How Amazon’s Unusual Approach To Streaming Continues To Pay Off

Summary:

• Amazon and Apple have been quietly making big strides in the world of streaming by taking a more flexible approach than Netflix in terms of content distribution timing.
• While Netflix is stuck on day-and-date, Amazon and Apple have shifted towards utilizing the traditional theatrical model and for Amazon specifically investors have already begun seeing the benefits.
• Amazon first saw success with “Creed III” in March and over the weekend scored a big win with “Air,” which had been earmarked for streaming and switched-last minute.
• What makes “Air’s” performance so unique is that it is a decidedly more mainstream adult film and not the typical popcorn movie that has been dominating at the box office.
• Amazon doesn’t need to go all-in on theaters, but the idea they are willing to on tentpole projects speaks volumes to creatives and gives them a competitive edge.

Second place is looking good right now.

Yes, that’s not something you’d expect any entertainment industry player to say with pride – but for Amazon (NASDAQ:AMZN) it’s a major win.

So why is that the case and why is it such a seismic development?

First as always, some background.

The other week I wrote about how Amazon and Apple (NASDAQ:AAPL) were in a few ways quietly making big strides in the world of streaming. You can read the full piece here, but the crux of it is that where Netflix (NASDAQ:NFLX) is zigging, Amazon and Apple are zagging.

In particular, Netflix is sticking to its day-and-date approach for theatricals while Amazon and Apple are seeing the value in being flexible – and its having a profound effect on the industry.

By staying day-and-date Netflix is not just exasperating creatives who want a theatrical debut, but it is effectively holding back the growth of the industry. Yes, Netflix has made it clear they want to put streaming first and given its business model you can understand why – but even when there is a clear road to success that raises all ships, that team seems content to just look the other way.

For Apple, which is still relatively new in the space, they are coming at things from the perspective of “where can we stake our flag?” The company is still figuring out its streaming identity but already are aware of the moves its rivals are making that it should mimic and the ones it should exploit.

In other words, Apple is seeing the mistakes of Netflix and the success of Amazon and going from there in planning. In the future you can expect those two key areas of learning to dictate how the company moves forward. Though in the meantime, Amazon has found itself in the driver’s seat as it has had a strong few months.

In March, it’s first release from the newly-acquired MGM – Creed III – broke all kinds of records and made a statement about the value of the theatrical model. Amazon could have opted to pull the film from theaters and use is as a subscription driver, but it stayed the course to great success.

That luck continued this past weekend with Air.

The duo of Matt Damon and Ben Affleck once again made magic happen at the box office as the pair teamed to tell the story behind the launch of Nike’s famed “Air Jordan” shoe brand. The movie, which had been earmarked for streaming, was eventually re-routed to theaters.

Lomis, the late Amazon/MGM distribution chief, saw the potential in the movie and called an audible.

Now keep in mind nothing about this movie was cheap – it cost $90 million to make and Amazon bought the rights for a reported $125 million. So why does a second place finish of $20 million mean so much?

Well for starters, Amazon/Apple/Netflix/etc are playing with billions which change the stakes dramatically. All of a sudden, the benchmarks for success are very different.

But more importantly for the industry it’s what that $20 million also represents.

Air doesn’t revolve around super-heroes, it isn’t in 3D, there will be no sequel and it is not targeting teens/young adults – in short it is NOT a franchise movie. In today’s day-and-age that is incredibly important and a rarity in the market.

For it not to be all of those things and hold its ground against a movie that IS, says something. Studios have traditionally counter-programmed big action/family tentpoles with more adult fare in the past. It had normally been a big success, but that has waned over the years with the blockbuster taking all of the oxygen as audiences had (even pre-COVID) opted to just stay home.

We are seeing that old way come back more and more.

Comcast/Universal had a big week with The Super Mario Bros. Movie which dominated all aspects of the Cineplex… and yet Air hit that magic $20 million number (that has always been a metric for a successful film in the past) in spite of that success.

It shows the landscape of film is changing again and studios have to be nimble.

“Not every film needs to be theatrical, but some belong in theaters… the industry needs more product to continue to be healthy. Amazon can be part of that. This is a really positive thing for Amazon and the industry.” – MGM and Amazon Studios theatrical distribution executive Kevin Wilson

Audiences don’t want to always stay in and watch a movie, but with the economics involved in going to the movies, it has to be the RIGHT movie. Today’s consumers are smarter, they aren’t going to pay for another rom-com based on a concept they’ve seen before or an artsy film that was made purely as Oscar bait.

Air wasn’t in either of those categories.

It was a film based on actual events, with a big-name cast and the right mix of comedy and drama.

Lomis and Amazon knew that and had the foresight to alter their approach. So now when Air ultimately does come to Prime Video, it will do so with a pedigree and some added momentum.

Combined with Creed III Amazon/MGM has now not only given theaters two solid back-to-back hits (plus a lifeline), but they’ve been able to connect with audiences and creatives in a way other streamers have failed to create.

Theaters remember that when making distribution deals, talent remembers that when signing on to projects, creatives remember that when selling projects – it’s that simple.

By giving theaters that first cut of the take and giving talent/creatives solid box office data they can use to market themselves, Amazon is again shifting the model.

It is not that Netflix and the like are going to go out of business if they don’t follow suit, but its investors may start to question why the hesitation in exploring new models… and that’s not going to be a fun conversation.

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