How Netflix opened the floodgates with its statement on abortion rights

We're all familiar with Hollywood and Bollywood — but what about Y'allywood? While Atlanta's moniker might not be as well known, it's not for lack of trying.

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Aimee Rawlins for CNN Business
CNN — We're all familiar with Hollywood and Bollywood — but what about Y'allywood? While Atlanta's moniker might not be as well known, it's not for lack of trying.

Georgia has become one of the top locations for film and TV productions over the past decade. Bolstered by hefty tax credits and a diverse topography that can stand in for a variety of settings, the state has provided the backdrop for shows like "The Walking Dead," "Atlanta" and "Stranger Things," as well as films like "Black Panther," "Avengers: Infinity War" and "The Hunger Games."

So in May, when Netflix said it would "rethink" its investment in Georgia if a new restrictive abortion law went into effect, it was putting its business interests on the line.

That statement, attributed to Chief Content Officer Ted Sarandos, was the first by a major company to oppose the law. It opened the floodgates, spurring other large studios to follow suit.

For Netflix, it marked a major moment of leadership in the industry — but a potentially risky one, too. In coming out against Georgia's ban, Sarandos raised the bar for where Netflix would do business, essentially putting all jurisdictions (not just Georgia) on notice: The company wouldn't film in places with laws that didn't match up with its values.

But that positioning could one day put Netflix in a bind.

The company has been expanding its global footprint to places like the Middle East, where abortion access is restricted. Eventually, it will have a choice to make: does it apply those values consistently, or risk looking hypocritical? Netflix declined to make Sarandos available for an interview with CNN Business. But some think a strong stance in Georgia could put pressure on the company to apply the same standards globally.

Setting the agenda in Hollywood

The Georgia law bans abortion once a fetal heartbeat can be detected, often as early as six weeks into a pregnancy — before many women know they're pregnant. The ACLU, Planned Parenthood and the Center for Reproductive Rights sued to block the law from going into effect on January 1, 2020.

Two weeks ago, a judge issued a temporary injunction, saying the law was likely unconstitutional, although many experts expect the state to appeal and the suit to ultimately end up before the Supreme Court.

In the meantime, the largest players in Hollywood, including Netflix, are taking a wait-and-see approach.

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Back in May, Sarandos said that Netflix would work with the ACLU to fight the heartbeat law in court. "We have many women working on productions in Georgia, whose rights, along with millions of others, will be severely restricted by this law," he said in a statement to Variety.

Disney followed the next day, with CEO Bob Iger saying that if the legislation was enacted, "I don't see how it's practical to continue to shoot there." The day after that, AMC, NBCUniversal, Sony, CBS, Viacom and WarnerMedia all issued similar statements. (AT&T's WarnerMedia is the parent company of CNN, as well as Warner Bros., HBO, TNT and TBS.)

"Ted Sarandos has done a great job of seeing things before they happen," Paul Hardart, director of NYU's Entertainment, Media and Technology Program and a former film industry executive, said in an interview with CNN Business. "He made a strong statement, and a lot of other studios followed," Hardart added. "It shows the power of Netflix to set the agenda for Hollywood in a way that other studios didn't in the past. I give him a lot of credit for having conviction."

Not surprisingly, Netflix's statement triggered backlash from conservatives and anti-abortion groups, some of whom threatened to boycott the streaming service.

But for Netflix, "it's an intelligent risk," said Hardart. "They have a lot of leverage ... because they can shop their productions to other states willing to offer an improved tax credit."

Still, exiting Georgia could mean leaving substantial cost savings on the table. Since 2008, Georgia has offered a 30% tax credit for productions in the state (20% as a base, with an additional 10% if the Georgia Peach logo is in the credits). Variety noted that while the tax credit isn't the largest in the country, it's one of the easiest to get, with almost no strings attached. In the 2017 fiscal year, Georgia gave out more film tax credits than any other state: $800 million, compared to $420 million in New York and $320 million in California.

In the 2018 fiscal year, the state said 455 film and TV productions had filmed in Georgia, leading to $9.5 billion in indirect spending — a tenfold increase from 2007, the year before the tax credits went into effect. Different states measure "productions" differently, so it's difficult to compare Georgia's claims directly to those of other states; however, it is often named as one of the top production locations in the U.S., along with California and New York. And in 2017, Georgia had more top-100 box office films than New York or California, according to a FilmL.A. report.

On top of the tax credit, productions have flocked to Georgia for the temperate climate and varied topography. Locations in the state can stand in for a number of other places: Atlanta became a post-apocalyptic New York City in "The Avengers," Lake Allatoona stood in for the Ozarks in "Ozark" and Tybee Island was a substitute for Miami in "Baywatch."

But "lots of states can do that same thing," Hardart noted, and by coming out in front of the Georgia bill, Netflix has given itself both time and buying power.

Sarandos and Netflix are "sending a message to other states and Canada: 'Make us a compelling offer to leave and we'll consider it,'" Hardart said.

A move to keep creatives happy

Kirsten Schaffer, executive director of Women in Film, Los Angeles, called Netflix's move "both a courageous statement and a safe statement," but one that was ultimately in line with the company's "overall commitment to diversity and inclusion." Netflix recently started publishing the racial and gender makeup of its employees, she noted, adding that the company was early to partner with her own group Women in Film through its ReFrame initiative, which advocates for gender parity in the industry.

