I was quite surprised this winter when a longtime member of the Academy of Motion Picture Arts and Sciences, which is responsible for the Oscars, openly said what everyone was thinking. “Everyone hates Netflix,” she told a foreign visitor who asked about the streaming platform.
And it’s true. Even though many in Hollywood depend on Netflix for their livelihood, they hate the company and what it has done to a century-old, once-thriving business. But so far, almost no one has said it out loud.
Producers hate Netflix because they can’t make “back-end” profits, meaning box office revenue, licensing and sales to other platforms. Celebrities and their agents hate that Netflix changed the salary system and doesn’t pay residuals, that is, proportional percentages each time content is rebroadcast.
Studios hate Netflix for stealing their talent and inflating executive salaries. Exhibitors hate Netflix because the platform harms the viewing of feature films in theaters by convincing people that it is better to stay on the couch.
The Academy, meanwhile, has demonstrated its contempt by silently refusing Netflix cinema’s highest honor, the Best Picture Oscar, year after year, even in the face of campaigns for acclaimed films like “Roma,” “Attack of the Dogs,” “The Irishman” and “Emilia Pérez.”
Today, this seismic event occurs, where Netflix announces its intention to acquire Warner Bros. Discovery – which includes HBO, a strong film library and a new distribution business, plus CNN and other cable channels, all for $83 billion. Part of the shock the industry is going through is because, until this week, most believed David Ellison’s Paramount Skydance, backed by his billionaire father Larry Ellison, a figure aligned with Donald Trump, would win the race.
Things changed in recent days when Netflix co-CEO Ted Sarandos proposed to Warner Bros. CEO. Discovery, David Zaslav, a job to run the studio, as well as a termination fee of $5.8 billion, exceeding Paramount’s offer. If the deal is approved by regulatory agencies, Netflix, which until recently was a newcomer full of new ideas, will now officially rule Hollywood.
Netflix has never had much talent for theatrical releases, once the central idea of the entertainment industry. “This is the day movie theaters died. It will always be seen like this,” a major Hollywood film producer told the New York Times in panic. “This will be David Zaslav’s legacy. He will be remembered as the guy who killed cinema,” he said.
“Everyone is afraid to say that, because Netflix has half the payment deals, half the production deals, and massive TV deals,” he continued, citing lucrative deals to stream content made by other studios on Netflix. “But it’s not debatable. All the studio heads say it.”
The Directors Guild of America, the Actors and Screenwriters Union and the Cinema Trade Association have expressed concern about the negative impact of this potential purchase on employment and film production.
“Netflix’s proposed acquisition of Warner Bros. represents an unprecedented threat to the global exhibition industry,” Cinema United said in a press release. “Netflix’s business model does not support theatrical viewing. In fact, it is the opposite.”
Resentment has remained hidden until now, including among executives of competing studios, because of the power Netflix has acquired in Hollywood. With a market value of $426 billion, the company dwarfs all other studios – Disney, valued at $187 billion, comes a distant second. Netflix spent about $18 billion on content this year, with movies and TV series the economic driver of entertainment.
But that doesn’t mean that people like to follow their rules, dictated in particular by data. Founded in 1997 as a DVD rental company, the platform moved into streaming in 2007.
Netflix is committed to increasing volume and scale rather than courting expensive talent and private planes. This virtually ended profit sharing, which other platforms copied. Only a few star producers have deals that guarantee time to develop quality material.
TV has now largely become a streaming business while cable and free channels are in decline, with strict budget limits and no “back-end” profits. In the movie business, directors have to beg for their films to be distributed theatrically, even in the case of features like the critically acclaimed “Frankenstein,” which was shown for three weeks in a few hundred theaters to please its director, Guillermo del Toro. He didn’t stay.
At the origin of it all, Sarandos has been the leading advocate of the idea that the consumer should have control, more options and more ease. And that has always been a detractor from the cinematic experience. During the Covid-19 pandemic, people lost the habit of going to the cinema, which never fully returned.
But even if Netflix has been good for consumers (which is debatable; aside from highlights like “Stranger Things” and “Adolescence,” it also offers an endless buffet of unambitious series), it certainly hasn’t been good for the people who make up the entertainment industry. Many in Hollywood simply don’t trust Netflix.
So it’s no surprise that many are wondering if Sarandos will keep his promise that Warner will continue to release films theatrically. Or whether he will let Warner languish as a movie studio and simply grow its streaming business to a $1 trillion market cap.
Ironically, I received the news of Netflix’s winning bid as I sat down with a pair of 3D glasses to watch “Avatar: Fire and Ashes,” James Cameron’s three-hour-plus sci-fi fantasy film distributed by Disney and undoubtedly destined for the big screen.
Just two weeks ago, on a podcast, Cameron was asked if he thought Sarandos would keep his promise that if Netflix acquired Warner Bros., he would continue to release the studio’s films theatrically.
“It’s Muggle bait,” Cameron said. “‘We’re going to release the film for a week, ten days, just to qualify it for the Oscars.’ It’s rotten. A film must be made like a film for the cinema. And the Oscars mean nothing if there is no theatrical screening. But I think they’ve been co-opted, which is horrible.”
For former Hollywood royalty, being ruled by Netflix will be humiliating.
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