Is Netflix set to dominate this year’s headlines?

Wild Bunch has launched its new LA-based sales company, Insiders, a cluster of new American funds are about to enter the market and Robert Simonds’ high-profile STX is in exploratory talks to move into international sales.

Heading into Cannes there is plenty to chew on, including currency fluctuations, anxiety over the proposed European Digital Single Market and a diverse US distribution landscape offering more opportunities than ever before.

Yet there are no prizes for guessing who everybody will be talking about when the fun and games kick off on the Croisette this week.

Ted Sarandos hits Cannes 

Netflix’s $17m swoop on all worldwide rights to Jadotville in Berlin served as a timely reminder of the streaming giant’s ambitions and, in the run-up to Cannes, the company had already made at least one offer on a major agency package. The outfit has gone from a beast with a taste for bamboo shoots to an 800-pound gorilla with its eyes on a jungle-wide binge.

A scheduled on-stage appearance by Netflix chief content officer Ted Sarandos as part of the Marche du Film’s NEXT programme on May 15 has already developed the aura of a Floyd Mayweather-Manny Pacquiao ticket for market badge holders.

Netflix’s output deals are morphing into a truly global presence as the company aims to boost its presence from around 50 countries to 200 within two years. To this end, in a document on its website called ‘Netflix Long Term View’, the company says that in this year alone it has earmarked $3bn on content spend and more than $600m on worldwide marketing to grow that 62 million-plus subscriber base.

Besides TV, Netflix is ramping up original film content as seen in partnerships with Adam Sandler and the Duplass Brothers, while sources tell Screen that the budget on Crouching Tiger, Hidden Dragon 2, the collaboration with The Weinstein Company and Imax, has soared to $100m.

Of greatest concern to international distributors, the giant with mile-deep pockets can rub shoulders with the studios and is making increasingly frequent incursions into the independent space, as selective rights deals give way to a new focus on global acquisitions.

The Netflix effect

The official line from buyers and sellers is Netflix represents another revenue stream. However, behind the scenes, anxious distributors are feeling the Darwinian chill. Without SVOD rights to make up for the collapsed DVD market - let alone all rights - things do not look too rosy.

Alarm bells sounded last AFM when Netflix briefly circled SVOD rights to The Weinstein Company’s Quentin Tarantino Western The Hateful Eight. AFM buyers - already irked by high asking prices and the wish of the film’s notoriously controlling director to be intimately involved in all negotiations - revolted and the flirtation ultimately amounted to nothing. To this day the Weinsteins sales team has not announced a single international deal despite repeated inquiries by Screen.

Netflix was not be deterred and had a couple of other worldwide plays up its sleeve, taking Jadotville off the table at the EFM and paying $12m for Beasts Of No Nation, starring Idris Elba, in March. Sales agents are now thinking hard about how to engage most effectively with the digital titan and, among other things, how to price SVOD rights.

Jadotville may not have been the most sought-after sales title in Berlin, yet Netflix showed a steely resolve in its pursuit, tracking the package from initial talks in Sundance with UTA Independent Film Group. Now the question is will Cannes become the first market where the non-linear distributor snaps up the most desirable title of the market.

“They’re a player,” says Radiant Films International chief Mimi Steinbauer of Netflix. “They’re only going to buy worldwide rights on a few films. Of course the studios can do this but this is an interesting development. But what does it do for the release pattern? Overall, it’s good for the business as a whole because it’s an additional revenue source to make films.”

“They’re buying premiere product, which they want to attract first-time subscribers,” said Russell Levine, CEO of financier-producer Route One. “We’re going to see more of it and we’re going to see more because of the competitors in the marketplace taking a somewhat similar approach.

“There are others like Amazon, Broad Green and STX that have a fresh take on how they’re going to distribute,” Levine adds. “We’re going to see some changes in other groups that will focus on the low to lower mid-budget range, from $2m or $3m to $20m.”

