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Netflix Paying Big Money For Will Smith Movie: Good Or Bad?

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Netflix Paying Big Money For Will Smith Movie: Good Or Bad?
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Netflix, Inc. (NASDAQ: NFLX) has reportedly committed $90 million to purchase the rights to fantasy cop thriller "Bright" starring Will Smith. The big budget makes "Bright" Netflix’s largest movie deal to date.

Netflix reportedly won a bidding war with Time Warner Inc (NYSE: TWX). Warner Bros. recently worked with Smith and "Bright" director David Ayer on another movie, "Suicide Squad."

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Netflix is reportedly committing about half of the $90 million budget to production costs and the other half to talent. Albert Fried & Co analyst Rich Tullo sees the movie as a high-risk/high-reward scenario for Netflix.

“Honestly, I like the movie business better than TV for Netflix, but so far the movies have not seemed to be worth the money they are paying,” Tullo told Benzinga. “They must feel Will Smith indexes well on the service.”

Netflix expects to pay a hefty price for the movie’s talent partly because of the lack of residuals the actors would receive from ticket sales. Netflix is reportedly interested in a limited theatrical run for "Bright" in addition to an online release, but that type of arrangement with theaters would be unprecedented for a movie this large.

Wedbush analyst Michael Pachter was a little bit skeptical. "I am a huge Will Smith fan, and he is far more marketable than Adam Sandler, but if Netflix made the best offer, it makes you wonder," Pachter told Benzinga. "[S]ince this threatens the Hollywood model, it may not get a lot of critical support from places like the Golden Globe and Academy Awards. Distribution and awareness depend on the Hollywood press, and it isn't clear they will get that."

Pachter holds an Underperform rating and $45 price target on the stock.

After ending 2015 as the top-performing stock in the entire S&P 500, Netflix has started off 2016 down 11.8 percent.

Image credit: Red Romero Ramos, Flickr

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Apr 2017Cantor FitzgeraldMaintainsOverweightOverweight
Apr 2017RosenblattInitiates Coverage OnNeutral
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