Cannes: Netflix Spreads Fear and Opportunity

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Netflix CEO Reed Hastings

As Cannes kicks off, the global film industry will be watching to see what Netflix does next.

The 68th Cannes Film Festival opens under the shadow of Netflix.

Just a year ago, the digital streaming service was a major licensor of library titles but a relatively minor player in the individual movie acquisition business. But a series of deals — including the jaw-dropping $17 million pre-buy of Richie Smyth's Jadotville in Berlin and a four-picture deal with Adam Sandler — has caught everyone’s attention. As Cannes kicks off, the global film industry will be watching to see what Netflix does next. Suffice to say, chief content officer Ted Sarandos keynote address May 15 — at the Cannes Film Market’s NEXT program — will be this year’s hottest ticket.

So far, the industry has viewed Netflix’s move into the film production and distribution business with equal amounts of excitement and dread, the promise of new audiences and revenues streams balanced by fears the SVOD giant will tear down established business models.

Producers, directors and sales agents mainly see opportunity as Sarandos and his deep-pocketed acquisition team descends on the Croisette. “More competition means higher prices, which means more money,” says Sean O'Kelly, CEO of London-based sales agency Carnaby International. “Everyone wants to meet with Netflix — all the artists, all the talents want to do an innovative Netflix deal,” adds veteran producer Nigel Sinclair (Rush, The Woman in Black).

In contrast, the distribution side of the business sees Netflix as a threat. Major theater chains, from Regal, AMC and Cinemark in the U.S. to Cineworld in Europe and Cineplex in Canada, have denounced Netflix' plans to debut its biggest upcoming film, Crouching Tiger, Hidden Dragon: The Green Legend day-and-date in theaters and online Aug. 28 and are boycotting the Weinstein Co. title. Theatrical distributors and TV buyers are either dismissive — “they are taking films no one else wants for theatrical,” says one European TV exec — or fearful. "I see a danger for independent films with the day-and-date Netflix model,” says Nico Simon, an exhibitor whose Utopia cinema group runs theaters across Europe, “because it could weaken the theatrical experience.”

Distributors fear Netflix because the company — which operates in around 50 countries now and aims to be in nearly 200 within two years — is not satisfied to stay on the low end of the food chain but is determined to act like a global studio. Unlike Amazon, which both pays royalties to creators and respects theatrical windows (albeit much shortened ones), Netflix pays a premium to do buyouts — like the $12 million it paid for Cary Fukunaga’s Beasts of No Nation at Sundance — and wants its films to premiere on Netflix everywhere. The difficulty in doing day-and-date releases in many territories — France, for example, bans the process, requiring a full three-year window between theatrical and SVOD — makes it even more likely that Netflix will go it alone if it can. Netflix CEO Reed Hastings suggested as much at a conference in Berlin last week when he said that going forward, the company would try to make “the bulk of all Netflix content available to all its subscribers worldwide at the same time.”

That's an approach many filmmakers, faced with the uncertainties of the independent market, are embracing. “The international marketplace is such a mercurial space,” says Daniela Taplin Lundberg, a producer on Beasts of No Nation. “But with the rise of Netflix comes the idea that you can make a worldwide deal and don't have to worry if your film will be serviced in this territory or that one ...They also seem to be such a robust company so that there isn’t the fear that we sometimes have with foreign distributors, which is that a company will suddenly go under, and your film will be collateral damage and never be seen.”

There are filmmakers who remain attached to the theatrical experience — Quentin Tarantino's insistence that his new film, The Hateful Eight, be screened in cinemas (and on 70 mm no less) may have been one reason why the director and Netflix were unable to reach a global deal for the film at AFM last year. Instead, the project is going out in a traditional manner, with international pre-sales to established theatrical indies.

But unlike the direct-to-video business, which was always seen as a mark of low quality, direct-to-Netflix does not carry the same stigma.

“Those old made for video movies — no one ever thought of those films as anything,” says Sinclair. “Made for Netflix carries a cache. They are seen as high-end, potentially award-winning. For the talent, and that's what's important, Netflix is seen as being a cool company doing cool things. Artists are ready to make the leap with them."