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Netflix lost the best picture battle, but its war with Hollywood is just getting started

"It doesn't really matter that 'Roma' didn't win best picture. Netflix has unleashed the power of a new business model that will be with us for a long time."
Image: Alfonso Cuaron, Yalitza Aparicio, 91st Annual Academy Awards - Show
Alfonso Cuarón and Yalitza Aparicio at the 91st Academy Awards on Sunday.Kevin Winter / Getty Images

In the days leading up to the 91st Academy Awards, Hollywood's old guard was bracing for a tough night that could see a streaming company win the best picture Oscar, hastening the death of the traditional moviegoing experience.

The host-free ceremony was already mired in public relations stumbles and controversy, issues magnified by the show's steep, multiyear ratings decline. A big win for Netflix and Alfonso Cuarón's critically adored "Roma" would make matters worse for establishment studios and multiplex chains.

But by Monday morning, not even after-party hangovers could dampen the industry's celebration.

"Hollywood is euphoric," one Hollywood entertainment executive told NBC News on Monday morning. "The ratings do not appear to have collapsed, and Netflix did not win best picture, despite spending $25 [million] to $30 million" on a promotional campaign. "After so much misery, this morning feels like bliss."

"Green Book," an earnest but polarizing dramedy distributed by Universal, put the upheaval on hold, triumphing in the top category and denying Netflix the chance to make history — at least for now. The producers of the telecast, for their part, managed to reverse a recent ratings slump, drawing some 29.6 million viewers. (Universal Pictures is owned by NBCUniversal, the parent company of NBC News.)

But like the ratings dip that has hammered the Oscars and other major live TV events, one year's reprieve does not do much to blunt the wider tumult coming to the movie industry, pitting Silicon Valley against Los Angeles in a high-stakes battle for cultural dominance.

In roughly two decades, Netflix has gone from a mail-order DVD service to an era-defining global entertainment force that has left few parts of Hollywood untouched. It works with studios but may eventually have little use for them. It plays the marketing game, but owns arguably the most powerful marketing space in entertainment: the Netflix home screen.

In other words, the euphoria in Hollywood is all relative.

“Remember the rat experiments. In the absence of prolonged electric shock, rats experience the same neurological state as euphoria," the executive said. "Ratings declines and Netflix’s assault equal nonstop electric shocks."

Netflix was still a commanding presence at the Oscars, picking up three major honors for "Roma" — directing, cinematography, foreign-language film — and a fourth for best documentary short. But more crucially, Netflix and other leading streaming platforms — Amazon and Hulu, plus old-school titans looking to replicate their innovations, such as Disney and WarnerMedia — still pose an existential threat to age-old business models.

"It doesn't really matter that 'Roma' didn't win best picture," said Tom Rogers, the former chief executive of the digital video recorder company TiVo. "Netflix has unleashed the power of a new business model that will be with us for a long time."

In the aftermath of awards season, film executives will be forced to confront the same headaches that have plagued them since the ascent of streaming services. A growing number of consumers, hooked on the ease and convenience of on-demand video, are ditching conventional multiplexes for the comfort of their living rooms, and old-line studios could soon be forced to trim the "window" between a movie's run in theaters and its appearance on digital platforms.

Netflix is also luring away top talent, such as Guillermo del Toro, Noah Baumbach, Dee Rees, Michael Bay, and legendary filmmaker Martin Scorsese, director of the upcoming Netflix project "The Irishman." In a telling move, Netflix ran a teaser trailer for Scorsese's big-budget mob drama during the Oscars telecast on Sunday night. Netflix's television division, meanwhile, has poached elite producers including Ryan Murphy and Shonda Rhimes.

It's only a matter of time before a digital-first movie claims the best picture prize at the Oscars, Rich Greenfield, an analyst at strategy firm BTIG Research, recently told Bloomberg. "This is an inflection point for the industry, showing you where the world is going," he said.

Netflix may have lost Hollywood's most illustrious prize, but some observers Monday pointed out that the firm pulled off a feat that might be just as impressive in an industry dominated by blockbuster franchises.

"That people consider Green Book an upset is a testament to how successful Netflix's Roma campaign was," Hollywood Reporter editorial director Matthew Belloni said in a tweet. "They took a black and white foreign language film all the way, in the process sparking a dialogue about the future of film. A pretty remarkable achievement."

Netflix drew the ire of executives and theater owners last fall by giving relatively short theatrical releases to "Roma" and the Coen brothers' Western anthology "The Ballad of Buster Scruggs," depriving exhibitors of ticket revenue; both films played for a few weeks in select cities before moving to the digital platform.

But critics — including National Association of Theater Owners president John Fithian — reportedly dismissed the quick theatrical release as a perfunctory bid to satisfy Oscar eligibility rules and please Cuarón, an A-list director. AMC Theatres, intent on preserving theatrical runs and protecting the value of a movie ticket, struck back at Netflix by refusing to screen "Roma."

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Patrick Corcoran, a vice president at the theater owners group, said in a phone interview Monday that Netflix would be wise to follow the example of Amazon, which gave a more robust theatrical release to another foreign-language nominee, "Cold War," and did the same for the acclaimed drama "Manchester by the Sea" three years ago.

"I think if Netflix is going to continue to be part of the Hollywood firmament, it will need to accommodate the interests of directors like Cuarón and Scorsese, who want the most people as possible to see their movies in theaters," Corcoran said. (Although some prominent filmmakers, such as Steven Soderbergh, say they don't mind going straight to streaming.)

A film industry insider who follows the battle between Netflix and the major studios agreed, praising Amazon for "making themselves a part of the community and not threatening the community" as it chased awards glory for "Manchester." The film won best original screenplay and best actor honors in 2017.