Shortly after the 2019 Oscar Awards, the U.S. Government decided to get involved with Hollywood. The Academy of Motion Picture Arts and Sciences received a letter from Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice just four weeks after the broadcast. The letter was addressed to the Academy’s CEO, Dawn Hudson.
“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 … that rule could violate Section 1,” Delrahim wrote, referencing the portion of the Sherman Anti-Trust Act that bars anti-competitive agreements between competing companies.
This letter arrived in the wake of what had turned out to be an incredibly fruitful award show season for Netflix. In the weeks leading up to the note’s delivery, Netflix had accrued an impressive 15 Oscar nominations, including a highly esteemed nomination for best picture (for Roma). In wake of the online streamer’s success, Hollywood executives began to look toward a proposed rule that would possibly ban future films that forwent conventional theatrical releases from Oscar consideration.
Despite the easy connection between the proposed rule and the letter, Netflix maintains that it did not lobby Delrahim to act on its behalf. In fact, some Netflix executives have stated that they were shocked that the U.S. Department of Justice was even remotely concerned with whether or not its future films would be Oscar-contenders. According to The Hollywood Reporter, the streamer’s statements were backed by sources in D.C. who maintain that Delrahim acted alone. Regardless, the letter acted in Netflix’s favor, as no anti-Netflix proposal has circulated the Academy’s meetings since.
Although Netflix was not involved in this particular interaction between Hollywood and Washington D.C., the streamer has exercised its ability to influence policy in other, subtler ways. As discussed by Rebecca Keegan in her article, “The Netflix Lobbying Machine: Inside the Effort to Sway Policy Worldwide” with The Hollywood Reporter, Netflix has recently used policy as a means of aligning itself with Hollywood instead of Silicon Valley. This move follows the streamer’s expansion into a major production studio and coincides with Washington D.C.’s increased scrutiny of technology’s epicenter. For instance, in January Netflix decided to abandon the Internet Association, a lobbying cohort that represents major tech companies like Google and Facebook. In turn, Netflix became the first-ever streaming company to join the MPAA, a cohort that represents major Hollywood production studios. This move benefits Netflix in a number of policy-based ways. It grants the corporation a so-called “bargaining advantage” on issues like new European laws and Latin American tax policies that stand to regulate streaming services.
Distinguished fellow of the Georgetown Law Institute for Technology Law & Policy Gigi Sohn, who has counseled presidents Bill Clinton and Barack Obama on telecom-related matters, weighed in on the issue. “Netflix is a hybrid company,” she said. “It’s not your typical Silicon Valley firm and not your typical Hollywood studio, and their policy positions reflect that.”
Unlike Google or Facebook, Netflix does not depend on selling ads or reaping income from user-generated content. This protects the company from scrutiny and fines, like the $5 million one that Facebook faced for its use of users’ data.
“Tech companies come with a lot of baggage,” explained a tech policy strategist when asked why Netflix would choose to affiliate itself with film and television production studios. “Everybody has baggage, but the studios have less than tech.”
This “baggage” has compelled tech companies to spend millions of dollars on domestic lobbying. Facebook alone spent $12.6 million in an attempt to sway higherups in Washington D.C.. According to the Center for Responsive Politics, this number was topped by Google, which spent $21.2 million in order to protect itself from potentially detrimental policies. Meanwhile, Netflix spent $800,000 on domestic lobbying.
In the last 10 years, Netflix’s team of lobbyists has grown from one to 30 full-time employees. Four such staffers are based in D.C., and the others are stationed abroad in countries like France, the U.K., the Netherlands, Canada, Australia, India, Singapore, Korea, Belgium, Italy, Germany, Spain, Brazil, and Mexico. In fact, Netflix dedicates most of its lobbying resources to international policies, as these spheres hold the most potential for growth while simultaneously threatening the streamer with harsh regulations.
