Netflix is the New H-Wood: A Closer Look at the Controversy at Cannes

When cinema legends Pedro Almodovar and Will Smith clashed over the role of Netflix in film at this year’s Festival de Cannes, it was the perfect storm for an international headline. Smith, a progressive, naturally laid out a passionate case for the benefits of a diet consisting of both streaming and theater-going. But ultimately, surrounded by bastions of the motion picture in a country where film is the national industry, Almodovar had his way—starting next year, you won’t be seeing any films at Cannes that haven’t already been released in a French cinema.

Far from being an isolated incident, Smith and Almodovar’s disagreement represents one of the most nuanced debates in contemporary film, one that goes so far as to demand a reevaluation of the definition of film itself. Following the controversy at Cannes, 93% of South Korean movie theaters backed out in protest of screening the Palme d’Or nominated Okja, a Netflix original that raised alarm at the festival for its straight-to-Netflix release. In the US, where the presence of Netflix is arguably more deeply rooted, disgruntled theater chains have had similar fallouts. And just this summer, while on the road promoting his new World War II drama Dunkirk, Hollywood giant Christopher Nolan came out in steadfast disdain of the “bizarre aversion” Netflix has to theatrical films—it doesn’t really get more scathing than that.

Looking back, the advent of web-based streaming services has been the single greatest catalyst for change within the film industry since the popularization of VCR and DVD. But whether that change will lead to innovation or destruction is a complex issue. Setting aside arguments about whether or not a “Netflix film” can truly be considered film, streaming platforms have proven to be a double-edged sword. One one hand, they stimulate independent films by bidding for their funding and ostensibly presenting them to an international audience. Yet they also compete with traditional avenues for audiences, stifling certain films by leaving them hidden or inaccessible to the vast majority of viewers. If that’s not bad enough, the director of the French National Cinema Center has gone so far as to call Netflix “the best example of American cultural imperialism”, following its announcement of plans to enter the market for traditional TV in France and Mexico. But no matter how events develop, one thing is guaranteed: the turf war will be a prolonged one, where victories and losses are made less distinguishable by the symbiosis that often exists between the newcomer and the establishment.

The current capacity that streaming has for altering the filmscape is predicated on its massive stream of income, which stems from its user base that has grown steadily throughout the years. The most prominent example is Netflix, which started off as a DVD rental-by-mail service in 1997, later expanding to include streaming media in 2007. For more than a decade, Netflix bought the rights to movies without impacting the way they were made, and nobody complained, with movie theaters perhaps being the exception. The game changed markedly in 2013 when Netflix announced it would begin sponsoring originally-produced series, transforming the company from a distributor of content to a creator. Today, the service boasts over 98 million subscribers worldwide, and is available in over 190 countries. In 2016 alone, the platform released 126 “Netflix Originals”, incredibly surpassing every pre-existing network and cable channel in the sheer amount of content it produces. And with outstanding Emmy-winning series like Orange Is the New Black and festival-circuit films like Okja and 13th, Netflix has made clear that it cares about quality, and is here to stay.

What makes the Netflix model so successful is a steady source of income coming in the form of subscription fees, whereas traditional studios earn their profits from volatile box office performances, engaging in annual hit-and-miss gambles. On the television side of things, in contrast to traditional networks, Netflix’s viewership data isn’t released to the public, the filmmakers, or even its advertisers (for complicated financial reasons beyond the scope of this article), which gets rid of an obligation to demonstrate public interest and ad profitability. Thus, Netflix doesn’t require pilot episodes, releasing episodes of new seasons all at once, and offers content-producers more creative freedom and less pressure to garner views. Models like these put Amazon Studios at even more of an advantage, with revenues from the company’s retail services serving as a hefty cushion for its media-related activities.

Flush with cash, streaming services have been able to enter the bidding market for upcoming projects at an astounding rate, snapping up films like the upcoming Bright starring Will Smith as well as financing projects by auteurs like Martin Scorsese and Woody Allen. But high-profile films haven’t been the only beneficiaries of streaming’s newfound wealth—independent filmmakers have been able to find a market as well, with funding often covering 20 percent more over production costs, reducing risk and encouraging more creative talent to try their hand at the game.

But as businesses go, the same factor that qualifies as a boon may very well become a curse. By bidding up prices for films that would have previously gone to indie distributors like A24, Fox Searchlight, Sony Pictures Classics and Focus Features, the traditional platforms for such projects, streaming platforms increase the price studios must pay when they do win the rights to films, creating more financial risk. Furthermore, most movies in the US have a theatrical window lasting around 30–45 days in which video-on-demand services are banned from releasing them (in France, the window is 36 months). To add insult to injury, platforms like Netflix have been ferociously lobbying for a shorter window—perhaps even concurrent theatrical and streaming releases—which deals a huge blow to theaters, and is the main complaint of critics like Nolan. And with an increasingly large share of the content pie, platforms like Netflix are now able to produce films that never make it to the big screen at all, remaining forever in the realm of streaming. There may soon come a day when audiences have nowhere to see the newest indie releases but on their own television sets.

