This might sound quite amusing to a lot of people who know Amazon (AMZN, Financial) as the ecommerce giant, and analysts are already busy speculating the prospects of the new foray of Amazon. Hence we thought let us also take a dig at the new role that ecommerce giant is about to adorn. “Amazon.com 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”, Amazon said in a press release, it further added that “it was aiming to produce close to 12 movies a year for theatrical release which would then be available on its Prime video service within two months,” significantly faster than the roughly one-year wait it normally faces to stream Hollywood releases.
Filmmaking spree
Amazon expects to focus on “indie” movies with budgets of between $5 million and $25 million, spokeswoman Sally Fouts said. While modest compared with Hollywood blockbusters, the move will add to the already hefty spending at Amazon, potentially creating a worry-spot for investors concerned about the company’s lack of profitability.
“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 out the challenges of getting good story and script and the competition for quality productions at festivals like Sundance.
The new move makes it clear that now Amazon does not want to carry the label of just an etailer but aims at becoming a business honcho in digital media, coming just days after the online retailer signed director Woody Allen to create a TV series and one of its existing series won a Golden Globe Award, a first for Internet TV services.
Unlike rival Netflix Inc (NFLX, Financial), a standalone Internet TV service provider, Amazon’s Prime video service comes in a package with online shopping services of two-day delivery for items purchased on the site, and the Prime service package comes for a subscription cost of $99 a year, a key driver of revenue for the company.
The road ahead
Though it is not clear if Amazon is trying to become a mainstream film maker or not, but to date all its ventures have been aimed towards enhancing the credibility of its core business, ecommerce.
Though Amazon founder Jeff Bezos is famed for his innovative and enterprising ways of gaining ground in new markets but of late the performance of the etailer has been a rather mixed bag with its smartphone venture, Fire phone, failing badly and then the slashing of the price considerably in order to entice consumers but not proving to be of much help to the phone's weak sales report.
Its movie-production gamble seems to be a move to tackle the intense competition from Netflix, which said in September it would jointly produce a sequel to “Crouching Tiger, Hidden Dragon” and in October signed a deal for comedian Adam Sandler to star in and produce four films to be broadcasted exclusively on their service.
Amazon said in a press release that it has hired Ted Hope, a producer of independent movies with the fame of producing blockbusters like “Crouching Tiger, Hidden Dragon” and Academy Award-nominated “Eat Drink Man Woman,” to assist Amazon in their tryst as a filmmaker.
“He’s very much tuned into the indie world and the specialized film vibe,” said Paul Dergarabedian, an analyst at Rentrak (RENT, Financial). “It’s just a way to get out the kind of edgy, interesting and sometimes enlightening content that these films sometimes provide.”
Future prospects
If "Amazon Original Movies" turns out to be a successful venture for the ecommerce honcho, it could further threaten traditional big-screen movie theaters, which have been coping with the falling count of audiences and patrons. Sony Pictures’ (SNE, Financial) recent success in releasing its comedy “The Interview” through video-on-demand services after the recent threats from hackers has served a big blow to big-screen businesses.
“That verbiage probably scares theater owners,” Bock said, referring to Amazons’ plan of reducing the time frame 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.”
Though the theater fraternity is already at unrest with such revelations and quite a number of them has voiced out protest 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. But this does not seem to lay much impact on the video streaming sector.
“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 added.
While Hope holds his identity as an independent filmmaker rather than having his fingers dipped into big-budget Hollywood blockbusters, Amazon Studios has somewhat achieved average success with its tryst in television features by being able to rope in high-profile directors like Allen and Steven Soderbergh of “Ocean’s Eleven” fame.
Amazon has already scoffed out $2 billion in 2014 in its film making venture of which $200 million went into developing original shows with good script, according to Wedbush Securities analysts. Such projects include “Mozart in the Jungle” and “Transparent” famed of winning the Golden Globe Award in multiple categories.
“The Golden Globes, they got that, now the next step is Oscar nominations,” Bock said. However to enter the red carpet of Hollywood’s biggest award event it has to get into the business of theatrically released movies.
Our take
Of late the ecommerce honcho has started foraying into several new sectors and wants to shed the mantel of being just an online shopping company. Rather it aims at providing several categories of virtual services. From an investor’s perspective these moves in the near term would not do much good to the company’s stock valuation since a lot of investment has been put into gaining new business grounds and it is not yet clear which of them would pay back a considerable yield. Hence if you are looking to encash benefit in the short term it would be wise to stay away from the company as the investments in the diverse sectors is bound to eat into its profitability however these moves should pay off in the long run hence investors who have the patience and intensions to wait for a longer term should build positions in the company for benefit in the long run.
