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Netflix, Hollywood’s biggest disruptor, is radically altering the movie landscape

FILM

The great Netflix chill

With the new Brad Pitt comedy, War Machine, and a strong presence at Cannes, Netflix is radically altering the movie landscape. Barry Hertz reports on Hollywood's biggest disruptor, for better and for worse

Even before the 2017 Cannes Film Festival began last week, the stage was set for the kind of heightened drama the film industry thrives on.

Nineteen titles from around the world competed for this year's prestigious Palme d'Or. Most featured the expected auteurs and provocateurs – a Haneke here, a Lanthimos there. But sprinkled among the selection were two hotly debated curiosities: Okja and The Meyerowitz Stories. Both are from respected directors and both feature name-brand stars. Yet, both are also produced by a company that is loved and loathed in equal measure: Netflix.

The love is easy to understand: Who doesn't enjoy paying a mere $10 a month to access a world of content and how many artists have benefited from Netflix's deep pockets? The scorn is a bit trickier to untangle. As Netflix insists that theatres play its original films the same day they become available to stream – what's called "day and date" releasing – the company has become the nemesis of traditional studios and exhibitors, who see the strategy as cannibalizing their own business. French theatre owners have even succeeded in forcing Cannes to, starting next year, limit festival titles to movies that are guaranteed to receive a theatrical release.

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And so, early last Friday morning, when the house lights went down at Cannes's Grand Théâtre Lumière for the world premiere of Bong Joon-ho's Okja and the Netflix logo popped up on screen, a loud chorus of boos filled the room. How dare this digital "disruptor" invade the most hallowed hall of cinema? But, quickly, the tables turned. Owing to a technical error, Okja was projected in the wrong aspect ratio, causing the top of the frame to be cut off. The audience, already agitated and already very much French, stomped their feet, hissed at the screen and, surely, wondered to themselves whether this would happen at home. On their couch. Watching Netflix.

Okja is an original film produced by Netflix.

This weekend, a different but inextricably linked drama will play out a world away from the Croisette, in the 93 million living rooms where Netflix subscribers will be greeted with a new movie "you might like": War Machine. The film is Netflix's splashiest original production to date, a buzzy political comedy that combines major star power (Brad Pitt), hot-button issues (it's based on the career of U.S. general Stanley McChrystal) and prestige (director David Michod is a favourite on the festival circuit).

It is also the latest plank in Netflix's ambitious original-film lineup – a slate that includes Okja and The Meyerowitz Stories, yes, but also glossy horror (Death Note), Martin Scorsese epics (The Irishman) and Will Smith blockbusters (Bright).

None of these films is going to play at a theatre near you – but they are all radically altering the way movies are made, bought and sold. For better, and for worse.

When Macon Blair was starting out in the independent film scene, he couldn't have predicted his career would be in the hands of a mail-order DVD service.

Back in the early aughts, Blair was a successful indie actor, writer and producer – meaning, he was just barely getting by. His first film with creative partner Jeremy Saulnier, 2007's Murder Party, enjoyed a warm reception at festivals and earned the pair an instant cult following. It took the duo six years, though, until they could make their follow-up, Blue Ruin, and even then it was only thanks to the emptying of their bank accounts and a scrappy Kickstarter campaign.

But then, Netflix happened.

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The Will Smith blockbuster Bright is part of Netflix’s original-film lineup.

The company, founded by marketing whiz Marc Randolph and computer scientist Reed Hastings, started out in 1997 selling and renting DVDs by mail: a Blockbuster Video without the bricks and mortar. Soon, Netflix rolled out its streaming service, offering old movies and TV series online, for about $10 a month. Quickly realizing it'd be smart to produce its own content rather than rely solely on licensing deals with studios, the company leveraged its vast reams of audience data (what subscribers watched, which actors they preferred, what genres sparked binge-watching) to engineer original series almost guaranteed to appeal: House of Cards, Orange Is the New Black, a resuscitated version of Arrested Development. All of a sudden, the television landscape had shifted in Netflix's favour. And now, it wants to cause chaos in the film world.

Over the past two and a half years, Netflix has produced and acquired a rash of indie films to unfurl under its "Originals" banner, cherry-picking titles from festivals and generally causing panic sweats among studio executives at imprints such as Sony Pictures Classics, Focus Features and Fox Searchlight, the once-expected homes for now-Netflix-ized films such as Beasts of No Nation, Tallulah and Barry.

Which is where Blair comes in. Impressed with Blue Ruin's performance on Netflix, as well as his and Saulnier's 2015 horror, Green Room, the streaming giant offered to fund and exclusively distribute Blair's next project, I Don't Feel at Home in This World Anymore. On the surface, it's like any other lucky indie film. It stars familiar, but not costly, faces (Elijah Wood, Melanie Lynskey). It premiered at this year's Sundance Film Festival, earning favourable reviews. It even won the fest's Grand Jury Prize. Normally, it would trickle out to art-house audiences in major cities over the course of a year, if Blair was lucky. But with Netflix onboard, it was available to stream in 190 countries, on the device of your choice, barely a month after Sundance wrapped.