The numbers speak for themselves. Although the domestic box office has been booming, breaking its own record for the second year in a row in 2016, the increase can largely be attributed to big-budget blockbusters toting eye-popping special effects and star-studded casts like Star Wars: The Force Awakens and Captain America: Civil War. Attendance at indie films, meanwhile, has never been more measly. According to the Economist, in 2002, half of all films with budgets under $10 million failed to earn $1 million. In 2016, that number rose to two thirds. The median return on investments on those same films is now a mere 45 cents on the dollar.

One may ask: don’t platforms like Netflix at least spread films to a wider audience, giving them access to releases they otherwise wouldn’t have paid to see in a theater? Ostensibly, yes. But alas, the reality is more complex. In addition to financing original content, Netflix is notorious for purchasing the rights to independent films and then burying them in a slew of other selections, where they’re often doomed to be lost or ignored in favor of more eye-catching content. New releases are often uploaded silently in the middle of the night, with little to no publicizing at all. To make matters worse, curious users have experimented and found that Netflix’s new algorithm does nothing to guide viewers to what they’re interested in seeing, but instead just points them to flagship releases that the company wants them to see—resulting in the need to scroll through pages of shows before finding what you’re searching for—by which time many viewers will lose patience and just watch the new season of Stranger Things.

Nor will people be able to access the films through other channels—by purchasing exclusive rights, Netflix prevents other platforms from peddling the same content. Now imagine how many times the devastation is multiplied when the film doesn’t even receive a theatrical release beforehand. With anecdotes of directors literally breaking into tears upon hearing the news of their film being purchased by Netflix, nobody could have put it better than IndieWire senior critic David Ehrlich when he commented that “it’s the equivalent of a museum buying a work of art, locking it in a vault, and making photocopies so widely available that people lose sight of the fact that they’re missing out on the real thing”.

Already, we have seen the signs of a content monopoly beginning to arise. As Netflix gains more and more influence, the suggestion that its generous deals and lavish artistic freedoms are only for the purpose of establishing itself as the Google or Facebook of Hollywood becomes more and more plausible. In an interview with The Hollywood Reporter, House of Cards producer Dana Brunetti commented on how Netflix no longer offers the same creative freedoms it did once before, becoming no different from a traditional studio. Additionally, there has been no dearth of filmmakers complaining of the jurisdiction Netflix takes away from them, providing little if any information as to how their films are marketed or received. Over the years, Netflix has gained a reputation for acting as a unilateral juggernaut, carefully controlling their output and image to the extent that one writer who has done business with the platform mused: “The first rule of Netflix: you do not talk about Netflix.”

Sounds bad right? But before we jump to any conclusions, it’s best to first consider things in the long run: realistically, a company possessing a copyright to culture is a fairly extreme situation guaranteed to be mitigated to some extent by competition and trust-busting legal restrictions. And as filmmakers come to realize that they have to give up control and the symbolic meaning of a theatrical release, they are likely to seek alternative avenues to pursue their work. Some already have: just last year, Nate Parker sold The Birth of A Nation (2016) to Fox Searchlight Pictures, despite Netflix offering millions more. Additionally, it’d be foolish to forget that theaters are constantly upgrading their setups in order to compete with the streaming experience, with the rise of VR being an exciting new trend that top-tier directors like Alejandro Iñárritu have already begun to explore. New screening technology catalyzes new filmmaking activity, producing content that’s less appropriate for streaming platforms—if one looks back, they’ll find that it’s how Hollywood survived TV (or at least sort of). One thing is for sure: it is still far too early to throw in the towel.

Yet in my opinion, the big picture is far simpler: as profit margins and theater attendance dwindles, it’s important to recognize that movie-watching in theaters as a pastime is fated to become what going to the opera or seeing a musical is to us today—a luxury that focuses more on the experience than the content itself. But the rise and fall of theater chains is nothing to weep over. Whether the framework for distributing art lives or dies makes little difference. Before portable listening devices were invented, live music was arguably the only way to go, and even the most zealous of luddites would have to acknowledge that our lives would be fairly awful without the audio technology we have today. Yet good opera is still good opera—what’s being admired hasn’t changed. At the end of the day, the only things that matter are the people who make art and the people who appreciate them. The bridges between them will come and go. What we can’t have is a gatekeeper that tries to cut off and pervert the products that are attempting to cross. As an industry generating $38 billion dollars annually in box office revenue, theater-based film is far from being knocked out of the ring by streaming. But as of now, one can only observe what happens as the two battle it out in the arena of time.