Netflix’s decision to pull out of the Cannes film festival highlights the tension between streaming companies and the cinema industry over how movies will be watched in the future.
The world’s premiere film festival provided a cool reception for the US streaming company last year, with audiences booing the Netflix logo when it appeared before the screenings of Bong Joon-ho’s family adventure film Okja, as well The Meyerowitz Stories from athe 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 French law, films cannot be streamed until three years after their cinema release in the country.
The British actor Helen Mirren joined the fray on Thursday, claiming that the rise of streaming has been “devastating” for film-makers 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 (£8.4m) but 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 a significant 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 at the same time, Netflix is now making a run at Hollywood. It is directing a significant chunk of its $8bn budget at making 80 films this year. That is equivalent to the same number of releases the top five Hollywood studios will deliver in 2018. Netflix’s deep pockets have lured Hollywood stars such as Will Smith and Joel Edgerton, stars of the company’s recent $100m sci-fi film Bright, which is an indication of its intent.
Netflix’s combination of quality content, cheap monthly cost – starting from £7.99 in the UK and $10.99 in the US – and straightforward delivery has seen it race to over 120 million subscribers globally, and a market value of $130bn. Worryingly for the cinema industry, analysts believe its 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-on-year and analysts predict Netflix will continue to grow rapidly.
A recent investor note by the US investment bank Morgan Stanley forecast that the streaming service 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 canot be replicated by staying at home on the couch. 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. “Why do people go to restaurants, football games, live music – they want to get out of the house, they are social – and it is the same with film. Never under-estimate the demand for watching a movie on the big screen.”
That demand helped rival Cineworld, which uses the strapline “the best place to watch a movie”, report an 11% rise in revenues, a profit bincrease of 23% and admissions growth of 3.5% in the UK last year. Business is also booming at the upmarket end with the Everyman chain recently unveiling an aggressive plan to expand by more than 50% to 35 locations across the UK.
Overall, the number of cinema sites in the UK has grown from 727 to 766 over the last decade – with screen numbers up 18% to 4,150.
While the UK cinema industry seems in robust shape there are those that believe the global sector is living on borrowed time, on the brink of the kind of wholesale digital disruption that forever altered the music industry and revolutionised the way we watch TV.
“I think worldwide cinema admissions will [fall] back about 20% in the next five to 10 years,” said Philip Knatchbull, the chief executive of cinema chain Curzon. “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.”
As a smaller cinema chain and distributor, Curzon already offers its films on its own video-on-demand service the same day as a release in one of its 20 UK cinemas. And Curzon has also done deals with Netflix to put its movies including Okja and Mudbound on the big screen.
“We do want to continue to open cinemas and build footfall, but we don’t want to be big in the UK,” he said. “We are much more like the Apple stores, a means to an end rather than an end in themselves. I believe the future lies with Amazon and Netflix, that is where the funding is coming from for most of the content in the coming years, the tech platforms. The industry needs to stop seeing them as our enemy. I see them as my friends.”