The film festival chose to change the rules after facing pressure from French theatre owners who have raised their concerns over Netflix films being allowed to enter the festival without being shown in French theatres.
Reed Hastings, Netflix chief executive, responded to the festival's move Wednesday on Facebook.
All films competing in the Cannes Film Festival will have to played in French movie theatres from next year, organisers of the worldwide event said, a rule that could affect the rapidly growing industry of streamed content.
In response, Cannes has introduced a new rule: to qualify for competition, a film must have a theatrical release in France.
But Hastings - whose Silicon Valley-based operation now has 100 million subscribers - placed the blame squarely at the door of French cinemas. In the USA, meanwhile, Okja will be released for streaming on Netflix June 28, 2017, while a Netflix release date for The Meyerowitz Stories has yet to be announced.
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As the build-up to Cannes Film Festival continues, one controversy surrounding the event appears to have been dealt with - for now, at least.
"Okja" will have theatrical releases in Korea and the U.S.
Netflix, which has committed to investing $6bn in original content this year, is not the only streaming service likely to be affected by the new Cannes rules.
The Directors' Fortnight section is not considering such a rule since it is a non-competitive section, Edouard Waintrop said.
But a theatrical release would have triggered the 36-month countdown clock to SVOD becoming available.
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The row comes as Netflix is locked in a bitter conflict with big USA cinema chains.
This year's Cannes film festival begins with an opening screening of French drama Ismael's Ghosts, starring Marion Cotillard and Charlotte Gainsbourg.
Members of the film and cinema industry have argued that the Netflix model, which sees films released through the streaming platform at the same time worldwide, is killing off the theatrical business.
In 2015 most of the big multiplex chains refused to screen the long-awaited Netflix-made sequel to the martial arts blockbuster Crouching Tiger, Hidden Dragon.
The film reportedly bombed, with Netflix taking the highly unusual step of not releasing its box office figures.
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