Independent Course Taken by Netflix

Seeking to broaden its hold on folks who want to watch art-house films in the comfort of their own homes, Netflix Inc. has forged an unusual alliance with a group representing thousands of independent filmmakers hungry for wider exposure.

Under an agreement expected to be made public today , the largest online purveyor of DVD rentals would partner with the nonprofit Independent Feature Project/Los Angeles, making available to its 9,000 members all movies nominated for the Independent Spirit Awards, the offbeat alternative to the Oscars.

The cable-televised awards show, which for years has been hosted by the acerbic, pencil-mustached director John Waters, is taped the day before the Academy Awards show and is a magnet for cinephiles.

“A disproportionate number of our members are independent film fans,� said Ted Sarandos, Netflix’s chief content officer, explaining why Netflix sought to partner with IFP.

Although only IFP members will be able to access the films nominated for Spirit Awards, Sarandos predicted that the alliance would give Netflix an edge with sophisticated, high-income customers.

The company needs all the help it can get. With more than 2 million subscribers, it has struggled to compete with large retail chains such as Wal-Mart Stores Inc. and Best Buy Co., which sell DVDs for discounted prices.

In recent months, Netflix’s stock has plunged 41%, in part because of speculation that Amazon.com Inc. would enter the rental business. To better compete with the rental industry leader, Blockbuster Inc., Netflix recently reduced its monthly fee to $17.99.

Overall, Netflix controls only 8% to 9% of the DVD rental market. But the company accounts for one-third to one-half of all rentals of “indie� and low-budget movies. According to Sarandos, the Netflix executive, specialized films often outperform mainstream studio movies rented via the service.

For example, 1 in 4 Netflix subscribers have rented “The House of Sand and Fog,� the critically acclaimed drama that made little at the box office. The New Zealand film “Whale Rider,� whose young star Keisha Castle-Hughes earned an Oscar nomination but whose ticket sales totaled about $20 million, has been rented on Netflix more than either “Charlie’s Angels: Full Throttle� or “The Hulk.�

For the IFP, striking a deal with Netflix will solve an enduring problem: the inability of many filmmakers to get their movies into the hands of the people who vote on the Spirit Awards.

Unlike films that are nominated for Academy Awards, most of which are backed by the deep pockets of a major studio, many Spirit Awards contenders are made on a shoestring. Directors often lack the resources to finish their films, let alone duplicate and distribute them.

“Many of the filmmakers couldn’t possibly afford to make one DVD copy, never mind 9,000,� said Dawn Hudson, executive director of IFP/Los Angeles, adding that in the past, voting members watched nominated movies at the IFP’s film library, at screenings or not at all.

“It was not a level playing field,� Hudson said.

But this year, IFP members will access the nominated films through a special page on Netflix’s website, punching in a code to order DVDs free of charge. Netflix will pay to make DVDs of the films that have not yet been acquired by distributors -- usually about 25% of the nominees. The company will pick up the cost of mailing those DVDs to IFP members.

The only movies that IFP members will be unable to access free will be those still being shown in theaters.

The DVDs will not be watermarked to prevent piracy, but Netflix will keep track of who requests what films and will require all copies to be returned.

Netflix executives hope by catering to the art-movie crowd, their company will attract a larger cross-section of movie fans who are suffering from blockbuster fatigue.

“More homogenized product has driven people to services like [ours],� said Netflix’s Sarandos. A bonus for the company, he said, will come if the IFP’s 9,000 members become paying customers after temporarily enjoying Netflix free.

“That,� he said, “would be a nice windfall.