Will Movie Theaters Survive What Netflix Has Up Its Up Its Sleeves?

Movie theater investors should be worried about the sector's outlook, a Recode report suggested.

For many decades, the movie industry followed a basic formula: new films are released in theaters followed by a minimum 90-day waiting period after which the movie can make its way to a consumer's home through video rentals or online streaming. But now this simple formula is set to change, whether the industry is ready for it or not, thanks to Netflix, Inc. NFLX.

Netflix's philosophy is that its consumers shouldn't have to wait 90 days, rather it thinks that consumers shouldn't have to wait at all, Recode's Peter Kafka noted. In fact, Netflix is aggressively spending to develop content that is worthy enough of competing with Hollywood's top budget films.

Netflix already boasts some of the biggest names in the movie studio in some of its projects, including Martin Scorcese, who is making a mob movie for the online studio. In fact, Netflix is looking to make up to 40 or even 50 movies a year.

The cost to movie theaters could be as much as $3.6 billion a year in lost annual revenue and up to 20 percent of their profit, MoffettNathanson's analyst Robert Fishman was quoted by Recode as saying.

While movie theaters could prove to be a long-term casualty, consumers will likely end up being the true winner.

"Ultimately, consumer choice is a very powerful force," Netflix's CEO Reed Hastings said earlier this year at the Code Conference.