"I'm a first-time director, so they didn't have to place a huge amount of trust in me," Blair said a few days after his film's Sundance premiere, relieved that he could take in the fest's hot-house atmopshere without worrying whether his movie might be seen outside Park City. "But they did. I did not hesitate for a second [to sign] with them. Hell, this movie was not going to happen without them. It was a no-brainer for me."

It's a typical sentiment from filmmakers who've found Netflix salvation: Without the company, there would simply be no movie. Now that the Big Six studios – Warner, Fox, Universal, Paramount, Sony and Disney – have largely abandoned movies that they're unable to spin off or sequelize (Paramount's entire 2017 slate, for instance, features just five films that aren't tied to franchises; Disney's contains only two), the market for mid-budget, non-tentpole, adult-oriented films has cratered. But Netflix is ready to pick up the slack. And then some.

"If you're in the moment that Netflix is in, with the success of its original series, you want to keep that train rolling, which means acquiring and developing and producing as much content as you can, especially if you have this infinite square footage of bandwith to house it," says Paul Dergarabedian, senior media analyst for comScore.

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To that end, Netflix has committed to spending $6-billion on new content in 2017, with 50 films and 65 documentaries currently in production around the world. Unlike the Big Six, the projects span the budget spectrum, are untethered from franchise expectations and come with apparently complete creative freedom.

War Machine, starring Brad Pitt, is Netflix’s splashiest original production to date.

"This film wouldn't have gotten made at a major studio. I mean, maybe it could've gotten made, but it would have been neutered to sell tickets," says Topher Grace, who co-stars in War Machine alongside Pitt. "When we were making this, people couldn't believe that Brad was starring in a movie on Netflix. And now, people of his stature are lining up."

In addition to Pitt's game-changing presence, upcoming Netflix films will star Smith, Robert De Niro, Emma Thompson, Jake Gyllenhaal and Paul Rudd, to name a few. Angelina Jolie's next directorial effort will be for Netflix. Ditto Scorsese, whose The Irishman was rescued from development hell for the low-low cost of $120-million (U.S.). Netflix is even funding the completion of Orson Welles's "lost" film, The Other Side of the Wind.

"It used to be be that movie stars wouldn't do TV or commercials, but now everything is part of this whole, big entertainment landscape. There's no bias against a movie star like Pitt jumping between the big and the small screen," Dergarabedian says. "If the resources are there to make your movie, why wouldn't you do it?"

But just because the resources are there doesn't mean the exposure is, too. War Machine is getting a sizable marketing push, its posters gracing bus shelters and its trailer sitting on top of your average Netflix home screen. But it takes some effort to find Blair's I Don't Feel at Home in This World Anymore or any of the 14 titles Netflix picked up from Sundance this year and subsequently dumped into the company's massive back catalogue. Have you heard of Tramps, Burning Sands, Deidra & Laney Rob a Train or, pardon the ironic title, The Discovery? They're all on Netflix, but only if you know where to look.

"There's so much available at home right now that it devalues each individual movie," says Patrick Corcoran, vice-president and chief communications officer for the U.S.-based National Association of Theatre Owners (NATO). "Essentially, people sit down at home and, not thinking of what's new or best, just turn something on, because, hey, I've already paid for it."

Adds Ellis Jacob, president and chief executive of Canadian theatre giant Cineplex Inc.: "We never hear about [Netflix's movies]. Usually, when you succeed you want the world to know about it. But we don't know anything about the success or failure of those movies."

Cineplex and NATO, of course, have vested interests in bemoaning Netflix's "discoverability" problems – they are the ones most directly affected by the company's increasingly insatiable appetite, and disdain for the theatrical experience. But Jacob underlines an infamous Netflix sticking point. Unlike major studios or TV networks, Netflix refuses to release its viewership data. Not even filmmakers know how many subscribers are actually watching their work, with Netflix only infrequently offering bits and pieces of news on their successes – the company really wants to let you know how popular its Adam Sandler movies are, for instance – leaving information-starved media to gobble up the news releases as if they're candy. (Netflix is also notoriously press-shy; despite several interview requests and questions on strategy from The Globe and Mail, the company has refused comment.)

So the world gets carefully managed sound bites, such as this gem from chief content officer Ted Sarandos at Cannes last week: "Remember, we're living in an age where everything is at our fingertips and there are very few things in the world that you still have to do at a certain time and place. I know why I have to be at the airport at 8 o'clock to be on my flight, but I don't know why I have to be at the theatre at 8 o'clock to see the start of my movie."

