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Cannes Film Festival: How Netflix, Amazon and Other Streamers Changed the Market

Now in its 72nd year, the Cannes Film Festival promises to offer its signature cocktail of glamour and cinephilia, a feast of rosé-lubricated moviegoing that unspools against the glittering backdrop of the Côte d’Azur. At the Palais, a seaside cathedral to all things film, the likes of Leonardo DiCaprio, Margot Robbie, Brad Pitt, Bill Murray, Pedro Almodóvar and Antonio Banderas are expected to walk the red carpet at one star-studded premiere after another.

But the engine that drives Cannes, and the reason that entertainment companies from around the globe shoulder the cost of flying their talent and teams to the South of France and housing them for the better part of two weeks, is that the festival also has a vibrant market. It’s one that offers everything from grindhouse favorites to auteur-driven fare. Agents and producers deplane in Nice ready to sell buyers on completed movies or scripts that they argue will have the sizzle to attract big box office. It’s a pitch that’s getting harder to make, Cannes regulars admit.

The rise of Netflix and Amazon, and the expected launch of streaming giants such as Disney Plus, are scrambling the entertainment ecosystem. It used to be that companies could release a film theatrically, profit from its launch on DVD or Blu-ray and then license it to broadcast television or cable companies. That may no longer work in an era in which Netflix is forgoing traditional theatrical releases and streaming platforms are snapping up small-screen licensing rights that would have previously been reserved for an HBO or a Showtime.

“There’s been a traditional way of monetizing feature films country by country that is under immense pressure with the digital delivery of content,” says Glen Basner, CEO of FilmNation Entertainment, the producer of the Mindy Kaling comedy “Late Night” and sci-fi movie “Arrival,” adding, “It’s altering the value chain for distributors and changing how they go about exploiting their content.”

It’s also driving up prices. At Sundance, Amazon went on a buying spree, shelling out nearly $50 million for the rights to such films as “Late Night,” the Adam Driver political drama “The Report” and Shia LaBeouf’s semiautobiographical “Honey Boy.”

Netflix was also an active buyer, plunking down $10 million for “Knock Down the House,” a look at Alexandria Ocasio-Cortez’s upset congressional bid, which set a high-water mark for documentary sales at the festival. After largely sitting out the previous Sundance and fests like Toronto, Netflix and Amazon were positively frenzied when it came to acquiring movies. With Apple, Disney, Comcast and WarnerMedia all readying their own digital distribution platforms, these companies are in a race to buy premium programming. That can be good for the people who finance films or shows.

“There is an aggressive content grab going on right now that feeds all of our business,” says John Friedberg, president of STX Films’ international division.
Rival studios wonder if Netflix and Amazon are temporarily done buying or if they’ll carry their checkbooks on the journey.

“Some years they turn the switch on, and some years they turn it off,” notes Tom Bernard, co-president of Sony Pictures Classics, which is screening Almodóvar’s “Pain and Glory” and Ira Sachs’ “Frankie” in competition at the festival.

If there’s a bidding war for a specific film, Bernard acknowledges that his indie studio can’t pay what Netflix can, but because it releases its movies in cinemas, he feels SPC has something compelling to offer artists. “For us, it’s a question of whether or not filmmakers want to take the money or if they want the kind of exposure that a theatrical release can provide,” he says.

The movie business appears to be at an inflection point, but it’s uncertain what impact these new streaming services will have on revenues. Disney and WarnerMedia are set to launch their platforms this year; Comcast’s NBCUniversal won’t unveil its ad-supported digital service until 2020. When they all debut, it could mean more competition for cable subscribers who are already cutting the cord at a record clip as they try to find cheaper ways to watch movies and television shows. If the cable business teeters, it would imperil the lucrative licensing fees that producers and studios charge for the rights to their content.

And though Netflix, Amazon and some of the new streaming players are willing to pay top dollar for programming, it’s unclear if they will be adding more money to the media landscape than they will be taking away from existing businesses.

