Essec Business School

The speed and magnitude of disruptive change that digital video is generating has long been throwing many industries and their business models into upheaval. The film industry, however, has been more or less been able to shield itself from this change. Indeed, the same old studio players have continued to dominate the scene… until now. Signs point to an emergent model where film will have to find its place within the digital video ecosystem. We spoke with Judith Andres, Executive Director of ESSEC’s Media & Digital Chair, to get her take on the state of the transformation on the eve of the 2017 Cannes Film Festival. 

ESSEC Knowledge: How has the film industry so far shielded itself from change?

Foster innovation, break with the past, develop new business models ... most industries impacted by the digital revolution have been following these steps to evolve with their environment. Nevertheless, although the cultural and entertainment sectors were among the first subjected to the digital revolution (the music industry in particular), the film industry has managed to resist change, despite the proliferation of new types of content and changing consumption.

In France, again and again the subject of chronology comes up - does our new digital reality make film exclusivity in cinemas impossible? Until now, the French film establishment has been shaken… but never really broken.

EK: Does the Festival de Cannes 2017 mark the arrival of an inevitable changeover?

We started to see signs of this change last year. Amazon, a powerful player who had carefully yet discretely prepared its arrival on the film scene, became a major focus of the 2016 Cannes film festival thanks to the opening screening of the Café Festival Sociéty, a film directed by Woody Allen and acquired by the e-commerce giant.

But if Amazon is making its appearance in theatres, its VOD competitor Netflix has adopted a completely different strategy. With the goal of growing its subscriber base, Netflix has focused on developing exclusive content. Sometimes this content is acquired, but more often still its produced in-house.

The Cannes 2017 selection includes a original Netflix production: South Korean director Bong Joon-ho’s film Okja. This new element at this year’s festival has been a major object of discussion, concerns, and controversies amongst film industry bigwigs.

Will this non-exclusive film be shown in cinemas? The question underscore our current uncertainty, since Netflix is in discussions to make this happen, and it would be a first. Of course, Gus Van Sant’s Elephant made its way to cinemas after winning the Palme d’Or in 2003. But in this case, plans to show the film in French theaters were already in the works.  

EK: What further change is needed?

Everyone expects different answers to this question and the forces involved are effective and solid. In a highly globalized market where works circulate a great deal, trends can be sought elsewhere, although the legal environment may be very different. For example, the United States should allow contractual negotiations to settle release date issues. Indeed, this is a major legal hurdle often misunderstood by the public. If this happens, the industry will be in a better position to protect against piracy which is in large part driven by the wait between a film’s release in cinemas, and its availability on DVD.

However, it’s probably time to look at this question from a different angle. Why not find a more realistic solution that will allow cinema goers to see their films in cinemas, while also giving online viewers legal access to the content they want. This will help the film industry more effectively fight piracy much the same way the music industry did.

Initiatives such as the Screening Room, designed to allow streaming on the same day of the theatrical releases, deserves to be developed with the help of market players. In these times of digital disruption, co-competition seems to be a better tactic than obstinate resistance, which has so far prevented any historical actor from maintaining its advantages against the wave of new entrants ...