Still, Netflix isn't able to completely divorce itself from theatres. If it wants to be a major Hollywood player on the level of the Big Six, it needs Academy Awards. And to qualify for Academy Awards, its films must play, for at least a week, in a theatre in Los Angeles County. Unsurprisingly, Netflix has encountered few takers to screen its Oscar bait (AMC and Regal have boycotted the company's films), and has had to settle on iPic Entertainment, a luxury U.S. chain with just 15 locations across the United States (the Oscar rule has no such impact on Canada, and Netflix has not approached Cineplex with any such deal).

"The tradition of the Academy would never allow for any other way, so it says something about the perception of the big-screen movie experience," says Dergarabedian, who notes Netflix has yet to receive a single Oscar nomination outside its documentary division. "Every filmmaker I know, they want to see their movie on the big screen, too."

As many filmmakers who are eager to hop on Netflix's bandwagon, there are just as many who consider the sacrifice of the theatrical experience sacrilege. Director Cary Fukunaga, for instance, insisted his Netflix deal for Beasts of No Nation include at least some theatrical exhibition. "It was important to me that this film live in cinemas," he said when he took his film to the Toronto International Film Festival in 2015.

James Gray, director of The Lost City of Z, feels similarly, noting the theatrical experience "is in some peril. The large picture, the sound that surrounds you, the dark of it all – there is simply no match for that womb-like experience." Which is why Gray, and filmmakers ranging from Kenneth Lonergan to Todd Haynes to Asghar Farhadi to Gillian Robespierre have instead partnered with Amazon Studios, a smaller, albeit rapidly growing, streaming service that respects the theatrical window: Its films play theatres via standard distribution partners and only make their way online to Amazon Prime Video after a traditional 90 days or so.

"We have the distinct ability to raise awarness for our films while in the theatrical window, so our customers can find them once they enter the home-entertainment window," says Roy Price, head of Amazon Studios. "We're also not tied to one release pattern, one third-party distribution partner or anything else; but one thing is guaranteed – all of our films will receive an exclusive theatrical window."

Casey Affleck and Lucas Hedges in Manchester by the Sea.

"When you talk to the Amazon people like [head of motion picture production] Ted Hope, they really want to develop and make and sell movies that are meaningful to people," says Kenneth Lonergan, whose Manchester by the Sea was carried by Amazon all the way to the Oscars podium earlier this year. "It's gratifying … I'm just hoping that companies like Amazon draw people to those movies that others have given up on."

Still, no single company is in this game for the pure joy of art – this is a business, first and last. Amazon is making movies to drive subscribers to its universe of retail services. Netflix is adding all manner of movies in the hopes of luring every kind of audience demographic to increase its subscriber base, which it needs to constantly grow in order to survive. The Big Six live or die on box-office receipts. No matter how Netflix alters the landscape, the movie business starts and stops with money.

"A lot of producers don't care if it goes theatrical or not, if they get to make their deal," says producer Russell Levine, who's made films with both Netflix (the Ellen Page drama Tallulah) and Amazon (the upcoming Jenny Slate dramedy, Landline).

Yet, it's an open question as to how long Netflix's deal boom will last. Earlier this month, the company closed $1.4-billion in new debt financing in order to buy all its shiny new content – and this adds to $3.37-billion in existing long-term obligations.

In a recent report for global investment research firm Morningstar, senior analyst Neil Macker noted that Netflix also faces increased competition from smaller players (Amazon, but also Hulu, HBO Now, DirecTV Now, Fandor and more) that threatens its all-important growth. Netflix admits as much in its own 2016 annual report: "If we do not grow as expected, given, in particular that our content costs are largely fixed in nature and contracted over several years … [the] results of operation may be adversely impacted." Meanwhile, the company has still been unable to break into the huge Chinese market, with Beijing's protectionist regulations preventing Netflix (and Amazon) from setting up shop in the territory.

A still from The Meyerowitz Stories. If Netflix is to thrive, it needs its original products to succeed.

War Machine, Okja, The Meyerowitz Stories, Bright – if Netflix is to thrive, it needs its original products to succeed. If filmmakers want to work outside blockbusters, they need streaming giants to open their wallets. And if movie theatres want to keep their doors open, they depend on Hollywood to keep pumping out hit after hit – that is, if movie theatres want to stay in the movie business.

Last month, Cineplex, which controls 78 per cent of Canada's market share, announced the opening of its second "Rec Room" location, in downtown Toronto. The entertainment space will have everything from arcade games to axe-throwing to eSports to restaurants. Just, no movie screens.

A decade from now, Cannes's Grand Théâtre Lumière might just be the last best place to see a movie – if it can nail down its projection problems.

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