Amazon agenda

The Amazon Original Movies team led by Ted Hope may be about to announce the first couple of titles on its annual slate of 12 sub-$25m features in Cannes. Spurred on by a couple of big plays by Amazon Studios’ TV division – this year’s Golden Globe win for Transparent’s Jeffrey Tambor and the announcement of an original TV series with none other than Woody Allen – it is time for the feature unit to make its move. Hope and Co will be on the Croisette scouring for content and at this point the focus appears to be more curatorial than that of Netflix.

Levine, whose company has a two-film deal with STX and fully financed and co-produced A Walk In The Woods that Broad Green will release in September, believes the robust nature of US distribution will create competition in the international market for better product. “You will see corporate agendas driving very interesting opportunities for content suppliers,” he says.

Suppliers are starting to get their product in front of Netflix and Amazon via sales agents, who more and more are presenting what they regard as suitable packages to the digital giants.

Yet if the path of the traditional independent player appears daunting, the disruptors face challenges, too. Nobody seems too sure what Amazon Studios’ expansion plans are or how exhibitors will engage with an Amazon Original Movies US release strategy that calls for shorter windows.

Transparent felt like it was a turning point, creatively,” says Sierra/Affinity president of international sales and distribution Jonathan Kier. “That’s a good sign for the international space but the question is what’s the plan? Netflix very clearly wants to be everywhere and will therefore need to licence rights everywhere. We don’t know what Amazon’s expansion plans are, or how they will licence films internationally, but they’re very strong in the UK.”

For Route One’s Levine, Amazon’s primary agenda is to improve their market overall. “They want to go more upscale and get a more ethnically diverse clientele – that sounds like a smart corporate agenda.”

Unlike Amazon, Netflix does not pay royalties so it spends a lot upfront to buy producers out of their upside. Some insiders say Netflix will want to address this.

Then there is the matter of how global expansion will affect its international output deals. “Many of our buyers have deals with Netflix in Latin America, the UK and Germany,” says Kier. “The question is are they going to be expanding these deals.”

Kier believes Netflix will bring benefits to the industry. “With the decline of home entertainment, these SVOD services are kind of the Holy Grail. It’s hoped they will make up for some of the [lost revenues] from the home video sector. For US sales agencies, we’re in business of big theatrical movies and theatrical is still growing for us and that’s our focus. SVOD premieres are still new internationally.”

French resistance

France in particular could be problematic. Once Netflix elbows its way in besides StudioCanal, it will have to navigate strict chronology laws that enforce a three-year window between theatrical and SVOD. Netflix may have to eschew theatrical in France, as it did when it licenced St Vincent in the territory from The Weinstein Company.

One executive who said Netflix’s strategy changes “every six months” speculated that it remained in the streaming giant’s best interests to mount a theatrical launch because that would add value down the chain. Certainly its goal of buying all worldwide rights on titles presents problems for traditional competitors.

“If they’re going to compete on a movie everyone wants it’s an issue,” says one leading sales agent. “But if it’s something more specialised, maybe not. Buyers didn’t want to buy The Hateful Eight without pay TV. That’s why Netflix walked away from the deal.”

Industry observers who spoke to Screen speculated it was incumbent on distributors to take destiny into their own hands. A move into production or output partnerships with well capitalised producers from the US and elsewhere might, they suggest, mitigate the fall-out within a drastically shifting landscape. As always, it seems, there is genuine excitement in some quarters about opportunity.

“The fascinating thing is how many deals are now available,” says one financier. “It enables us to have a lot more flexibility in how we fashion deals to suit [distributors’ goals] and help us drive a much more predictable return on investment.”

Says Levine: “The big change is the robustness of the distribution platforms and the ability of these companies to provide films to hundreds of millions of people on phones, tablets and other devices. That changes everything and it’s been very recent.”

As one Cannes-bound agent puts it during a break from assembling a slate of A-list packages: “Netflix, Amazon… they’re the future and we have to engage. It’s as simple as that.”