Over the last ten years, Netflix has made a dramatic transformation from a DVD mail-distribution service to an online streaming service. Netflix’s survival and success can be attributed to its “disruptive” business model that generates large quantities of original content to lure viewers away from traditional television. However, this content-heavy approach has caused a backlash from movie directors, who can only qualify for Academy Awards if their work is featured in cinemas, as well as from investors who bankroll production budgets for original content.
Netflix’s content-oriented model began in 2011 with House of Cards, the first “original series” produced by the company. Netflix has since grown into a production giant, creating over 700 original series in 2018 alone. These original series and films have been the key driver of Netflix’s growth, a means of attracting subscribers to the site and away from traditional television. With over 120 million subscribers all across the world, Netflix has begun to diversify the kinds of original content it produces. Stand-up comedy, indie films, and foreign-language productions are some of the media that it is prioritizing in the next year in order to attract new subscribers.
However, as Netflix attempts to diversify the scope of its media production, it has to fight to win recognition for its original content from the traditional gatekeepers of the entertainment industry. Netflix made headlines for waging a public battle with the renowned Cannes Film Festival after the festival made theatrical distribution in France a requirement for a film’s eligibility. This is particularly key since under French law, films are not allowed to be shown on streaming platforms until three years after their release. Preventing simultaneous online and in-theater release poses an existential threat to Netflix’s model of growth: If it wants its original content to be eligible for the festival, Netflix cannot stream it and therefore cannot profit from it to the same degree. Streaming remains Netflix’s key platform, so making streamed movies ineligible for awards greatly disrupts their content-oriented strategy. Netflix responded to the festival’s new policy by pulling the two Netflix original films nominated for awards, Okja and The Meyerowitz Stories, out of the festival.
Ironically, in the United States, Netflix has begun to encounter the same requirement to distribute its films to theaters to be eligible for awards, but now with much higher stakes. Netflix rarely shows movies in theaters in the United States, and in the few times it has, it is “only as a nominal concession to the Oscar rules.” Netflix’s simultaneous release of films online and in theaters has come under criticism from esteemed Hollywood directors. Steven Spielberg argued that films achieving “token qualifications” should not qualify for Academy Award nominations. Christopher Nolan called the policy of simultaneously streaming and releasing content “an untenable model for theatrical presentation.” Many of these critiques revolve around the fact that Netflix prioritizes a large quantity of content over quality, many times focusing on releasing a variety of shows and using trial and error to see what yields the greatest revenue.
These two critiques are from established directors who receive large production budgets and the backing of cinema distributors. To lesser known directors, who pose a greater financial risk to studios, Netflix’s model offers a chance at recognition and production. Netflix’s model also increases the accessibility and affordability of cinema. Ava DuVernay, who directed A Wrinkle in Time and the Oscar-nominated Netflix documentary 13th, has noted that Netflix allowed production without financial or geographic access to movie theaters. As streaming services remove barriers between audiences and films, they have the potential to transform a home into a cinema.
With its upcoming releases from big-name directors, Netflix has straddled the line between traditional cinema release and streaming availability. Many of these films are fit for the big screen; it requires more than a token distribution to do them justice. In particular, Alfonso Cuarón’s film Roma was photographed in 65mm with Atmos sound mix, which is ideal for a theater. Roma as well as the Coen Brothers’ The Ballad of Buster Scruggs will be selectively distributed in theaters before being released on Netflix in December. For the time being, this strategy has appeased directors and viewers alike, allowing Netflix to continue partnerships with big-name directors such as Martin Scorsese, whose newest film The Irishman is set to be released in 2019. This strategy appeases big-name directors by making their films eligible for awards and, as opposed to simultaneous release, encouraging audiences to go to theaters to watch films before they’re released online.
While Netflix’s content-oriented model may be viable even with limited theatrical releases, another problem that Netflix faces is the sheer cost of its ambitious original projects. For example, the film Okja cost $50 million to produce, and yielded an unspecified amount of box office revenue. Netflix has spent double to sign Scorsese–and this large spending has started to add up. Netflix’s heavy expenditure has resulted in the $10 billion dollars in long-term debt, which the company has argued is essential to ensuring long-term revenue. Their strategy is to outspend competing online streaming platforms in order to produce the most original content, hoping that in the hundreds of shows produced, a few of them achieve broader success. Netflix argues that these heavy expenditures are needed to maintain their edge in the market, especially as new platforms are being launched by companies such as Disney. However, this trial and error strategy requires considerable financial resources, a problem which is exacerbated by directors’ new requests for cinematic release. Additionally, at the moment there is no sign of these large investments paying off: As Netflix will continue to operate at negative cash flow at least into 2019 and has failed to meet new subscriber targets, investors remain concerned.
Netflix has clearly outlined its role as a disruptor of the entertainment industry not only by its bold business strategy, but also by changing how people consume media. Netflix has changed the nature of consumption of media, from its use of cliffhangers to encourage viewers to “binge” the next episode to its entry into slang as “Netflix and chill.” The ability to consume movies and shows on any phone, tablet, or laptop has created “home-cinemas” and has made media more accessible to those in remote regions. Yet, in order to be a remain a disruptor of the industry, Netflix must continue to innovate. A content-oriented approach has done the company well until now, but growing economic pressures indicate that Netflix’s ambitions exceed its abilities. Netflix’s careful balance of creative pressure from directors and financial pressure from investors could have consequences in the entertainment industry in the years to come.
Photo: “he took her to a movie”