Essec Business School

The Cannes Film Festival is widely regarded as the most prestigious - and largest - international showcase for the cinematic arts. However, as new technologies, products, and channels of consumption throw the film industry into a period of transformation, will the Cannes film festival continue to be as important as it once was? We asked Serge Hayat, Founder of ESSEC’s Media & Entertainment Chair.

ESSEC Knowledge: What are the main concerns of the film industry today?

Above all, piracy is a recurring subject of debate. Nobody has yet taken the bull by the horns in France, and it’s still a problem that still plagues neighboring countries like Germany. Even though the WTO has supplied a framework to outline the rights of states in this matter, nothing has yet proved effective.

Platforms are also changing the rules of the game. The explosion of series is due to growing number of broadcast channels that demands original content to hold the interest of their subscribers and advertisers. So many of these channels, like pay-TV platforms and channels in the United States, produce exclusive original content, which will allow them to build their brands and capture new clientele - elements that the film industry are struggling with today.

EK: In this context, is Cannes as important as it once was?

Film festivals are more important than ever! The industry relies on festivals like Cannes to ensure the financial success of their films. Indeed, audiences have a wider range of choices including TV and VOD so it’s harder to draw them into theatres. In this context, French as well as foreign film-makers need to rely heavily on international markets without which they would certainly encounter major profitability issues. And since international markets are so important, so too must be film festivals. The initiatives of the CNC (National Film Center) go in this direction by promoting and supporting the export of French films.

Indeed, international markets are supported by festivals, and the Cannes Film Festival remains the largest film festival in the world, and therefore the largest film market in the world. Cannes is absolutely essential to ensuring the profitability of films that produced each year.

Furthermore, private investors take major international film festival results into consideration when selecting which films they will invest in, whether in official or parallel competition. Indeed, not only does participating in film festivals expose films to more buyers, recognition at a festival improves a film’s reputation, ensuring it will sell better and in more territories. The presence of these festivals is therefore essential and this applies not only to arthouse but to all categories of films.

EK: If the platforms have a huge impact on the film and television industries, what role do the platforms play in Cannes?

Platforms like Netflix and Amazon also look to buy when they’re at Cannes. For example, Divines, which won the gold camera last year, sold for 1.2 M euros to Netflix. It would not have been possible to imagine that Netflix would have bought this film if it had not been exhibited at the Cannes Film Festival. Moreover, it would never have been able to obtain such a sum for an international purchase (art-house films usually sell for tens of thousands of dollars internationally). Here you can see that the role of festivals is clearly growing.

One of the subjects provoking debate in the industry in France is the disappearance of financing by television. Indeed, television series are getting a bigger share of the attention, which has negatively impacted cinema financing. Platforms aren’t consistently positioning themselves as a substitute because they do not pre-purchase films. This means that they don’t fund upstream, even though they’re consuming the finished product. However, Netflix is beginning to fund productions and Cannes just created the controversy by selecting two films financed by Netflix that will nonetheless not be shown in French theatres. 

It is also interesting to see how these platforms work within the release date windows that exist today in France. Because in France windows open and close (cinema, video, pay TV and free), broadcasters can profit from the films they pre-purchase. Platformes, on the other hand, tend to play a role of catalog on which one can find the films some 36 months after its been shown in theatres, which makes them less attractive. Amazon is the only platform financing its own films today.

This is due to problems of exclusivity. In general, a film is first shown in theatres before being shown through other channels. Now, when it arrives on a platform, the film has already been broadcast on other channels. Platforms, including Netflix, want films to be release on the platform and in theaters simultaneously. This worries theatres who fear they will be deprived of their prerogatives on the subject . Series pose no problem in this sense.

There is therefore a clear question about financing. Although in France there is an arsenal developed to protect the traditional players, it's no longer adapted to the presence of these platforms: Is it possible to reform all this without throwing baby out with the bath water?