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Film Festivals vs. Netflix

The keys to a conflict between the past and future of cinema

By Adriana Izquierdo

The conflict between the streaming platform and the most prestigious film festival in the world has been revolutionizing the industry for the last year and has resurfaced these past few weeks with the start of the 71st edition of the Cannes film festival.

The presence of “Okja” and “The Meyerowitz Stories” in last year’s edition of the festival, more specifically in the competition section, brought up many critiques in the film sector, within and outside France. The main reason for the complaints came from the fact that Netflix doesn’t usually release its movies in cinemas, but go straight to its platform. If it does have a cinema release (and for the only purpose of being eligible for the Oscar’s), it is usually simultaneous with its VOD release.

France is well known for its restrictive window/exhibition laws, where 36 months have to pass for a film to be released on any VOD (video on demand) or SVOD (streaming video on demand) platform. Last year, Netflix skipped this regulation, deciding to release it’s two Cannes competing for films by Bong Joon-ho and Noah Baumbach directly on its platform worldwide (except for France). This provoked an absolute rejection of the movie's screenings at the festival, being booed every time the Netflix logo came onscreen.

This year’s edition, however, after much discussion, decided that films had to be released in cinemas in France to be able to enter the Cannes Film Festival competition section.

Realizing this new rule for the 71st edition of the festival, not only did Netflix pull out the films that were supposed to compete for the Palme d’Or, but also pulled out all its other films that were scheduled to participate in other sections of the festival, even if they didn’t require having a release in cinemas in France. Some might think this was a, somewhat, too aggressive response from Netflix, and that it’s wasting an opportunity in the notoriety and prestige that the festival can bring to its content, for a problem that only affects the distribution in French territory. Nonetheless, what Netflix is reinforcing with this reaction, is its priority to be coherent with its distribution model, defending it and giving value to the relationship created between the service provider and its subscribers.

Taking as a concrete example Netflix and Cannes, it’s a conflict that has become an allegory to the recurring (and necessary) debate on the past and future of the film industry. These are two very opposing extremes that symbolize the crisis period which the industry is entering and must revise what considers to be cinema — art — and which should be the cinematographic experience in the digital era.

A part of the industry defends that cinemas are an essential part of the experience, that cinema as art gains value in the darkness of a screening room. Others claim that we must respect and protect the dynamics and agents of the actual market, as they have been working for a long time.

Percentage of Internet users that have an SVOD subscription

The truth is that France is one of the most adequate countries to have a debate like this, and to confront the issue. French people go a lot to the cinema and, also, they support very much its local and European filmmaking (36,4% of the screen quota is French, 2016). It’s one of the countries with the biggest screens per capita ratio (around 5.800 screens for a population of 67 million, 2016) and French distributors buy all kinds of cinema, auteur, independent and from varied nationalities.

As we can see in the graph above these lines, the SVOD penetration in the French market is notably lowering than in other countries (2017). However, since last year Netflix subscriptions have been growing exponentially. According to French press, subscriptions are around 3.5 million, above the OCS ones (TV service operated by Orange) and behind Canal+, with around 5 million subscribers.

But not only the Netflix data is important; it is necessary to open up the debate, about the industry in general as a creator of content. The real disruptor of the industry isn’t only the SVOD services, but the change in consumption habits that these and other services have created in audiences. It’s not only a thing of the new generations or the youngest, there’s more and more Netflix consumption on mobile phones, people watch films on their tablets and spend hours on end on Youtube and social media, where the presence of video is very strong. Just this past week Youtube announced how the consumption on the platform has reached 150 million hours daily.

There are many relevant factors in this debate but, without a doubt, and in front of all these new ways of consuming audio-visual content, one of the more visible arguments is the romanticizing (mixed with a bit of Luddite theory one can say) of cinema-going. That love for the screening room, for the big screen, for what it is considered to be THE CINEMA with capital letters. It is an argument that sounds out-dated; it sometimes even falls into the hypocrisy of some filmmakers who defend cinema as this concept, yet talk about classic artistic references which they had to discover through other ways, like TV, domestic formats like VHS or similar options. Yes, I, who am writing these lines, also have a hard time understanding some ways of consuming films today, and still, not sharing a taste for watching films on my phone on the way to work, doesn’t mean I should ignore that not only is happening but it is being normalized.

In France, 30 to 55% of Netflix users consume it on their mobile devices, whereas in Finland the percentage goes up 70%

Romanticizing this, in reality, is the wrapping that covers the conservatism patent in the decisions and arguments of the ones that are fighting to halt services like Netflix; but the change in the audience is real and it is not going to stop. Fiction has stopped being produced for just one household appliance (TV) or for a concrete place (cinema screening room); now it is produced for the individual, who decides when, where and how he wants to watch the new movie of his favorite director.

The success of Netflix comes precisely, in part, due to distributors, TV broadcasters, investors and exhibitors negative reaction and lack of adaptation to the changes provided by platforms like these (not even when the exploitation window and international distribution system lead us to piracy of films and other content).

This is one of the arguments that a group of French filmmakers, artists and producers are using to criticize the French law for distribution and exploitation windows. They denounce that the agreement they all accepted ten years ago has become obsolete and doesn’t reflect anymore the reality of how content is consumed, distributed and produced.

Since 2009, the law for the distribution and exploitation of a movie after its release in cinemas is as follows:

- 4 months until it can be released in physical formats (DVD, Bluray…) and pay VOD.

