Justice Department says attempts to prevent Netflix from Oscars eligibility could violate antitrust law

The US Department of Justice has sent a letter to the Academy of Motion Picture Arts and Sciences warning that any attempts to bar or limit Netflix and other streaming services from Oscars eligibility might violate antitrust law, considering the Academy’s membership includes studios and media conglomerates that compete with Netflix, Amazon, and others.

The letter, the existence and contents of which Variety reported exclusively earlier today, suggests that federal authorities are keeping a close eye on Hollywood after reports earlier this year that filmmakers and studios would seek rule changes designed to make it difficult for streaming services to qualify for Oscars. Instead, as director Steven Spielberg has reportedly proposed, these movies should be eligible only for Emmys unless they secure wide theatrical releases that don’t coincide with a simultaneous release on streaming platforms.

“In the event that the Academy — an association that includes multiple competitors in its membership — establishes certain eligibility requirements for the Oscars that eliminate competition without pro-competitive justification, such conduct may raise antitrust concerns,” wrote Makan Delrahim, the DOJ’s antitrust division’s assistant attorney general, in the letter addressed to AMPAS CEO Dawn Hudson.

Filmmakers like Spielberg don’t like that Netflix doesn’t have wide theatrical releases

Netflix, Amazon, Hulu, and other streaming service providers have for years now been edging their way into traditional Hollywood awards shows, winning Oscars and Emmys for a variety of programming as the budgets, big-name talent, and subsequent quality of these shows and movies has drastically increased. But Netflix, more so than other streaming services, has typically done only limited theatrical runs for its films to meet award eligibility requirements.

The company’s first Best Picture contender, Roma from celebrated director Alfonso Cuarón, had a limited theatrical run in the US last fall ahead of its Netflix release in December, and it went on to win three Oscars for Best Cinematography, Best Director, and Best Foreign Language Film. The windowed approach was because theater chains in the US have typically fought Netflix over exclusivity windows, requiring that films be shown in theaters prior to showing up on the service. The fallout over Netflix’s desire for so-called day-and-date releases has caused significant controversy for a number of films, including cult hit Snowpiercer and the sequel to Crouching Tiger, Hidden Dragon.

In a more public spat, the Cannes Film Festival successful pushed Netflix to pull out last year over requirements that participating films secure local, French theatrical releases of a certain length to be eligible for the prestigious Palme d’Or award. That occurred after Cannes leadership faced backlash from the independent film community and the French theatrical industry when Netflix was allowed to skirt requirements for Okja and The Meyerowitz Stories in the prior year.

Netflix has made an effort to start showing more original films in theaters before releasing them on its streaming service. But the company has regardless drawn the ire of traditional filmmakers and theater chains, namely Spielberg, who in February of this year said at an awards ceremony that he’s “a firm believer that movie theaters need to be around forever.” Accepting the Filmmaker Award at the Cinema Audio Society’s CAS Awards, Spielberg is reported to have said, “I hope all of us really continue to believe that the greatest contributions we can make as filmmakers is to give audiences the motion picture theatrical experience.” Last year, Spielberg told ITV News, “I don’t believe films that are just given token qualifications in a couple of theaters for less than a week should qualify for the Academy Award nomination.”

Netflix has tried to stake out a firm position here, sending out a tweet following Spielberg’s comments and reports that he and others would push the Academy to put in place eligibility requirements similar in design to Cannes’. “We love cinema,” the company said in its statement. “We also love... access for people who can’t always afford, or live in tows without, theaters. Letting everyone, everywhere enjoy releases at the same time. Giving filmmakers more ways to share art. These things are not mutually exclusive.”

We love cinema. Here are some things we also love:

-Access for people who can't always afford, or live in towns without, theaters

-Letting everyone, everywhere enjoy releases at the same time

-Giving filmmakers more ways to share art

These things are not mutually exclusive. — Netflix Film (@NetflixFilm) March 4, 2019

Netflix may have the general public and its growing and massive user base, many of which feel the theater experience has become too expensive, on its side in this debate. However, the company is facing down an industry in which filmmakers, theater chains, Hollywood studios, and nearly every other cog in the entertainment industry machine has a financial incentivize to maintain the status quo and keep theaters and the theatergoing experience alive and as lucrative as possible. Netflix’s willingness to show more films in theaters and to window the streaming release of Roma is evidence that the company may make more concessions in the future.

But, as the DOJ letter makes clear, efforts to harm Netflix’s ability to compete in award shows — participation that can often benefit studios and filmmakers financially through increased sales and notoriety — may violate Section 1 of the Sherman Act. “Agreements among competitors to exclude new competitors can violate the antitrust laws when their purpose or effect is to impede competition by goods or services that consumers purchase and enjoy but which threaten the profits of incumbent firms,” Delrahim wrote in his letter. “If the Academy adopts a new rule to exclude certain types of films, such as films distributed via online streaming services, from eligibility for the Oscars, and that exclusion tends to diminish the excluded films’ sales, that rule could therefore violate Section 1.”

According to Variety, the Academy has confirmed its received the letter and its Board of Governors intends to meet at its annual rules meeting on April 23rd. Making the matter of particularly renewed interest to the Justice Department is the substantial consolidation happening in media. Following AT&T’s Time Warner merger, a number of thorny regulatory issues might arise now that traditional telecommunications and media conglomerates own more of the infrastructure to deliver internet video in ways that could make it difficult for Netflix and scores of smaller companies to compete. And of course, many of those same corporations engaging in the war for streaming market share, from AT&T and Comcast to Sony and Walt Disney, also own the biggest movie studios on the planet.