Will Netflix's Ownership of L.A.'s Egyptian Theatre Spark Backlash?

Proponents of the takeover of the iconic film palace call it a win-win, but not every movie buff is happy: "The community will suffer a real loss."

Disney has its own historic Hollywood movie palace for splashy premieres and special events, the El Capitan Theatre, and now Netflix is about to follow suit.

Netflix prides itself on a digital-first strategy, but insiders say the multimillion-dollar deal for the streamer to buy the brick-and-mortar Egyptian Theatre in Hollywood is nearly complete, just in time to potentially showcase its films during awards season.

Proponents of the acquisition note that Netflix intends to use the venue for premieres and events during the weekdays, while seller American Cinematheque — a nonprofit dedicated to film preservation — will receive a much-needed cash infusion and the ability to program classic movies on weekends and those weekday nights when it isn't in use by Netflix, insiders say.

Netflix, whose chief content officer Ted Sarandos is on the Cinematheque board, can trumpet its commitment to film preservation amid criticism that its service devalues the theater experience.

But the sale of the property has critics. "If the Egyptian is sold to a for-profit corporation, the community will suffer a real loss," says Richard Schave, who owns Esotouric, a historical L.A. tour company. "It's naive to think of this is a binary choice, where the Egyptian Theatre is either shuttered or sold to Netflix."

On Aug. 13, Schave and his wife, Kim Cooper, will address their concerns during the public comment portion of an L.A. City Council meeting. Specifically, they say they'll ask Council Member Mitch O'Farrell, who represents the Hollywood neighborhood, to ensure the Egyptian retains its cultural heritage. (So far, O'Farrell's office hasn't commented on the proposed Netflix/Egyptian transaction.)

In 1996, the L.A. Community Redevelopment Agency sold a then-closed Egyptian to American Cinematheque for a mere $1. The theater, built in 1922 by Sid Grauman, had fallen into disrepair and was damaged during the Northridge earthquake. The Cinematheque oversaw a $12.8 million renovation, reopening the theater in 1998.

Netflix and the Cinematheque declined to comment until the deal is finalized, but sources place the streamer's bid in the "tens of millions."

A nonprofit can sell assets as long as it uses the money to further its core mission; whether it would have to pay a capital gains tax on the Egyptian sale is unclear.

Sources say Netflix could begin work on the theater as early as September. While the city of Los Angeles may not have a say in the sale, it can influence renovations because of the Egyptian's landmark status.

"Any permits for proposed substantial alternations of the theater would require review by the Department of City Planning’s Office of Historic Resources and the mayor-appointed Cultural Heritage Commission,” says Ken Bernstein, who spearheads L.A.'s Office of Historic Resources. That, in turn, could result in a public comment period or hearings, he says

So far, preservationist groups such as Hollywood Heritage and the L.A. Conservancy haven't commented on the pact. However, individuals are speaking out. "There are a lot of choices," says Schave. "We'd like to hear them."

A version of this story first appeared in the Aug. 7 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.