How Netflix Is Winning Over Top Hollywood Talent

Netflix (NASDAQ:NFLX) recently hired away Channing Dungey, the former head of Disney's (NYSE:DIS) ABC Entertainment, as its VP of Original Content. She'll join the company in February, following other ABC talent including showrunners Shonda Rhimes and Kenya Barris.

Netflix has also managed to attract film executives including Kira Goldberg from 21st Century Fox (NASDAQ:FOXA) and Tendo Nagenda from Disney, as well as top film directors including Martin Scorsese, the Coen brothers, and Michael Bay. This is not to mention the on-screen talent drawn to its films and series.

This article originally appeared in the Motley Fool.

Most Netflix films are confined to home theaters at best and often streamed on laptops or mobile devices. That's not the cinematic experience for which most people in the industry aspire to create.

But Netflix offers something nobody else in the industry can provide.

The most important word in media for 2019

"The most important word in media for 2019 is the word 'reach,'" BTIG analyst Rich Greenfield told Cheddar. By this time next year, Netflix will have around 175 million subscribers globally, he estimates, whereas Disney will just be launching Disney+ with, effectively, zero customers.

As Netflix's content chief said on the company's third-quarter earnings call, "[Directors] want their film to be in the discussion. They're able to do that on Netflix in ways they've never seen before."

There won't be much discussion about the new series or exclusive films released on Disney+ in the early days because they'll only reach a few million people. Even if the content is great, it won't get the same exposure as it would on Netflix, and that's exactly what top Hollywood talent wants.

The other side of the coin is that Disney and other major film studios can provide massive reach for top film talent and guarantee creators access to the full cinematic experience. Disney and Fox produce some of the top global box-office hits. Disney's studios hold the top three films by box office gross in 2018, and Fox has No. 5. The studios are able to put big marketing dollars behind some of their best films to reach a wide audience.

But the top films of the recent past have been dominated by sequels and adaptations. Indeed, the top 10 films of 2018 are based on existing intellectual property. So, a creator with an original story to tell might not get as much attention from a big film studio that's formulaically pumping out blockbusters based on its back catalog.

Others are doing it, too

Netflix isn't the only company stealing talent away from top Hollywood studios. Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) have each had success attracting big names to their streaming media platforms.

While Amazon has over 100 million global Prime members to dangle in front of executives and creators, Apple doesn't even have a streaming service. Instead, it's marketing the idea that its content will be available on the 1.3 billion active Apple devices around the world. And that potential reach (and a sizable amount of cash) has enabled it to attract talent including Steven Spielberg, Oprah Winfrey, Justin Lin, Reese Witherspoon, Jennifer Aniston, and Steve Carell.

Any company with a platform to reach tens of millions of viewers (and a bucket full of cash) can acquire the necessary parts to put together a top film studio capable of producing content that will "be in the discussion," as Sarandos put it. That's one reason we've seen consolidation in the traditional media space as more tech companies move into film and television.

Going forward, investors should expect further consolidation among smaller media companies, while big companies like the combined Disney and Fox will still have to spend heavily on talent and marketing to get their direct-to-consumer products off the ground and expand their reach.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon, Apple, Netflix, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.