Hol­ly­wood stu­dios fear the grow­ing power of Net­flix

Threat to in­dus­try’s busi­ness model of cin­ema-first re­leases

The Guardian Weekly - - Finance - Mark Sweney

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

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