Yahoo Finance 'The pendulum is certainly swinging back': Why Amazon plans to spend $1 billion making movies for theatrical release
Amazon (AMZN) is betting big on the theatrical experience.
The tech giant plans to invest $1 billion to produce 12 to 15 movies a year exclusively for theaters, according to a new report from Bloomberg. That spending would be roughly on par with major film studios like Paramount Pictures (PARA), Bloomberg noted.
The report sent shares of theatrical 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.
"Much will come down to what kind of content Amazon produces, how long their windows will be, and how heavily it may lean on IP versus original material, but this is still resoundingly good news for theater owners and Hollywood," Shawn Robbins, chief analyst at Box Office Pro, told Yahoo Finance, explaining that more streamers committing to the theatrical window will help fill in calendar gaps for theaters.
"Now that streaming has begun to mature, the pendulum is certainly swinging back toward a balance as these distributors see the kind of success they've been leaving on the table with an all-in approach to streaming," Robbins said. "Theatrical remains a very lucrative business model, and [Amazon's] news underscores that yet again."
If confirmed, Amazon's investment would represent the largest commitment to cinemas from an internet company and could "easily boost theatrical receipts by 15% to 20% given Universal and Warner have roughly similar budgets," Bloomberg Intelligence analyst Geetha Rangathan wrote in a new note.
'The debate is over'
Streaming companies have slowly begun to embrace the theatrical window, with high-powered Hollywood executives arguing that the box office has become an essential stop for films 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 make up for it on streaming just isn't true. The theatrical window is more essential than ever to get the streaming revenue."
Gelfond referenced deep direct-to-consumer losses from the likes of 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 releasing a film in the theater first, citing "Top Gun: Maverick" as a prime example. The summer blockbuster saw record-breaking success at the box office after Paramount delayed its release five times due to the pandemic.
The Tom Cruise-led sequel went on to gross nearly $1.5 billion globally and eventually became the number one digital release of all time on OTT streaming platforms. On Tuesday, seven months after first arriving in theaters, Paramount announced the sequel will officially debut on Paramount+ beginning December 22.
Netflix hesitates
But one streamer has been largely resistant to the box office — Netflix (NFLX).
"We are in the business of entertaining our members with Netflix movies on Netflix, so that’s where we focus all our energy and most of our spend," Netflix Co-CEO Ted Sarandos said following the company's third quarter earnings results.
But even Netflix will release its much-anticipated "Knives Out 2" sequel in select AMC, Regal, and Cinemark theaters for one week over Thanksgiving Weekend — despite the platform claiming that it will not report its box office grosses.
Robbins surmised that there could be unofficial reports that bubble up after the debut, setting expectations that the movie could produce between $6 million to $8 million in domestic ticket sales over the 3-day weekend, with the potential to hit $10 million-plus.
"The level of success here could really make this a watershed moment for the relationship between Netflix and all streamers and exhibitors as this is arguably the most significant 'streaming title' to open exclusively in theaters."
"If anything is going to move the needle, it's going to start here with this movie," Robbins said. "I expect this to do really, really well."
The original "Knives Out" grossed $312.9 million back in 2019. Netflix spent a reported $450 million-plus to secure the rights of the next two sequels, one of the largest movie streamer deals in history.
Still, Netflix Co-CEO Ted Sarandos downplayed the decision to release the film in theaters, telling investors during the earnings call: "There are all kinds of debates all the time, back and forth. But there is no question 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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