The Netflix Controversy

Netflix is an internet entertainment service that offers movies and television series to subscribed members. It was founded in 1997 and has now around 150 million subscribers worldwide. Since the early 2010s, Netflix also took an increasingly important role as producer and distributer of films and TV series. The rise of this player bypassing traditional channels of distribution of audiovisual contents has generated several controversies.
 
Attacking theatrical release windows
 
For decades, the movie industry has relied on a system of release windows; movies were first released in movie theatres, for around 17 weeks, before being available for sales in VHS or DVD. As Netflix became progressively a major film producer and distributor, it has been at the forefront in attacking this system. Netflix movies have had limited theatrical releases in order to prioritize the subscribers of the platform. But this move has been met with some resistance in the movie industry. As a matter of fact, the organisation running the Academy Awards considered rendering films with less than 4 weeks of theatrical release ineligible to be nominated for Oscars. That said, in the 2019 91st Academy Awards, the film “Roma”, distributed by Netflix after only three weeks of exclusive theatrical release, received three Oscars. Netflix stated that its aim is to make movies accessible to those who cannot afford to go to a movie theatre or do not have one in their own town.
 
Avoiding corporate taxes
 
A second controversy has risen from the fact that in many of the countries where Netflix is operating, it manages to get away without paying corporate taxes. Despite generating hundreds of millions in revenue in various European countries – for example, 500 million Pounds in the UK and 315 million Euros in France were reported for 2017 – it declares only very little profit, and pays from little to no tax in these countries. Users who subscribe to the service have a contract with a branch of the firm based in the Netherlands. Through this system, the firm manages to avoid paying most of its corporate taxes. Such practices are widespread among large Internet firms. To respond to critics, Netflix stresses that in the countries where it generates revenue it invests in local movie production companies, bringing benefit to the local audio-visual productions.

- futurelearn.com, European University Institute (EUI)

Culture in the Digital Age

Philip Kern (KEA) discusses how different sectors of the creative economy have had to come up with new economic models in order to adjust to the digital era. In the following excerpts, he describes specifically the case of music:

The main impact is to actually facilitate the production. The cost of producing has been reduced definitely. It’s also enables people or artists to produce directly, to auto-produce, to self-produce to be directly in contact with a consumer through digital networks. So definitely the impact has been a reduction of cost of production, the availability of production tools at retail level, even to film, to do audio recordings and to make it available directly through distribution channels.

Of all Cultural and Creative Industries (CCIs), music has suffered the most from the digital revolution, being hit by digital piracy, the reduction of physical sales (away from highly profitable retail stores), the development of new distribution channels with different monetisation logics (Apple - iTunes setting the precedent by establishing prices of downloads independently of the industry). This industry disruption is driven by new powerful digital players, the development of new business models and new consumption patterns with the instant availability of music on mobile devices and, most specifically, the rise of music streaming. … 

Taken as a whole the revenue of the music industry has severely declined over the last 16 years, essentially due to the decline in sales of packaged music (recorded music in the form of CDs) - the turnover of the recorded music industry significantly dwindled since 2000 (from EUR 32 billion in 2001 to EUR 13 billion in 2014 – worldwide data). The recent 3.2% increase in recording revenues (in 2015) should, however, be noted. The boom of live music and digital sales has not yet compensated the lost sales: digital sales represented EUR 1.3 billion for EU markets in 2014. …

Artists have suffered from the industry’s painful restructuring and have been forced to adapt to a new landscape. They are playing a greater role in fighting for consumers’ attention by making use of new online tools, notably social media, to develop a fan base and attract the attention of concert venues, festivals, and music businesses. However, user-generated content has not replaced artist-generated content, since consumption of music remains talent driven. Artists are confronted, on the other hand, with the fact that the new generation of music fans are less loyal to given bands or music genres switching more easily than former generations. …

Nowadays artists have to make more efforts to emerge by developing a fan base, thus forcing extensive touring, which contributes to a thriving life music scene (concerts and festivals). Artists have to develop a fan base if they hope to achieve a record deal or to be able to feature in music festivals. Social media are important tools enabling artists to develop such a fan base. The direct monetisation with fans remains relatively limited and artists still have to rely on distribution specialists (the record companies) for most of their revenues.

- futurelearn.com, European University Institute (EUI)