EXCLUSIVE: Netflix remains the industry’s favorite talking point. But as the online giant continues to soar, Europe is starting to push back against its largely unchecked growth.
HDF Kino, Germany’s largest cinema association, says it agrees with Italian cinema bodies which roundly criticized Netflix’s presence at the Venice Film Festival. The advocacy organization, which has 620 members who account for more than 3,200 cinema screens across Germany, said it would not welcome Netflix films at the Berlin Film Festival which takes place early next year.
“It should be clear that we wouldn’t be pleased if Berlin were to be misused through day and date cinema,” the organization’s CEO Thomas Negele told Deadline. “We represent the same position as the Italian associations.”
Italian trade orgs such as ANEC and ANEM, as well as European cinema groups CICAE and UNIC, condemned Netflix’s presence at Venice and called on festival director Alberto Barbera to change his open stance toward the streaming giant. Six Netflix films played at the festival, including Alfonso Cuaron’s lauded Competition pic Roma, and Italian drama On My Skin, which went day-and-date.
The decision to grant Roma the festival’s top prize outraged the Italian trade bodies which claimed that the publicly-backed festival had become a “marketing vehicle” for the platform, “The Golden Lion, a symbol of the International Film Festival, which has always been financed with public resources is a patrimony of Italian spectators; the film that bears its name should be within everyone’s reach, in cinemas, and not exclusively for the subscribers of the American platform.”
Negele concurs that Netflix’s presence at A-list festivals is counterproductive for the wider film industry, “The original meaning of festivals was and is the presentation of a certain genre of film within the framework of a business model which promotes windows. Festivals should allow for the possibility of buying and selling these products abroad. If Netflix wants to present its own productions at festivals they should fall under strands for TV series and TV productions and there wouldn’t be a windowing problem. The question is what does Netflix want to achieve through its presence at festivals? Netflix cleverly uses them as an advertising platform for its productions and tends to combine this with a small scandal, such as the call for day and date releasing. They want to suggest to their customers that their products are at least as good as movies, if not better.”
To date, Berlin has been in line with Cannes by not allowing Netflix films into its main competition. According to the festival, only one Netflix film has ever played at the event: Liz Garbus’s 2015 pic What Happened, Miss Simone? The festival, which takes place in February, has said it would welcome Netflix series in its TV strand while Gus Van Sant’s Amazon-backed Don’t Worry, He Won’t Get Far On Foot played in main competition this year with a theatrical commitment.
Many industry I’ve spoken to in recent months see Netflix’s presence at leading Euro festivals as necessary evolution, but Negele’s views chime with those of his continental counterparts, as evidenced by a communique yesterday from European exhibition body UNIC, which represents cinema associations across 37 territories, “UNIC wishes to express its support for Italian cinema exhibition colleagues and others in encouraging festival competitions only to consider for inclusion those films intended for theatrical release. The cinema industry can exist alongside streaming providers, but believes that their – and the audience’s – best interests are served by a film receiving a proper cinema release, including a clear and distinct window. Films belong on the big screen and we therefore encourage leading international film festivals to take a lead from the Cannes Film Festival and celebrate the social, cultural and economic relevance of cinemas when designing their future selection policies.”
Negele believes that local cinemas must reinvent themselves to become more relevant to customers but he also thinks that Netflix is using festivals as a “stage” by which to entice directors and producers. His concerns extend beyond the platform’s model. He suggests that splashy first collaborations with high-profile creatives aren’t often maintained and says that contracts only benefit a minority of producers, “For the medium and small scale producers, who account for at least 80% of producers in Germany, Netflix doesn’t really bring anything, especially if money for Netflix shows or films has flowed from public funding pots!”
Negele’s last point speaks to a growing frustration in Europe that the streamer is piggybacking off public funding and lax regulation. Netflix is increasingly known for strong local-language TV series such as Dark in Germany and Suburra in Italy, and it recently announced the launch of a Madrid production hub, but as the voracious platform continues to enjoy rapid subscriber growth, political as well as film and TV organizations are increasingly questioning whether the U.S firm, which has a market cap of $174B (bigger than Disney’s and almost six times the value of Sky) is doing enough to feed back into the local economic and cultural ecosystems from which it benefits. Similar questions have been asked of U.S. majors and commercial broadcasters in the past but for the first time new kid on the studio block Netflix is experiencing regular European turbulence.
In May, soon after the well documented spat with Cannes, the EU’s top court rejected an appeal by Netflix, and its Dutch subsidiary, Netflix International BV (Netflix services to Germany are broadcast from its Amsterdam-based arm), to overturn a German levy implemented to help fund German-language features and TV programs. The German government argued that a tax on foreign VOD operations was necessary to ensure domestic producers are not disadvantaged. The German levy could be the first of many.
Meanwhile, the EU is readying a quota to ensure Netflix, Amazon and other streamers operating in the European Union have at least 30% local content in their on-demand catalogs. This could become law by the end of this year. Whether this digital pushback is part of a broader international ‘trade war’ or not, it is clear that frustration is growing as a result of Netflix’s perceived free ride.
Today, BBC boss Tony Hall will use a keynote speech at the Royal Television Society’s London Conference to call for leading SVOD services to be taxed and regulated in the same way as traditional linear broadcasters to avoid the latter competing with “one hand tied behind its back.”
Netflix received a €200,000 tax rebate from the UK government last year and paid no corporation tax, despite earning an estimated £500M from its millions of Brit subscribers. Despite its significant local reach the firm declared a pretax profit of only €1.2M in the UK because — like other tech titans such as Google and Amazon — it largely uses the UK as a service arm and has its HQ elsewhere in Europe. In Netflix’s case that is the tax-friendly Netherlands.
Even in the Netherlands, however, the country’s leading government advisory board for culture and the arts has called for locally-based SVOD companies to do more to back the local entertainment sector.
Netflix’s remarkable growth curve is likely to continue but in Europe, at least, bumps in the road map are increasing.
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