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

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Amazon (AMZN) is committed to the cinema experience.

According to a new report from Bloomberg, the tech giant plans to invest $1 billion to produce 12 to 15 movies a year exclusively for theaters. Bloomberg said spending would be roughly comparable to a major movie studio like Paramount Pictures (PARA).

The report saw shares of theater giants such as AMC (AMC) and Cinemark (CNK) rise 4.4% and 12.5% ​​respectively on Wednesday. Amazon did not immediately respond to a request for comment from Yahoo Finance.

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

“It will limit a lot what kind of content Amazon produces, how long their windows will be and how heavy it could go on IP versus original content, but it is still good news for theater owners and Hollywood,” said Shawn Robbins, chief analyst at Box Office. Pro, told Yahoo Finance, explaining that more streamers committed to theater windows would help fill gaps in the theater calendar.

Robbins added, “As streaming begins to mature, the pendulum definitely swings back to an equilibrium as these distributors look to see the kind of success they leave on the table with the streaming approach.” “Theatre remains a very attractive business model, and [Amazon’s] The news underlines that once again.”

If confirmed, Amazon’s investment would represent the largest ever commitment by an internet company to theaters, “easily beating Universal and Warner Bros. Theatricals given their comparable budgets,” Bloomberg Intelligence analyst Geetha Rangathan wrote in a new note. Can increase receipts by 15% to 20%.”

‘The debate is over’

As streaming companies slowly begin to embrace the theatrical window, powerful Hollywood executives have argued that the box office has become a necessary stopper for for-profit movies.

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“The debate is over,” IMAX CEO Richard Gelfond previously told Yahoo Finance Live. “The argument that you can skip a theater window and make it up via streaming is not true. Theater window is more important than ever to get streaming revenue.

Gelfond referenced large direct-to-consumer losses from the likes of Disney (DIS), which reported disappointing earnings earlier this month amid unfavorable macroeconomic conditions and higher content costs.

Gelfond argued that “the facts are indisputable” when it comes to the benefits of being theatrically released first, citing “Top Gun: Maverick” as a prime example. The summer blockbuster had a record-breaking box office success, even as Paramount delayed its release five times due to the pandemic.

The Tom Cruise-led sequel grossed nearly $1.5 billion worldwide, eventually becoming the number one digital release of all time on the OTT streaming platform. On Tuesday, seven months after it first hit theaters, Paramount announced that the sequel will officially launch on Paramount+ on December 22.

‘Top Gun: Maverick’ underscores importance of theater windows, says IMAX CEO, as Amazon commits to investing $1 billion annually in movies for theaters (Courtesy: Paramount)

netflix hesitates

But one streamer was largely resistant at the box office: Netflix (NFLX).

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

But even Netflix will release its much-anticipated “Knives Out 2” sequel in select AMC, Regal, and Cinemark theaters over Thanksgiving weekend for a week — despite the platform’s claim that it will report earnings at the box office.

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Robbins speculated that unofficial reports may have emerged after the initial opening expecting the film to generate between $6 million and $8 million in domestic ticket sales over the three-day weekend. , which has the potential to exceed $10 million.

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

Robbins said, “If anything sets the needle in motion, it starts right here with this movie.” “I hope it goes very well.”

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

The original “Knives Out” grossed $312.9 million in 2019. Netflix reportedly committed more than $450 million to secure the rights to the next two sequels, one of the biggest movie streamer deals in history.

Nevertheless, Netflix co-CEO Ted Sarandos rejected the decision to release the movie in theaters, telling investors during the earnings call, “There are all kinds of discussions going on all the time, back and forth. But internally there is no question that we make movies for our members, and we really want them to see them on Netflix.”

Alexandra is a senior entertainment and media reporter at Yahoo Finance. follow him on twitter @alliecanal8193 and email her [email protected]

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