'The pendulum is definitely swinging back': Why Amazon plans to spend $1 billion to make movies for theatrical release

‘The pendulum is definitely swinging back’: Why Amazon plans to spend $1 billion to make movies for theatrical release

Amazon (AMZN) is betting big on the theater experience.

The tech giant plans to invest $1 billion to produce 12-15 movies a year exclusively for theaters, according to a new report from Bloomberg. That spending would be roughly equivalent to that of major movie studios like Paramount Pictures (PARA), Bloomberg noted.

The report pushed shares of movie giants like AMC (AMC) and Cinemark (CNK) higher on Wednesday, gaining 4.4% and 12.5% ​​respectively. Amazon did not immediately respond to Yahoo Finance’s request for comment.

Earlier this year, Amazon closed its $8.5 billion deal to acquire MGM.

“A lot will depend on what type of content Amazon produces, how long their windows are, and how much importance it may rely on IP versus original material, but this is still great news for theater owners and Hollywood,” Shawn Robbins, chief analyst at Box Office Pro, told Yahoo Finance, explaining that more streamers engaging in the theatrical window will help fill the gaps in the schedule for theaters.

“Now that streaming has started to mature, the pendulum is definitely swinging back toward a balance as these distributors see the kind of success they’ve left on the table with a holistic approach to streaming,” Robbins said. “Cinema remains a very lucrative business model, and [Amazon’s] the news highlights it once again.”

If confirmed, Amazon’s investment would represent an internet company’s largest commitment to theaters and could “easily boost theatrical revenue by 15% to 20% given that Universal and Warner have budgets roughly similar,” Bloomberg Intelligence analyst Geetha Rangathan wrote in a new note.

“The debate is over”

Streaming companies have slowly started to embrace the theatrical window, with top Hollywood executives saying the box office has become a critical milestone for movies looking to turn a profit.

“The debate is over,” IMAX (IMAX) CEO Richard Gelfond previously told Yahoo Finance Live. “The argument that you can skip a theatrical window and catch it streaming just isn’t true. The theatrical window is more critical than ever to earning streaming revenue.”

Gelfond pointed to deep direct-to-consumer losses from Disney (DIS), which reported disappointing earnings earlier this month amid unfavorable macroeconomic conditions and high content costs.

Gelfond argued that the “facts are uncontroversial” when it comes to the benefits of first releasing a film in theaters, citing “Top Gun: Maverick” as an example. The summer blockbuster enjoyed record box office success after Paramount delayed its release five times due to the pandemic.

The Tom Cruise-directed sequel grossed nearly $1.5 billion worldwide and eventually became the first-ever digital release on OTT streaming platforms. On Tuesday, seven months after it hit theaters, Paramount announced that the sequel will officially debut on Paramount+ starting December 22.

‘Top Gun: Maverick’ underscores importance of theatrical window, IMAX CEO says, as Amazon pledges $1 billion a year in movies for theaters (Courtesy Paramount)

Netflix hesitates

But one streamer has largely held up at the box office – Netflix (NFLX).

“We’re in the business of entertaining our members with Netflix movies on Netflix, so that’s where we focus all of our energy and most of our spending,” Netflix co-CEO Ted Sarandos said following the comments. company’s third quarter results.

But even Netflix will release its highly anticipated sequel “Knives Out 2” in select AMC, Regal and Cinemark theaters for a week over Thanksgiving weekend – although the platform says it won’t bring in its box office receipts. office.

Robbins speculated that there could be unofficial reports bubbling up after the debut, setting expectations that the film could produce between $6-8 million in domestic ticket sales over the 3-day weekend. with the potential to reach over $10 million.

“The level of success here could truly make this a watershed moment for the relationship between Netflix and all streamers and exhibitors, as this is arguably the most important ‘streaming title’ to open exclusively in theaters.”

“If anything is going to move the needle, it’s going to start right here with this movie,” Robbins said. “I expect it to work really, really well.”

Netflix will be released

Netflix will release ‘Glass Onion: A Knives Out Mystery’ in select theaters for a week over Thanksgiving weekend (Courtesy Netflix)

The original “Knives Out” grossed $312.9 million in 2019. Netflix spent more than $450 million to secure the rights to the next two sequels, one of the biggest movie streaming deals ever. story.

Still, Netflix co-CEO Ted Sarandos played down the decision to release the film theatrically, telling investors on the earnings call: “There’s all kinds of debate going on all the time, back and forth. back. But there’s no doubt internally that we make our movies for our members, and we really want them to watch them on Netflix.”

Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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