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Why Netflix joining the MPAA is a big deal

Netflix has joined the Motion Picture Association of America (MPAA), reports the Hollywood Reporter. Netflix is the first streaming service to join the entertainment industry’s lobbying group whose members are Walt Disney Studios, Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film, Universal City Studios, and Warner Bros Entertainment.

The report adds that the MPAA will lose a member after Fox and Disney are merged, leading a possible decline in annual dues of $10-12 million. Its sources say that the MPAA is looking for new members, including Amazon, to gain memberships to the association.

Where do we go from here?

Netflix joining the MPAA signals a perception shift in the entertainment industry as Netflix has gone from being a DVD rental company to a streaming only service to one that produces films, TV shows and other content. Netflix produced its first piece of content in 2012, 7 years ago.

This is not to say that Netflix has been able to turn a profit on its content:

  • For its Q4FY19 quarter, international revenues stood at $2.1 billion, while revenues from paid memberships stood at $80.7 million.
  • Paid net adds for the entire year were 33% higher than the 22 million net adds in 2017.
  • The company reported revenues of $4.1 billion for Q4FY19, 27% higher YoY from $3.2 billion in Q4FY18.

Netflix said that it accounted for 10% of TV screen time in the US. “In other countries, we earn a low percentage of screen time due to lower penetration of our service,” it said.

Funding for content

However, in October last year, Netflix said that it would raise $2 billion in debt to fund “content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions” because it needed to invest in original programming to remain competitive. According to TechCrunch, Netflix’s debt has reached $8.34 billion as of 30 September 2018. Notwithstanding this, Netflix has also been nominated for the Oscars lately, including one for Best Picture.

While it would be hard for us to quantify how much of a loss traditional theatres and cinemas in the US have suffered due to online streaming services, the MPAA would only be too happy to bring Netflix on as a member. This is why:

  • Netflix is a paid and legitimate streaming service, which, in the eyes of the MPAA, would be akin to reduced piracy.
  • It signals a change in perception of Netflix being “an enemy” of traditional studios, and more towards being a friend, or complementary, as against a contemporary. There is no doubt that offline industries across the world have revolted against their online counterparts, but this signals a symbiotic relationship.
  • With Netflix onboard, the MPAA can appear more “balanced” when it approaches regulatory mechanisms next. It will also benefit from Netflix’s regulatory lessons so far, across the world, and would possibly help it formulate regulations in the US.

It remains to be seen what heads butt when it comes to censorship and IP rights, since MPAA was instrumental in bringing in the SOPA (Stop Online Piracy) and PIPA (Protect IP) Acts, which did not become US laws.

Further reading:

Our censorship and streaming coverage.

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