UPDATED with French industry reaction: Netflix is trying to find a compromise after news that its first features accepted into the competition slate at the Cannes Film FestivalOkja and The Meyerowitz Stories – quickly drew the ire of France’s theatrical exhibitors guild. In a letter, 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. That bucks up against the foundation of Netflix’s business model, which is first and foremost to provide product for its global streaming audience.

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. One observer says Cannes (not Netflix) has become “a battleground to establish a new definition of cinema,” while folks like Wild Bunch’s Vincent Maraval think the industry upset is “ridiculous” and “colonial.”

At issue is France’s Media Chronology Law, which 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 the compromise it seeks in the French marketplace.

By exploring a day-and-date theatrical release in France, Netflix is hoping the compromise gets around triggering the 36-month SVOD ban law. The idea is to give French theatergoers the chance to see the films by prestige directors Bong Joon-ho and Noah Baumbach at the same time as its streaming service providers. It’s another local customs obstacle Netflix has had to overcome as it has grown a streaming service that is now in 198 countries, and is making a deal with a third party in China to show some of its product in that country.

One question folks are asking today, however, is how Netflix would orchestrate a day-and-date release. In France, only theatrical triggers the 36-month countdown clock to SVOD becoming available, so the thinking is that the streaming service would have to do a technical release in at least one theater and then wait three years before putting it on the platform and into moviehouses.

The company this morning issued the following statement: “We are working to protect great cinematic storytelling, like that of Okja and The Meyerowitz Stories (New and Selected), that will connect films with audiences that will love them. Consumer choice and improved distribution options have helped to make this the most vibrant time in the history of cinema for fans and filmmakers alike, and above everything we want to offer our subscribers in France the opportunity to watch these films wherever, whenever they want — like the rest of our members around the world. We are certain that French film lovers do not want to see these films three years after the rest of the world. With that said, we are exploring theatrical distribution of these two films in France, for a limited theatrical run, day and date with the films’ release on Netflix. We are 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.”

Claudia Cardinale © Archivio Cameraphoto Epoche/Getty Images

Contacted by Deadline, FNCF executive officer Marc-Olivier Sebbag said the first he heard of Netflix’s olive branch was in this story. But, he said, the federation’s issue is not with the streaming service. “Our interlocutor is the Cannes Film Festival. Netflix has their objectives and model, it would be presumptuous to think they would change for us. Our preoccupation is what does the festival want to do.” He said the federation has yet to officially hear from fest organizers.

Interestingly, he contends the FNCF has no problem with movies from Netflix that might screen out of competition, even if they are officially selected by the festival. “Competition is the showcase,” explains Sebbag, who wonders, “What is the nature of a festival where films win prizes but don’t release in theaters?”

The typically outspoken Maraval, co-founder of Wild Bunch which has four movies in competition, calls the upset “ridiculous.” He tells us, “It’s a colonial Franco-French reflex of a country that wants to impose its system on others. Is a French film excluded from competition in Venice because it doesn’t release in Italy? Bong Joon-ho’s film is a work of Korean cinema which will have a wide release in its home country. There is no debate.”

Wild Bunch in 2014 became the first company in France to bypass theatrical entirely. At the Cannes Film Festival that year it made headlines by screening Abel Ferrara’s Welcome To New York on the beach (in an unofficial capacity) and simultaneously releasing it on its own VOD platform, FilmoTV. The experiment was a success and allowed it access to TV advertising.

France, like some other European territories has its own long held customs that seem odd to the Hollywood business model, including the prohibition of P&A spends for TV commercials to promote theatrical releases. Cannes is a big step in legitimizing the feature film program of Netflix, which in past years didn’t have its films accepted at the festival in comparison to Amazon Studios (whose model allows for wide theatrical releases). Amazon had five titles in last year’s festival lineup, including Woody Allen’s fest opener Café Society.

Folks don’t have an issue with Amazon because it guarantees wide theatrical releases – what’s more, the streaming service last year hadn’t yet moved into France so the point was somewhat moot at the time.

There are other issues that the government-subsidized film industry has with Netflix, which it has accused of using a movie festival as a promotional tool after shuttering its Paris office last year and gaining advantage over other distributors that contribute to the French film ecosystem. But the streaming service is hoping today’s missive starts a dialogue on the most pressing issue at hand, its Cannes films.

The French industry is certainly girding for serious discussion in Cannes — on the economic and existential front. FilmsDistribution co-founder Nicolas Brigaud-Robert says there is “a bigger philosophical question which all of us in the industry are asking ourselves: What is cinema?” Regardless of anyone’s position as they defend their own interests, he says, “there is a really interesting debate. And, the fact that it is happening in the biggest art house film festival in the world means we can’t avoid it anymore.”