Netflix closing Red Envelope

8:29 PM PST 07/22/2008 by Gregg Goldstein, AP

Company invested in more than 100 films over two years

NEW YORK -- In a move that could have a big impact on indie film sales and distribution, online film rental service Netflix is shuttering its film financing and acquisition arm Red Envelope Entertainment.

Since it was founded two years ago, REE invested in more than 100 films and partnered on key acquisitions for small distributors. Until this January, the division typically put up half of a film's total acquisition and theatrical release costs in return for Netflix disc and digital streaming rights and half the total profits. These partnerships allowed indie studios to take risks on smaller projects and fueled many buys during and after film festivals.

In January, REE changed its general approach to pay a flat fee for DVD rights and nonexclusive Netflix online rental streaming, done day-and-date with the retail DVD release, typically taking less risk for less money. REE's closure means smaller distributors have lost a key partner which allowed them to purchase and give a theatrical release to riskier low-budget films.

Some of the acquisitions REE partnered on include the war docu "No End in Sight" with Magnolia Pictures and the romantic comedy "Two Days in Paris" with Samuel Goldwyn Pictures.

According to a Los Angeles Times report, the company said the reason for its shuttering was that the buys put it in competition with its Hollywood studio partners. REE employed approximately 50 people.
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