Amazon invests $1 billion in box office launch as more streamers embrace cinema

Amazon ( AMZN ) is betting big on the theater 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. That spending would be roughly on par with major movie studios like Paramount Pictures ( PARA ), Bloomberg noted.

The news sent shares of theater giants 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.

“A lot will depend on what kind of content Amazon produces, how long their windows are, and how heavily they can lean on IP versus original material, but even so, this is definitely good news for theater owners and Hollywood,” said CEO Shawn Robbins. an analyst at Box Office Pro told Yahoo Finance, explaining that more streamers committing to theaters will help fill gaps in the theater calendar.

“Now that streaming has started to mature, the pendulum is definitely swinging back as these distributors see the success they’re leaving on the table with an end-to-end approach to streaming,” Robbins said. “Theatrical remains a very lucrative business model and [Amazon’s] the news underscores it again.”

If confirmed, Amazon’s investment would be the Internet company’s largest commitment to theaters and could “easily add 15% to 20% to theater sales, given that Universal and Warner have roughly similar budgets,” a Bloomberg analyst wrote in a new note Intelligence Geetha Rangathan.

‘The debate is over’

Streaming companies have slowly begun to embrace the theatrical window, with high-ranking Hollywood executives arguing that the box office has become a necessary stop for movies looking to turn a profit.

“The debate is over,” IMAX ( IMAX ) CEO Richard Gelfond told Yahoo Finance Live earlier. “The argument that you can skip the theatrical window and make up for it with streaming is simply not true. The theatrical window is more important than ever to generate streaming revenue.”

Gelfond cited deep direct-to-consumer losses from the likes of Disney ( DIS ), which reported disappointing earnings earlier this month due to adverse macroeconomic conditions and high content costs.

Gelfond argued that “the facts are uncontroversial” regarding the benefits of releasing a film theatrically first, citing “Top Gun: Maverick” as a prime example. The summer blockbuster was a record-breaking success at the box office after Paramount delayed its release five times due to the pandemic.

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

'Top Gun: Maverick' underscores the importance of the theatrical window, says IMAX CEO as Amazon commits to invest $1 billion a year in theatrical films (Courtesy: Paramount)

‘Top Gun: Maverick’ underscores the importance of the theatrical window, says IMAX CEO, as Amazon commits to invest $1 billion a year in movies for theaters (Courtesy: Paramount)

Netflix hesitates

But one streamer has been largely resistant to the box office — Netflix ( NFLX ) .

“We’re 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 spending,” Ted Sarandos, Netflix’s chief executive, said after the company’s third-quarter results.

But even Netflix will release its highly anticipated sequel, “Knives Out 2,” in select AMC, Regal and Cinemark theaters for one week over Thanksgiving weekend — despite the platform saying it won’t report its box office receipts.

Robbins speculated that there could be anecdotal reports that would blow up after the debut, setting expectations that the film could generate $6 million to $8 million in domestic ticket sales over the three-day weekend, with the potential to reach $10 million or more.

“The level of success 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 it to go really, really well.

Netflix Releases 'Glass Onion: A Knives Out Mystery' in Select Theaters for One Week Thanksgiving Weekend (Courtesy: Netflix)

Netflix will release “Glass Onion: A Knives Out Mystery” in select theaters for one week over Thanksgiving weekend (Courtesy: Netflix)

The original “Knives Out” grossed $312.9 million in 2019. Netflix spent a reported $450 million to secure the rights to two more sequels, one of the biggest deals for a movie streamer in history.

Even so, Netflix CEO Ted Sarandos downplayed the decision to release the film, telling investors during the earnings call, “There’s still all kinds of debates going on, back and forth. 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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