The former CEO of the Information Technology Industry Council, Dean Garfield, recently joined Netflix’s public policy team in Amsterdam. Prior to his work with ITI, Garfield worked as the chief strategic officer for MPAA. In Washington D.C., Netflix has acquired the talents of lobbying firms like Baker McKenzie and Monument Policy Group. These bodies allow Netflix to defend itself before Congress when discussing policies relating to internet privacy, intellectual property and the tax code. For example, Baker McKenzie was a voice for Netflix during a spring discussion with senators who had their eyes on a bill that stands to simplify the taxation of digital services. Moreover, executives of Netflix like Reed Hastings and Ted Sarandos have donated to a number of political campaigns. Most of these donations have been in support of Democratic candidates. In addition, Netflix has become the home of Higher Ground, the production company of Barack and Michelle Obama.
For a time, Netflix focused most of its lobbying efforts on supporting net neutrality, which would require internet service providers to provide users with uniform access to its content. But this issue has fallen down several steps of Netflix’s ladder of priorities. A professor at MIT Sloan School of Management, Catherine Tucker, explained this shift to The Hollywood Reporter. “As Netflix has grown, so has its bargaining power, so net neutrality has grown less important,” she said. “Questions of piracy and copyright have now become more important.”
Despite this reasoning, Netflix’s sudden disinterest in the net neutrality debate has garnered criticism given that cable companies such as AT&T and Comcast are planning to launch streaming services of their own. Sohn had this to say: “They’re being short-sighted and ignoring the history of how these network operators behave.” Sohn continued with, “There’s more incentive now to discriminate against Netflix.”
Overseas, Netflix’s involvement with foreign policymakers is reflected by its content. In exchange for regular meetings between the streamer’s lobbyists and EU commissioners and staff members, Netflix ensures that at least 30 percent of its consent is European in origin. Viewers can witness this agreement play out in shows like Spain’s Gran Hotel to Germany’s Babylon Berlin. Netflix also supports local production subsidy funds in France, as any European broadcaster would do. But even though the company has been complying with many EU regulations, they have recently begun to push back on certain demands. In July, Benjamin King, the Netflix U.K. director, made a testimony in Parliament in which he criticized a propositioned tax on VOD companies. He called the policy “a solution in search of a problem.”
What is more, Netflix is reportedly keeping an eye on EU policies that stand to impact artificial intelligence regulations. These policies threaten Netflix’s algorithm-backed recommendation engine in addition to its pricing guidelines. This means that Netflix may have to sell its services at the same price Europe-wide.
Some of Netflix’s foreign lobbying efforts have centered on minimizing controversy. Early in 2019, Netflix was confronted by the Quebec for its depiction of the fatal 2013 oil-train disaster, which killed 47 people in Lac-Mégantic, in Birdbox. Netflix initially responded to their demand by explaining in a letter addressed to Quebec’s culture minister that the company could not alter a finished project. This prompted the Canadian Parliament to pass a resolution that demanded the footage’s immediate removal. Netflix complied with this resolution in March, and for good reason. Canada is the corporation’s third-largest source of viewers, and Netflix has previously arranged to spend an impressive $380 million in support of locally made projects. What is more, Canada is currently in the process of reviewing its telecommunications and broadcasting legislation in an attempt to modernize its policies so that they hold up to present-day and future technologies.
This speaks to a major difference between Netflix and its competitors like WarnerMedia and Disney. While the latter studios focus primarily on exporting domestic content, Netflix has dedicated an impressive sum of resources to curating internationally-produced films and television series. In keeping with this, Netflix’s public policy teams have been heavily involved with local production companies and government employees. This relationship is allowing them to develop rating systems that vary from country to country, which frees Netflix of tricky government intervention relating to its content. For instance, Netflix agreed to remove a 2018 episode of the Patriot Act wherein the host, Hasan Minhaj, disparaged Mohammed bin Salman, the country’s leader. Even though Netflix doesn’t currently have a lobbyist team based in the Middle East, given its dedication to international growth and influence, this will almost certainly change in the years to come.