Amazon to invest $1bn in ticketing as more streamers embrace theatrical

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

The report sent shares of theatrical giants AMC ( AMC ) and Cinemark ( CNK ) higher on Wednesday, rising 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 buy MGM.

“A lot will come down to what kind of content Amazon produces, how long their windows will be and how heavily it can lean on IP over original material, but this is still resoundingly good news for theater owners and Hollywood,” Shawn Robbins, boss. analyst at Box Office Pro, told Yahoo Finance, explaining that more streamers committing to the theatrical window will help fill calendar gaps for theaters.

“Now that streaming is starting to mature, the pendulum is definitely swinging back toward a balance as these distributors see the kind of success they’ve left 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 once again.”

If confirmed, Amazon’s investment would represent the largest commitment to movie theaters by an Internet company and could “easily increase theater revenues 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 are beginning to embrace the theatrical window, where high-profile Hollywood executives argue that the box office has become an important stop for movies looking to make money.

“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 is just not true. The theatrical window is more crucial than ever to get the streaming revenue.”

Gelfond cited deep direct-to-consumer losses from 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 theatrically first, citing “Top Gun: Maverick” as a prime example. The summer blockbuster saw record box office success 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 that the sequel will officially debut on Paramount+ starting December 22.

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

‘Top Gun: Maverick’ underscores importance of 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 resilient at the box office — Netflix ( NFLX ).

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

But even Netflix will release its long-awaited “Knives Out 2” sequel in select AMC, Regal and Cinemark theaters for a week over Thanksgiving Weekend — despite the platform claiming it won’t report its ticket sales.

Robbins speculated that there may be unofficial reports bubbling up after the debut, setting expectations that the film could generate between $6 million to $8 million in domestic box office 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.”

Netflix releases 'Glass Onion: A Knives Out Mystery' in select theaters for one week over Thanksgiving weekend (Courtesy: Netflix)

Netflix releases ‘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 back in 2019. Netflix spent a reported $450 million-plus to secure the rights to the next two sequels, one of the biggest movie streamer deals in history.

Still, Netflix Co-CEO Ted Sarandos played down 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 internally, there’s no doubt 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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