UPDATED, writethru with Reed Hastings comment: There has been much hand-wringing in France over the Cannes Film Festival’s decision to include two Netflix films in Competition this year, Bong Joon-ho’s Okja and Noah Baumbach’s The Meyerowitz Stories. At issue is Netflix’s business model, which is first and foremost to provide product for its global streaming audience on its platform, and which does not typically include theatrical releases. Responding to “anxiety” across the French industry over the lack of theatrical releases for these titles, the festival today confirmed the films will remain in Official Selection, but it has tweaked rules going forward from 2018, decreeing “any film that wishes to compete in Competition at Cannes will have to commit itself to being distributed in French movie theaters.”

The fest notes that it had “asked Netflix in vain to accept that these two films could reach the audience of French movie theaters and not only its subscribers,” but adds its regret “that no agreement has been reached.”

By its statement today, the festival in essence appears to be telling Netflix to get onboard with local regulations governing release windows, or not expect to be included in Competition going forward. France’s Media Chronology Law (something newly elected President Emmanuel Macron has indicated he may re-examine) keeps films released in French theaters from playing on SVOD platforms for three years.

On its highest-profile titles, Netflix has accompanied releases with limited theatrical runs in the U.S., and that is essentially a compromise it sought in the French marketplace, last month saying it was exploring a day-and-date theatrical releases in France on these films. However, a question was immediately raised as to how Netflix would orchestrate a day-and-date release. A theatrical release would have triggered the 36-month countdown clock to SVOD becoming available. There was thinking that Netflix could do a technical release in at least one theater and then wait three years before putting it on the platform and into moviehouses.

After the fest released its statement of the new rules today, Netflix CEO Reed Hastings took to Facebook to express his own upset. He wrote, “The establishment closing ranks against us. See Okja on Netflix June 28th. Amazing film that theatre chains want to block us from entering into Cannes film festival competition.”

Netflix has an ally in the French industry, Wild Bunch co-founder Vincent Maraval. He told Deadline today, “This is a smoke screen, political at its worst. I would love Venice, Berlin, Toronto and Sundance to do the same and there would not be many French films in selection in these countries. That means that an international film festival, the biggest of all, does not recognize a Korean release as a cinema release but tries to impose a French release to every cinematography. This is a colonialist behavior and a shame.” Okja is getting a theatrical release in Korea.

Festival chief Thierry Frémaux stoked the ire of French film industry groups when he announced the two pictures as part of the Official Selection on April 13. Exhibitors association the FNCF accused Netflix of skirting French regulations and fiscal obligations, and called on the streaming service to release both movies in French theaters following their Cannes premieres. The FNCF also sought consultation with the festival.

In April, Netflix said it was “thrilled to explore any and all options that will give these films an opportunity to be viewed by as large an audience as possible, on a variety of screens, because similar to French exhibitors, we want to continue to contribute to the development and financing of films.”

But going forward, if Netflix — or other new players — want to participate at Cannes, they will have to ensure that theatrical is part of the plan in France.

Here’s the festival’s full statement:

“A rumor has recently spread about a possible exclusion of the Official Selection of Noah Baumbach and Bong Joon Ho whose films have been largely financed by Netflix. The Festival de Cannes does reiterate that, as announced on April 13th, these two films will be presented in Official Selection and in Competition.

The Festival de Cannes is aware of the anxiety aroused by the absence of the release in theaters of those films in France. The Festival de Cannes asked Netflix in vain to accept that these two films could reach the audience of French movie theaters and not only its subscribers. Hence the Festival regrets that no agreement has been reached.

The Festival is pleased to welcome a new operator which has decided to invest in cinema but wants to reiterate its support to the traditional mode of exhibition of cinema in France and in the world. Consequently, and after consulting its Members of the Board, the Festival de Cannes has decided to adapt its rules to this unseen situation until now: any film that wishes to compete in Competition at Cannes will have to commit itself to being distributed in French movie theaters. This new measure will apply from the 2018 edition of the Festival International du Film de Cannes onwards.”

This will be welcome news to the industry whose national distributors association (FNDF) added its voice to the chorus of upset this week. For the French, the situation has also stirred a philosophical debate about the meaning of cinema in a country where the art form was born.