The Latest Controversy At Cannes Highlights Hollywood's Netflix Problem

The times, they are a-changin'. The last few years have seen streaming services like Netflix and Amazon increasingly focus in on original content, whether that's new TV shows, or original movies. Traditional studios and networks are struggling to adapt to their unexpected new competitors, and that's just caused quite a bit of controversy over at the Cannes Film Festival.

Controversy At Cannes

For the first time, two Netflix films are competing for the Palme d'Or this year; Okja and The Meyerowitz Stories. It looks as though that's never going to happen again, though, as the rules are being changed; from next year, films will have to be released in French cinemas if they want to compete at Cannes. The Jury president Pedro Almodovar has agreed with the change, declaring:

"All this doesn't mean I'm not open, or don't celebrate the new technology and the possibilities they offer to us.

But while I'm alive, I will be fighting for the one thing the new generation is not aware of - the capacity of hypnosis of a large screen for a viewer."

With the controversy raging, director Noah Baumbach stepped forward to defend The Meyerowitz Stories. He's explained that his film was actually made for the big screen, but simply happened to be purchased by Netflix in post-production. He later clarified that he'd not heard the quotes from Almodovar.

In an amusing twist, fellow Jury member #WillSmith publicly aired a very different opinion, though. He argued that the cinema and Netflix are two totally different forms of entertainment, and insisted the streaming service has been of real value in his house.

"In my home, Netflix has been nothing but an absolute benefit. [My children] watch films they otherwise wouldn't have seen. It has broadened [their] global cinematic comprehension."

Netflix Is Challenging Hollywood

This whole debate has to be seen in the context of a changing world. Digital models have been challenging every industry, and now it's Hollywood's turn. As far back as 2013, NATO president / CEO John Fithian was challenging that the cinema model was in danger.

"Subscription movie services and cheap rentals killed the DVD business, and now [Netflix chief content officer Ted] Sarandos wants to kill the cinema as well."

Here's the catch; at the time, Sarandos was suggesting that studios should release their movies in theaters and streaming services on the same day, rather than offering online streaming only after a film's theatrical run. Fithian rejected this idea outright, insisting it would kill studios because nobody would go to see the movies at the cinema. What he didn't seem to realize, though, was that this argument implicitly acknowledges people will prefer watching a movie in the comfort of their own homes to heading out for a night at the cinema. Given that's the case, even back in 2013, it wasn't hard to see what direction Netflix would move in.

Recent years have seen a boom in original content over on Netflix (and on rival streaming services such as Amazon Prime), but industry insiders are confident it won't last. As The Wrap reports:

"Among business-minded folks, a broad consensus has been building for some time that Netflix and Amazon are living in a bubble of their own making, gorging on making content at an unsustainable pace."

Complicating this, any producer has to think carefully before making a deal with Netflix. Although the streaming giant pays upfront to purchase a film, the catch is that producers don't earn any profits from the backend. What's more, there are reports that Netflix is aggressive about retaining global rights to their films for 20 years. Ultimately, though, as one agent told The Hollywood Reporter: "If what you want is for people to see your movie, Netflix has almost unparalleled power because of their direct relationship with the consumer."

For their part, Netflix's view hasn't changed since 2013. In a letter to shareholders distributed last month, they argued:

"Since our members are funding these films, they should be the first to see them. But we are also open to supporting the large theater chains, such as AMC and Regal in the US, if they want to offer our films, such as our upcoming Will Smith film Bright, in theatres simultaneous to Netflix. Let consumers choose."

Netflix's argument is a compelling one; they make money from subscriptions, and it makes sense that their customers should be the first to see Netflix films. As a result, the best deal in Netflix's view is for films to be available for streaming on the same day as theatrical release. Let consumers choose how they want to watch the film.

For now, the disruption to Hollywood continues. This year, the heated debate at Cannes hinted at just how severely Hollywood is feeling the disruption; traditional models are under increasing stress. That said, as demonstrated at Cannes, there's a fightback; and industry insiders are desperately hoping this is just a bubble that's going to burst. Only time will tell how this plays out.

(Sources: BBC, Deadline, The Hollywood Reporter, The Wrap, Yahoo Finance)