‘Glass Onion’ could have made $200 million, but Netflix only let it play in theaters for a week

Netflix probably left hundreds of millions of dollars on the table by not keeping Rian Johnson’s “Glass Onion” in theaters.

The sequel to Johnson’s critically acclaimed “Knives Out” opened in nearly 700 theaters, the largest release of any Netflix original film to date, last Wednesday ahead of the Thanksgiving holiday weekend. “Glass Onion” leaves theaters Tuesday. It will arrive on Netflix Dec. 23.

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The movie snared an estimated $13 million to $15 million during the five-day stretch, a solid opening for a film released in only a limited number of theaters.

Box office analysts, however, say that figure could have been much higher if Netflix had opted for a traditional wide release of 2,000 to 4,000 theaters. The truncated run for “Glass Onion” also prompted industry insiders to again question the streamer’s theatrical release strategy. Netflix has backtracked on its previous policies, including by adding an ad-supported subscription option, leading many to wonder whether the company should rethink its resistance to the traditional Hollywood movie release model as it looks for new ways to grow revenue.

“With a traditional wide release, premium screen spread, and full marketing campaign, I think ‘Glass Onion’ could have generated at least $50 million to $60 million to lead the entire market,” said Shawn Robbins, chief analyst at BoxOffice.com.

Instead, Disney and Marvel Studio’s “Black Panther: Wakanda Forever” continued to lead the box office, tallying $45.9 million in domestic ticket sales during the regular three-day weekend and $64 million for the five-day holiday period.

Netflix declined to provide box office receipts for the film, breaking with standard procedures other studios adhere to each weekend, so it is unclear what “Glass Onion” generated in ticket sales Friday, Saturday and Sunday.

But in 2019, “Knives Out” snared $312 million globally on a budget of just $40 million. The first film’s performance at the box office has provoked questions about why Netflix has limited the release of “Glass Onion” to just one week in a limited number of theaters. After all, the streamer reportedly shelled out $400 million for the rights to two sequels.

Box office analysts predict the film could have hauled in more than $200 million in ticket sales before the end of its run if it had been given a wider global release.

“This is exactly the kind of movie adults want to see in theaters right now,” said Robbins. “The family element made ‘Knives Out’ a perfect Thanksgiving release for audiences across the country three years ago. Daniel Craig’s return as Benoit Blanc, Rian Johnson’s sharp storytelling, and another round of positive reviews for ‘Glass Onion’ are building on the excellent goodwill from the prior film as this semi-sequel reaps some rewards, but it arguably could have achieved even more.”

Word of mouth was a huge factor in the success of “Knives Out,” as evidenced by the film’s low drop in ticket sales from week to week after its opening. Typically, films will see weekend sales drop by 50% or more in each week after its opening. “Knives Out” ticket sales declines remained consistently under 40% until Christmas, when sales got a 50% boost, and then only fell between 10% and 30% weekly until February.

This indicates that audiences were talking about the film and encouraging others to go out and see it, leading to a strong hold in ticket sales.

“Glass Onion” earned a 93% “Fresh” rating on Rotten Tomatoes from 238 reviews and an audience score of 92%, suggesting that it too could have generated the same kind of word of mouth.

Some executives within Netflix reportedly lobbied co-CEO Ted Sarandos earlier this year to consider longer stints in theaters and wider releases for some films, but Sarandos nixed the idea. Top brass at the company have said repeatedly that the future of entertainment is streaming.

The company’s strategy in the past with limited theatrical releases – such as with Martin Scorsese’s “The Irishman” – has been to build buzz for subscribers before the film arrives on its service. That’s the play here, too, the company said during last quarters earnings video.

“We’re in the business of entertaining our members with Netflix movies on Netflix,” Sarandos said during the call.

He said that Netflix has brought films to festivals and gave them limited runs in theaters because filmmakers have demanded it.

“There [are] all kinds of debates all the time, back-and-forth, but there’s no question internally that we make our movies for our members and we really want them to watch them on Netflix,” he said.

Netflix did not immediately respond to CNBC’s request for comment.

While Sarandos and co-CEO Reed Hastings have remained adamant that subscribers don’t want Netflix content in theaters, some on Wall Street don’t think that’s the case.

“Subscribers don’t care at all,” said Michael Pachter, analyst at Wedbush. “The talent, on the other hand, cares a lot. … The talent needs that to help negotiate future deals, and thrives on the prestige of awards nominations.”

“Netflix did not do this for the money,” he added. “They did it because of pressure from the talent.”

To others, like streaming expert Dan Rayburn, Netflix’s cross-platform promotion, putting “Glass Onion” in theaters for a week to tease its release on the streamer a month later, “makes a lot of sense.”

Netflix would have also had to shell out more in marketing costs to promote the film over time.

Still, it’s hard for investors to see all the money left on the table − especially when Netflix continues to spend heavily on content as subscriber numbers slow.

In recent years, the streamer has spent big on flashy, blockbuster-style action movies like “The Gray Man” and “Red Notice,” which ran the company $200 million each. The films are the first steps in bids to spark event-level franchises. But they’re costly, and it’s unclear how impactful they have been for Netflix’s bottom line.

Unlike rival studios Universal and Disney, Netflix doesn’t have a wide breadth of sources to generate revenue. Its only option, until recently, for recouping its spending has been through subscription growth. The company is hoping its ad-tier will help generate more funds to subsidize its $17 billion annual spending on content.

Box office analysts and Wall Street see theatrical releases as a smart way for Netflix to market its content and spark revenue growth.

“Here’s hoping ‘Knives Out 3’ is given the chance to build further on this watershed moment of cooperation between Netflix and theatrical exhibitors,” Robbins said. “It would be a win-win for the entire industry.” 

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Rotten Tomatoes.