Netflix CEO Hastings puts movie theater chains on notice

Reed Hastings blasts the theater chains for "strangling the movie business" and killing innovation

Financial trends and news by Steven Loeb
October 7, 2016
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The big movie theater chains have made it clear that they have no love for Netflix, and especially have no use for its plan to shrink the window for online release. The feeling is more than mutual.

Speaking at the New Yorker's TechFest event on Friday, Netflix CEO Reed Hastings did not mince words about the effect he feels the movie theaters are having on the industry.

Movie theaters are strangling the movie business. There’s been no innovation in the movie business in the last 50 years,” Hastings said.

He accused the theaters of having an "oligopoly," and, according to Hastings, the studios agree, but are powerless to stop them: theater owners have so much power that if the studios try different ways to distribute, they will find their movies boycotted.

That's something that Netflix knows a little something about. The major theater chains have taken a definitive stand against Netflix's movies, due to their strategy of releasing them simultaneously online. 

The company first ran into this problem in 2014, when it won the rights to produce a sequel to the early 2000's martial arts hit Crouching Tiger, Hidden Dragon. The plan was to release the film on its website, and in IMAX theaters, on the same day.

However, the operators of the majority of those screens balked at the idea, including AMC, Regal and Cinemark, which together operate 247 of the 400 IMAX theaters in North America. Those chains said that they would refuse to show the film, voicing their opposition to the idea of having it released on-demand on the same day.

The big chains, AMC, Regal, Cinemark and Carmike, also boycotted Netflix's most high profile film release to date, Beasts of No Nation, for the same reason last year.

One of the ways that theaters are still able to wield their power is through the Oscar nominations; in order for a film to be eligible for an Oscar it has to run for a week in both New York and Los Angeles. That's why Netflix just this week partnered with iPic, a smaller movie theater chain with 15 multiplexes around the country.

With this deal, starting within the next year, up to 10 Netflix movies will play in iPic theaters in Los Angeles and New York City, and the company will have the option of showing them at the company's other locations as well.

The deal also allows Netflix to release its original movies in theaters the same day that they appear on the streaming service.

Right now, Netflix needs movie theaters to garner the same prestige, and award show presence, that it has with its TV shows. If Reed Hastings gets his way, though, that won't be the case forever. This is a battle that is just beginning.

Netflix and China

Elsewhere in the interview, Hastings addressed Netflix's attempts to enter the Chinese market. He didn't sound very upbeat about the prospect going forward.

We’re focused on the rest of the world,” Hastings said. “Disney, who is very good in China, had their movie service shut down. Apple, who is very good in China, had their movie service closed down. It doesn’t look good.”

In January of this year, Netflix expanded to 130 markets, giving it a presence in 190 countries. That included major markets like India, Russia and Indonesia. It's even countries that you might not necessarily think of being prime targets for Netflix's offerings, like Saudi Arabia, Iran and Iraq. 

There are now only six countries in the world that don't have Netflix, and China is by far the biggest. It's not as though the company didn't try, though. 

Netflix was not shy at all about its plans to enter the Chinese market. In May of last year, Ted Sarandos, chief content officer at Netflix, talked openly about how the company would approach this, saying "our intent is not to go into China without a partner, our intent to try to figure out China and how to get there."

The company is also said to have been in talks with Wasu Media, and perhaps other big names in the Chinese video streaming market, but so far nothing has come of that.

Now, if Hasting's comment are to be believed, that dream has all but died. 

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