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Cinema trade group bristles over Netflix movie theater deal

Cinema trade group bristles over Netflix movie theater deal
Chief Content Officer Ted Sarandos at Netflix 2016 Summer TCA at the Beverly Hilton Hotel. (Eric Charbonneau / Netflix)

Long-simmering tensions between Netflix Inc. and the traditional movie theater industry may be coming to a boil once again.

The National Assn. of Theatre Owners on Wednesday expressed concerns about the streaming giant's plan to release movies online and in theaters at the same time through a deal with luxury exhibitor IPic Entertainment. The new agreement would allow IPic to screen Netflix's upcoming original movies in its 15 high-end locations, including New York and Los Angeles.

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It's the latest move by Netflix to get theatrical distribution for its growing film business, which has been viewed as a threat to the traditional theatrical window that gives cinemas the exclusive rights to show new movies before they become available for home viewing. Netflix contends the traditional release window is out of step with changing consumer habits.

Theater owners view the windowing model as essential to their business and have long resisted changes to the practice.

"We all should tread lightly and be mindful that over the years, the film industry's success is a direct result of a highly successful collaboration between film makers, distributors and exhibitors," warned John Fithian, president and chief executive of the association, in a statement. "Simultaneous release, in practice, has reduced both theatrical and home revenues when it has been tried."

The IPic deal is Netflix's first long-term agreement with a theater chain. Nonetheless, under the leadership of Chief Content Officer Ted Sarandos, Netflix has experimented with simultaneous releases in movie theaters before, angering major theater chains in the process.

Cinema operators earlier this year balked at Netflix's plan to release "Crouching Tiger, Hidden Dragon: Sword of Destiny" in IMAX theaters at the same time it debuted on the streaming site. It only ended up playing in about a dozen U.S. locations. A similar dispute erupted last year when Netflix announced simultaneous release plans for the critically acclaimed "Beasts of No Nation," which opened in October and was deemed a box office disappointment.

IPic's deal includes 10 Netflix films, starting with "The Siege of Jadotville," set for release Friday. Financial details of the pact, first reported by the Wall Street Journal late Tuesday, were not disclosed.

Founded in 2006, IPic remains a small but vocal player in the exhibition industry. It offers a luxury experience, complete with fine food, alcohol and special seating, in order to court people who might otherwise stay home. Tickets are pricey, reaching nearly $30 each.

Hamid Hashemi, CEO of IPic Entertainment, pushed against the backlash from the theater owner group. He said the deal would work for IPic because the experience is enticing enough to get people off their couches and into their theaters, even if the movies are available online for much cheaper.

"I'm surprised that people see this as a bad thing," he said. "Our deal is to showcase the quality of our theaters… If your theaters don't live up to modern day expectations, obviously people are going to stay home."

A Netflix spokeswoman declined to comment on the theater association's statement.

The Netflix deal is not the first time IPic has run against long-standing Hollywood business practices. IPic is in an ongoing legal battle with major theater chains over the use of clearances, agreements in which theaters get permission from studios to exclusively show movies in their cinemas within certain geographic areas. IPic has accused Regal and AMC of using clearances to stifle competition.

The U.S. Department of Justice is examining allegations from independent theater owners across the country that the big chains are using their market clout to block smaller rivals from receiving first-run movies.

Follow Ryan Faughnder on Twitter for more entertainment business coverage: @rfaughnder

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