“I don’t think spending will go up, and I don’t think it will go down,” says Jonathan Deckter, president and COO of Voltage Pictures, the maker of “I Feel Pretty.” “I just think the money will go into different pockets. When you look at Apple or Hulu or Disney Plus, all they’re doing is replacing existing revenues that were going to other companies. I don’t think they’re creating new customers.”

A few years ago, studios saw Netflix and Amazon as cash cows. The two companies overpaid for the chance to stream movies and shows from the studios’ back catalog, ponying up tens of millions of dollars for the rights to “Friends,” “The Sopranos” and “Star Wars.” In the process, they used other people’s content to build up their market share, drawing customers from cable and broadcast and endangering the long-term health of other, very lucrative revenue streams for studios. Media companies began to worry that these short-term financial returns were coming at the cost of future profits.

“Studios started to view streamers as frenemies,” says Simon Gillis, chief operating officer of See-Saw Films, the film and TV production company behind “Lion” and “Top of the Lake.” “They were bringing a lot more money into the equation, but they were also disrupting traditional models.”

Some producers and filmmakers believe that the rise of streaming services couldn’t come at a more urgent time. The multiplexes are hegemonized by a few giants. With its acquisition of Fox, Disney now controls 40% of the domestic box office, and the kinds of films it makes — big-budget adventures featuring Jedi warriors or superheroes — aren’t the type being celebrated at Cannes.

“Cinemas are dominated by science-fiction and graphic-novel adaptations ,” says Alexander Rodnyansky, founder of AR Content and producer of “Leviathan.” “Stories that are character-driven or provocative cannot work in theaters, but they can flourish on streaming platforms.”

These also tend to be the kind of movies and shows that win awards. That’s important for Netflix, Amazon and emerging streaming services. Those platforms make most of their money from subscriptions, and research suggests that customers are more likely to try out a service if it has some Emmys and Oscars in its awards case. See-Saw’s Gillis says that high-quality movies and series have never been in more demand.

“They need content, and they’re willing to spend a lot of money for it,” he says. “They want something director-driven and distinctive. There’s a great fight for material that you can get passionate about.”

There’s also a new spirit that some producers, agents, and industry players find appealing. The rise of streaming platforms enables companies and artists to experiment with different ways of getting paid and provides them with novel opportunities to reach an audience.

“This moment of disruption is arguably the best thing that’s happened to the entertainment business in decades — for those who embrace it, the landscape allows talent to be far more entrepreneurial, enabling myriad pathways for creation, distribution and monetization of both film and television,” said Micah Green, co-founder of 30West, an entertainment sales company and investor.

Other indie players say that with Netflix and Amazon inflating prices, it’s become risky to hit a market or festival looking for a completed film. It’s better to try to board a project at the script stage or to develop a film yourself. That’s changed the indies’ approach to Cannes. Instead of heated bidding wars, they come to the South of France hoping to identify fresh voices.

“Cannes is still very important,” says Arianna Bocco, exec VP of acquisitions and production at IFC Films. “However, it’s shifted in terms of being a place where we went to buy a lot of films to a festival where we take a lot of meetings and scout talent.”

That’s not to say that indie studios aren’t on the prowl for the next masterpiece. With Netflix and Amazon wielding bigger paychecks, it helps to stay nimble. In Sony Pictures Classics’ case, that requires a set of wheels. Bernard will speed from one screening to another on a rented bicycle, weaving through the narrow streets of Cannes and ducking among taxi drivers who treat red traffic lights as a suggestion, not a directive, in order to get a seat for his team. If he finds something he loves, he wants to be able to make an offer as quickly as possible.

“I leave the biking to Tom,” says Michael Barker, Sony Pictures Classics’ co-president. “But it’s quite a sight. He looks like a gunslinger, riding up and chaining his bike before walking into the Palais.”

Elsa Keslassy contributed to this report.

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