Amazon Seeing Success With Traditional Method At Key Time In Industry

Summary:

• Amazon has consistently gone against the grain in its methods to win customers, specifically with its Prime Video streaming service – even going as far as supporting the traditional model.
• Amazon had largely made it a point to embrace theatrical when its main rival was keeping that approach at arm’s length and it has paid dividends over the years.
• Last weekend Amazon stayed the course and gave “Creed III” – its biggest MGM release since the acquisition- a theatrical run knowing all eyes would be on the film’s financials.
• The gamble worked and “Creed III” had a best-in-franchise opening and many credit the theatrical approach for that success, which comes at a key time in the industry.
• With the various guilds beginning contract negotiations and transparency of data expected to be a key issue, showing the traditional and streaming models can work together is important.

While streaming has landed some punches in the battle for entertainment supremacy, the traditional model is not going down without a fight. In fact, last week the old-school method found itself supported by an unlikely alley – a streamer.

Amazon (NASDAQ:AMZN), which has found success as one of the leaders in streaming with its Prime Video service, has consistently gone against the grain in its methods to win customers. In many ways they were leading the charge in the opposite direction of Netflix (NFLX), before Disney (DIS), Comcast (CMCSA), Apple (AAPL) and Warner Bros. Discovery (WBD) even entered the field.

And not only could that help strengthen their own company, but that support could help bolster the industry as a whole at a dangerous time.

First as always, some background.

While Netflix is the originator of streaming, its strategy is very set in its ways.

The company largely operates off two principals – day/date releases with theaters and all at once in general. There is little doubt that approach was initially a success and cemented their role as trailblazers in the space, but the problem is that Netflix has never been able to move beyond that approach.

It is steadfast to the point it is being stifled in its growth.

Amazon from the start charted a different course.

Instead of challenging the theatrical model and positioning themselves as “the next big thing,” it befriended the industry and the industry responded in kind.

Amazon made it a point to embrace theatrical by giving its movies traditional runs verses forcing a day and date approach or giving theaters a minor exclusivity window. The best example is Manchester By The Sea, the studio’s first big awards film that netted the company multiple Oscars in key categories – while Netflix was fighting to break through the clutter.

Contrary to some beliefs… the industry doesn’t forget.

My point being awards do matter – but box office returns do as well, especially for higher profile franchise films.

That’s the other part of the equation which Amazon recognizes. While most of the company’s recent films have gone the Prime Video streaming first route, that is largely a by-product of COVID. The value just wasn’t there for Amazon to go the theatrical route, but now that things are (seemingly) returning to whatever normal is, the conversations are different.

Take Creed III.

The third entry in the boxing spin-off franchise is also the first movie released by MGM since being acquired by Amazon. And with all eyes on it and its financials (by investors and analysts) Amazon took the road less traveled and stayed the course with theatrical.

It worked.

Creed III’s opening was a franchise best at the box office and that’s saying something as it was also the first in the series to not open in the Fall and not to include Sylvester Stallone whose Rocky birthed this brand in the first place.

Led by the charismatic Michael B. Jordan and rising star Jonathan Majors, the movie over-indexed across the board and re-enforced the power of the Cineplexes.

It was a risk, but one Amazon knew it had to take and one that now reportedly could lead to a very lucrative cross-medium Creed-verse. That’s the value in what Amazon has built and its flexible approach to distribution.

One issue with relying only on streaming is that in general the landscape is the Wild West – in that anything goes and there’s no real metrics. The Nielsen ratings here are incomplete as they only measure some streamers but not all – as well as some methods but not all.

As a result, creatives, subscribers and investors aren’t getting the full picture.

That’s been a sticking point with creatives who want to use past success to secure future paydays. You can’t walk into a studio negotiation citing Netflix’s (supplied) numbers. How many minutes of streaming doesn’t mean much to others because there’s no financial value assigned to it.

$50 million at the box office and topping all comers (and past installments)… that’s telling. It speaks to the brand, its stars and its audience appeal – all things investors want to hear.

Yet, right now that type of information is also important for everyone to hear. In fact it may be vital as all the major guilds go back to the negotiating table with the studios in hopes of avoiding a costly strike. Transparency is expected to be a part of those talks, as are royalties from streaming projects.

Amazon’s current commitment to the traditional model is essentially an olive branch that many in the industry want to see extended by rivals. Warner Bros. also looks to be doing the same as new topper David Zaslav has publicly discussed why the studio’s 2021 controversial hybrid model was not going to be duplicated. Zaslav’s new co-heads of DC have also showed their support for theatrical with their “Chapter One” timeline that accounts for titles over both methods.

The idea of the box office as a financial driver is not exactly a foreign concept – it just seems like one because it was under fire for so long. Now it’s being handed a lifeline and that could make all the difference.

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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