Hollywood studios fear the growing power of Netflix
Threat to industry’s business model of cinema-first releases
The decision of Netflix to pull out of the Cannes film festival highlights the tension between streaming companies and the cinema industry over how movies will be watched.
The world’s premiere film festival provided a cool reception for Netflix last year, with audiences booing its logo when it appeared before the screenings of Bong Joon-ho’s family adventure film Okja, as well The Meyerowitz Stories from US director Noah Baumbach. Boos aside, the films were a critical success. But they symbolise a threat to a well-established business model for the industry.
This year the festival’s organisers, who insist that films can only be entered for the competition if they are screened in French cinemas, have said Netflix can only show films out of competition at the festival, which takes place next month. Netflix will not do this because under der French law, films cannot be streamed until three years after their cinema release in the country.
The British actor Helen Mirren (right) joined the fray last week, saying the rise of streaming had been n “devastating” for film-makers akers such as her husband, the US film director Taylor Hackford, who want their work to be “watched in a cinema with a group of people”.
Ted Sarandos, Netflix’s head of content, highlighted the division between “Netflix-film-makers” and the traditional industry when he said he feared that to show up at all in the south of France could mean “having our films and film-makers treated disrespectfully”.
Netflix has never been overly keen to make its films available in cinemas. At best it likes a simultaneous release, such as acclaimed African civil war drama Beasts of No Nation, whereby some cinemas show the film while it is released to subscribers at the same time. Most US cinema chains refused to screen the film, which Netflix bought for $12m but which made less than $100,000 at the box office.
Netflix’s streaming-first model threatens traditional film distribution that allows cinema chains to attract audiences because they have historically always enjoyed an exclusive period as the only place to catch a new release.
Having disrupted the model for TV broadcasters by making schedules irrelevant and grabbing millions of viewers, Netflix is now making a run at Hollywood. It is directing a significant chu chunk of its $8bn budget at ma making 80 films this year. Tha That is equivalent to the sam same number of releases the top five Hollywood stu studios will deliver in 2018. Net Netflix’s deep pockets have lured Hollywood stars such as Will Smith and Joel Edgerton, stars o of the company’s recent $100m sci-fi film Bright, which is an indication of its intent.
The company’s combination of quality content, cheap monthly cost – starting from $11 in the US and UK – and straightforward delivery has seen it race to more than 120 million subscribers globally, and a market value of $130bn. Worryingly for the cinema industry, analysts believe Netflix is still in its infancy. Cinema attendance remains massive, at more than 1.2bn visits a year in the US and more than 170m in the UK. However, that US figure represented a 6% decline year-onyear and analysts predict Netflix will continue to grow rapidly.
A recent investor note by the US investment bank Morgan Stanley forecast that Netflix will double in size, driven by other regions including Asia. “We believe Netflix is still in the early stages of global adoption,” it said. “The recipe for success is clear … [with] the virtuous cycle of scale leading to a deeper competitive moat.”
Nevertheless, the cinema industry is fighting back by investing heavily in making movie-going an experience that cannot be replicated at home. It is investing in leather reclining seats, VIP areas and high-quality sound and picture technology. “Our demise has been predicted for the last 80 years – with TV, VHS, DVD, Blu-ray, now with the internet – and we are not complacent,” said Tim Richards, the chief executive of Vue International, a top-three cinema chain.
Philip Knatchbull, chief executive of UK cinema chain Curzon, however forecast a global decline. “I think worldwide cinema admissions will [fall] back about 20% in the next five to 10 years. Look at music, people were blinkered and didn’t see that technology put power in the hands of the consumer. I think the big multiplex operators are living in a bygone age.”
No-show … Netflix are not attending Cannes – audiences booed the firm’s logo at screenings of Okja last year