"They totally could have remained silent, and they didn't," she said. "They're aware that corporations speaking out are an important part of the big-picture strategy to keep abortion safe and legal. They know that they play a role in that and have power in that situation."

But it's also a smart business move to keep creatives happy. Netflix has a unique relationship with stars and creators, many of whom spoke out strongly against Georgia's bill, a fact that likely influenced the company's stance.

"It is essential that Netflix treat creatives with respect, and many of them have trouble with abortion restrictions and any laws that impact women's rights," said Wedbush Securities analyst Michael Pachter in an email. "Creative talent cares a lot about things like this, and pulling production from Georgia is sending a signal to the state legislature that it faces economic backlash if it tramples women's rights."

Two stars of Netflix shows that film in Georgia, Jason Bateman of "Ozark" and Alyssa Milano of "Insatiable," said early on that they wouldn't continue working in the state if the "heartbeat bill" goes into effect.

But taking a strong stance isn't just about the people already attached to Netflix programming — it's an attempt to appeal to the entire creative community, said Russell Williams, a professor of film and media arts at American University.

"It can't afford to turn away major names from the viewing audience who otherwise might never have considered the small screen," Williams said. "Netflix has built a reputation and marketed themselves as being very director-oriented, creative-oriented, content-oriented. It's part of the reason everyone wants to come there."

Sarandos in particular has worked to cultivate talent, promising creative leeway and a hands-off approach. He's been with Netflix since 2000, when the company was still a subscription-DVD business. He was a major driver of the company's entry into original content, creating an entirely new division that announced itself with a bang with "House of Cards" in 2013.

Sarandos is also an active player in Democratic politics. He and his wife Nicole Avant (an ambassador to the Bahamas under President Barack Obama) bundled more than half a million dollars in one night for Obama's 2012 reelection campaign, and the couple has donated to numerous Democratic candidates over the years.

Conservatives have threatened to boycott Netflix for its ties to prominent Democrats in the past. Susan Rice, Obama's former national security advisor, joined Netflix's board in 2018. That same year Sarandos also signed a multi-year production deal with Barack and Michelle Obama's Higher Ground Productions, leading some to question whether Netflix was adopting a liberal slant.

Sarandos disagreed. In a talk at the Paley Center, he addressed the criticism: "This is not the Obama Network. ... There's no political slant to the programming." While Sarandos acknowledged that the creative community leans left, he said Netflix's programming isn't designed to follow suit.

"Ideally, it would be great if you could watch a network and not understand what the networks' politics are," he told The New Yorker's Ken Auletta on stage. "The programming on Netflix is an aggregation of the politics of a lot of storytellers and creators ... It's not an aggregation of my politics or Reed's [Hastings, Netflix's CEO] politics."

Still, Netflix's statement against the Georgia law was read as a political move by anti-abortion groups, who encouraged followers to boycott the company. In July's second-quarter earnings report, Netflix reported that new subscribers were only about half of what it had expected (2.7 million compared to 5 million) and that U.S. subscribers had slightly declined. (Investors will be closely watching for improvement when the company releases its third-quarter earnings late Wednesday.)

Some anti-abortion advocates took credit for the decline, but analysts said it was likely due to increased competition and a thinner Netflix content slate for Q2. That group includes Hardart, who said the numbers should be kept in perspective.

"They still had 2.7 million new subscribers. The Wall Street Journal has a total of 2.7 million subscribers," he said. "A disappointing month for Netflix would be glorious for most businesses around the world. HBO and Disney+ wouldn't mind saying they added 2.7 million subscribers. It's all relative. They're a global juggernaut."

Pachter, the Wedbush analyst, has been notably bearish on Netflix over the years, arguing that the stock is overvalued. But he still doesn't believe the Georgia decision will have an impact on the company's bottom line.

"Dropping Georgia over principle won't cost the company much economically," he said. "And it will engender support from the creative community, making Netflix a more desirable producer of future content."

It's unclear how much Netflix will have to give up in the long run. Both Williams and Hardart said it will be much easier to shift upcoming productions to different locations as opposed to uprooting existing productions that already have infrastructure in place in the state. "Pulling everything would be a challenge," Hardart said.

But even as Hardart pointed out that other locales could be possible replacements for Georgia, it's noteworthy that a number of states have also passed their own laws restricting abortion this year — raising the question of how many states could ultimately be off-limits for productions because of a Hollywood boycott. Hardart said it will likely continue to get more complicated.

That complexity was apparent in a few recent examples. Earlier this year, Netflix decided not to film an upcoming show in North Carolina because of the state's anti-LGBT law. Yet at the same time, Netflix is expanding its footprint in the Middle East, where abortion restrictions are the norm.

Even as it was putting out the statement about Georgia's heartbeat law, it announced a new show that would film in Egypt, which outlaws abortion unless a woman's life is at risk. It also has two original series filmed in Jordan, which severely restricts abortion rights as well.

If the Georgia law eventually goes into effect and Sarandos and Netflix make good on the threat to pull out of the state, the company could open itself up to criticism for staying in regions like the Middle East. How will it draw those lines? Netflix did not respond for a request for comment on that question.

"As we get into Netflix being available around the world, we get into human rights issues," Hardart said. "Georgia is a microcosm of what will happen around the world."

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