Amazon movies may crack theatrical windows, but it won’t break them

20 Jan 2015 | Author: | No comments yet »

Amazon branches out to launch movies for cinema release.

Not content with signing up director Woody Allen to create a TV series and winning two Golden Globe Awards for its original TV seriesTransparent, the online retail and streaming giant Amazon is now making a foray into the world of independent movies.

Amazon Studios announced Monday that it will significantly expand into movie production by acquiring films for theatrical release and early-window streaming through its subscription service, Amazon Prime Instant Video. The company is aiming to produce up to 12 movies a year, all of which will be initially released in cinemas, before being made available on Amazon’s Prime video service within two months.

Amazon original movies will be available for US streaming four to eight weeks after they make their debut in theaters, a significant reduction of the window of 39 to 52 weeks that films normally play in theaters before becoming available for streaming. The development is another step in Amazon’s ambitious plan to increase its entertainment offering to consumers, and an escalation in Amazon’s rivalry with Netflix. Amazon’s decision to release their films in cinemas rather than exclusively online may be linked to the fact that a movie that attracts paying ticketholders is still seen as having a certain prestige, said Phil Contrino, chief analyst at Boxoffice.com. “At the end of the day a theatrical release still generates a lot of publicity, it gets a movie reviewed – every person that goes to watch that movie is paying for it,” he said.

While modest compared with Hollywood blockbusters, the move will add to already hefty spending at Amazon, potentially unnerving investors concerned about the company’s lack of profitability. It also signals both companies’ broader ambition to revolutionize the so-called windowing system for TV and movies in the traditional entertainment industry. Such films have proved challenging even for major Hollywood studios such as Paramount and Warner Brothers, which have bowed out of the business in recent years, said Jeff Bock, Box office analyst at Exhibitor Relations. “It’s a tough, tough racket to play consistently,” he said, pointing to the difficulty of getting good content and the competition for quality productions at festivals like Sundance. In the fall, Netflix announced movie deals with comedian Adam Sandler and said it would release a sequel to the movie “Crouching Tiger, Hidden Dragon” simultaneously across the globe and in a select number of Imax theaters.

Still, it threatens to worsen Chief Executive Bezos’ tense relationship with Wall Street, which has grown increasingly vexed over his heavy spending that has spurred big losses in recent quarters. Amazon’s entry into movies also comes on the heels of Sony Pictures’ unprecedented digital distribution of the Seth Rogen comedy “The Interview,” the first major studio film to be released simultaneously in theaters, online and on video-on-demand platforms. It remains unclear whether Amazon believes the movie business can make money on its own, but most of its other ventures are ultimately aimed at bolstering its underlying retail business.

In an e-mail, Roy Price, vice president of Amazon Studios, described the projects as “indie” movies, with budgets between $5 million and $25 million. Amazon founder Jeff Bezos is known for his hunger to tackle new markets but the company has had a mixed track record, as with the recent Amazon Fire phone, whose price tag it has slashed after weak sales. Analysts cautioned that if the films were low-budget and of low quality, it would be difficult for them to profoundly alter the conventional system for theatrical releases.

Still, said Rich Greenfield, a media analyst with BTIG Research, the announcement adds to the pressure on traditional business models and gives consumers more of what they want. “In 2015, consumers don’t understand why there is an exceedingly wide gap between seeing a movie in a theater or seeing a movie at home,” he said. Corcoran said the movie’s release “doesn’t change anything,” and noted that its two-week $31.5 million digital gross was far less the film would have made at multiplexes.

Monday’s news comes one week after Amazon’s original series “Transparent,” a dark comedy about a family in which the father comes out as transgender, won a Golden Globe for television comedy. National Association of Theater Owners Vice President Patrick Corcoran declined to comment on Amazon’s move but said the time between theatrical and home video release would play into theaters’ decision on whether to take a particular film. Some theater chains objected vociferously when Netflix said it hoped to release the “Crouching Tiger, Hidden Dragon” sequel in select IMAX theaters and its streaming service at the same time. The company spent an estimated $2 billion on content in 2014 with about $200 million of that used to develop original shows, according to Wedbush Securities analysts. Such projects include “Mozart in the Jungle” and the multi-Golden Globe Award-winning “Transparent”. “The Golden Globes, they got that, now the next step is Oscar nominations,” Bock said, adding that only theatrically released movies are eligible for Hollywood’s biggest award.

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