also kind of genius: This time, TWC, Netflix, and IMAX have the leverage; by pulling their support in the U.S., theatrical exhibitors are only strengthening Crouching Tiger 2's chances to succeed on Netflix. All they can do is hope for something exhibitors have never wished for before: a flop.

This story has been updated to include a statement from AMC Theaters.