- 10 months to be released on pay TV

- 22 months to be released on open TV

- 36 months to be released on SVOD platforms (subscription streaming)

The front that is critical with the law, underlines that the evolution in VOD and SVOD, and the difficulty to finance films that haven’t been pre-bought by TV broadcasters, plus the new regulations being promoted by the European Union, finds justifiable the revision of it.

In response, the CNC (Centre national du cinema et de l’image animée,equivalent to the Spanish ICAA or the British Film Institute) proposed a draftfor a new law, which reduced the timings for each window (from 4 to 3 months for VOD, 10 to 7 months for pay TV, but kept the 36 months for SVOD), changes that were considered insufficient. The newest proposal, talks about implementing a new principal of “sliding window” for the SVOD services, where the window of months can be shortened depending on the amount of investment & support that the film has had; starting on 24 months for films that don’t have pay TV support and going down to 18 months for films with no support from open TV.

An agreement hasn’t yet been reached, but it is a negotiation very relevant for the future of film production and distribution in Europe. Multinational entertainment corporations are investing more and more in original content that they can later exploit on streaming platforms: Netflix, Amazon, HBO, Sky or the future platform being developed by Disney, can become a big source of financing for each tier of the film industry.

The controversy between the Cannes Film Festival and Netflix just brings light to a problem that creators face when they finally get funding thanks to one of these platforms, but then they see how their film is left out of competing in one of the most prestigious and visible film festivals in the world, just because its distributor doesn’t want to release the film in cinemas of one country. Amazon is being more flexible on that matter; it releases the film in cinemas and respects the exploitation windows in every country. But, as we’ve mentioned earlier, it is a declaration of intentions for Netflix, to defend its distribution model. They’ve gone as far as, a few weeks ago, announcing the intention of acquiring a chain of cinemas. Netflix approached Landmark Theatres, a chain of cinemas in the United States that mainly exhibits independent and foreign films. Negotiations weren’t successful, but this interest from Netflix shows how far is willing to go to be able to release at the same time its films in cinemas and online.

And here lies the key to all, the simultaneity that is part of the business model of these streaming services (and new ones that will come in the near future) and that understandably some sectors of the industry are rejecting. Exhibitors fear that audiences will stop going to the cinema, having films available at home (for instance, in Spain, they did a pact in which they wouldn’t release any film that tried to be simultaneously released online), TV broadcasters lose the exclusivity of premiering films with the traditional release window of physical formats (but, does anyone really buy this idea?), apparently, losing a lot of sales.

Technological advancement and social changes have made that entire business value chains disappear; it is the law of evolution, but in this case, with the distribution window system, resistance also comes from its efficiency when feeding into and prolonging the life cycle of a film; exploitation is longer in time, and a good marketing campaign can mark a difference on the release weekend, contributing a lot to the revenue of a production, be it big or small. Streaming, on the other hand, is synonymous with accessibility, but also synonymous of a shorter life.

However, exhibitors’ absolute rejection, romanticized arguments, and a totally antagonistic position is something that can play against them. We lived through it with the music industry. This kind of negativity blinds the possibility of finding hybrid flexible models (a real one, not the one proposed by the CNC with a minimum window of 18 months) for a certain type of cinema. For instance, it doesn’t make any sense that a film that is released with 10 copies, that has been two weeks in cinemas, has to wait 18 months to have its premiere on an SVOD platform.

A call to coherence should be made. Following an example, Cannes defends that its movies should and can be enjoyed on the big screen, but the reality of the matter is that films that are shown in the majority of markets, end up having a very small, or even ridiculous, exhibition in cinemas, only in big cities, with few copies and for a very limited amount of time. Platforms like Filmin in Spain and services that, like Netflix and Amazon, also produce its content, offer an exit and accessibility to producing films unthought-of some years ago.

Now, contrary to what might seem, if we listen to Netflix’s CEO, Ted Sarandos, we can tell that the streaming giant isn’t either a savior of the Art of cinema. Though it is true that it finances projects that nobody else wants to produce, it is also imposing incompatible prices for many. Also, and although for its business model it isn’t relevant, it isn’t very transparent about its viewing data, so to give an insight and perspective into its actual success. There’s other details also, like the ephemeral notoriety of the majority of its releases, the algorithm strategy to bury certain titles or the fact that, out of established auteurs, a lot of the investment is made around big data obtained from the users of the platform, than from an actual desire to finance projects that are diverse — edgy — new — auteur driven. Protecting the sacred art of cinema isn’t exactly its priority.

The conflict between Netflix and Cannes is happening in a moment where all loose. Netflix loses notoriety and prestige and risks being left without any star authors and creators who will, instead, want to compete at the festival. Cannes, on its side, risks losing some films from prestigious directors, that would bring stars to the red carpet (this year, Netflix took out of the festival the last work of Alfonso Cuarón, Paul Greengrass, Jeremy Saulnier or the newly found Orson Wells film), in favor of more flexible film festivals. Plus, Cannes is risking money. This year, Netflix announced that its acquisitions executives would go to the festival regardless of not having any movie screening, but this conflict can make Cannes loose one of its biggest investors.

But, in this debate, it is not so important to position oneself with one extreme or the other, as it is to act upon the irreversible and tangible change that consumption habits with the audio-visual experience have suffered these past recent years. The audience is changing and it doesn’t want anymore that others decide for it when and how they can see films, which requires a change in distribution; the technology is changing and that is taking us to transformations, not only in an exhibition but also in creation, production, and promotion. The revision in all these fields is so necessary and prevailing that this duel between the Cannes Film Festival and Netflix, between the cinema of the past and the cinema of the future, seems welcome.

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