Why Is Netflix Increasing Its Investment In French Films?

Netflix Inc. NFLX is increasing its focus on France with a new three-year agreement that will invest a minimum of $45 million into the production of French and European movies that will play in French cinemas before premiering on its streaming service.

What Happened: Variety reports Netflix’s pact the with the organizations BLIC (Bureau de liaison des industries cinématographiques), BLOC (Bureau de liaison des organisations du cinema) and ARP (Société civile des auteurs réalisateurs producteurs) is the streaming service’s latest effort to solidify its presence in Europe.

Under the terms of the new agreement, Netflix will invest 4% of its annual French-based revenue into financing of French and other European movies, with at least $34 million set aside for the funding of French-language films that will debut in France’s cinemas before streaming on Netflix 15 months later. The company previously had to wait three years to access theatrical French releases owing to the country’s draconian rules on the window between big- and small-screen premieres.

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Why It Matters: In December, Netflix and rival streamers Amazon AMZN, Apple’s AAPL Apple TV+ and the Walt Disney Co's DIS Disney+ signed an agreement with Conseil supérieur de l'audiovisuel, the French broadcasting authority, to invest 20% of their annual locally-sourced revenues on French content. France was the first European Union country to implement the Audiovisual Media Services Directive (AVMS) legislation put forth by the European Commission that is designed to create a more level playing field between the U.S. streaming companies and the European entertainment industry.

But whereas Disney has focused heavily on expanding its Asian presence, Netflix is digger deeper across the Atlantic to expand its contents and subscriber base.

As part of the new agreement, Netflix agreed to allocate at least 17% of its French-language film financing to productions budgeted under $4.5 million and invest in at least 10 films in pre-financing stage.

Netflix’s deal comes at a time when the nation’s theaters are still seeking to move beyond the COVID-19 crisis. For pre-pandemic 2019, the French cinemas generated 213 million ticket sales, breaking a 50-year record, with $1.57 billion in box office returns. That number plummeted 70% to 65 million ticket sales during 2020 when theaters were closed for 176 days, although it rebounded by 47% in 2021 with 96.2 million in admissions.

During the pandemic, streaming gained a new wave of popularity in France. As of August 2021, 47.7% of consumers who French watched a program on a video-on-demand platform did it on Netflix, according to Statista Research Department, with 28.2% citing Amazon Prime for their streaming viewing. More than half the French population watches a program on a VOD platform at least once a month, with 19.2% claiming daily viewership.

Netflix’s popularity can be primarily attributed to its French-based shows including “Lupin,” “Call My Agent!”, “The Hook Up Plan” and “Marseille.” Earlier this month, Netflix’s French viewers saw the premiere of the science-fiction comedy “BigBug” from filmmaker Jean-Pierre Jeunet, the director of the modern classic “Amelie.” Jeunet told AFP that Netflix was the only production company to back his new film and he predicted there will be an equitable balance between theaters and streamers.

“Platforms haven't replaced cinemas, which didn't replace the theater,” he said. “The big films will always be shown in cinemas. The world is changing, we have to adapt.”