Amazon will release movies in theaters

20 Jan 2015 | Author: | No comments yet »

Amazon branches out to launch movies for cinema release.

Amazon.com Inc is making a high-stakes foray into the challenging realm of independent movies, the latest step in its attempt to move beyond simply distributing digital entertainment content to creating it. After winning acclaim for one of its original television productions, Amazon announced Monday that it would produce and acquire films for theatrical release and early distribution on its Prime Instant Video service.Amazon has taken a big step forward into the world of Hollywood, with plans to create 12 feature films a year that will be released first in movie theaters and then, weeks later, streamed to customers online.

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. Amazon Studios is fresh off the success of series “Transparent” at the Golden Globes, winning best comedy, and its deal with Woody Allen to produce a new streaming series — accomplishments that have drawn comparisons to online giant Netflix. 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.

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. Both online firms have become stronger rivals to Hollywood studios and television networks, with their growth in subscribers and ability to fund dozens of new projects. 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 Studios, which launched in 2010, said it will begin production of films later in the year with budgets of $US5 million to $US25 million per project. Unlike rival Netflix Inc, a standalone Internet TV service, Amazon’s Prime video service comes bundled with the Internet retailer’s two-day delivery for items purchased on the site, which costs $99 a year, a key driver of revenue for the company. 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. 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. When Sony Pictures Entertainment’s released “The Interview” last month in theaters and online at the same time, the theater-owners group said the studio probably didn’t make up for the cost of the film because it only played in a small number of theaters.

Sony Pictures’ recent success in releasing its comedy “The Interview” through video-on-demand services after threats from hackers was also seen as a blow to big-screen businesses. “That verbiage probably scares theater owners,” Bock said, referring to Amazons’ plan to narrow the window between theatrical releases and streaming availability, adding that the theater chains could take some solace in Amazon’s decision not to go for simultaneous release or just putting films straight out on video. 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. Amazon may have decided to target theatrical releases rather than pushing movies straight to Prime because big name talent still associates paying ticketholders with 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.

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.

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