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Amazon in the Movies – Three Questions

So, Amazon is getting into the movie business. Here are three questions that I am hearing from folks in the industry about Amazon's announcement.

Why is this announcement a big deal?

Compared to many other players entering the original content space, Amazon is unique. Netflix, HBO, Hulu, and CBS all have (at least) one thing in common – their primary business is to provide interesting video content to consumers. In contrast, Amazon is a retail / CE maker / web services business (not including a few dozen other divisions I didn’t mention). Amazon’s video business is an interesting but tiny part of their overall portfolio. Since Amazon doesn’t solely rely on monetization of video for its profitability, it can experiment with release windows in ways that other companies cannot. If original programming or movies drives additional traffic to its online properties or can be bundled for free with tablets or streaming media players, Amazon also wins.

Another reason this announcement is a big deal is the potential for a shortened theater window. While broadband providers own the “last mile” to consumer homes, theater owners own the “first mile” to motion picture viewing. As such, they have substantial power to prevent movies studios from shortening the theater distribution window. Potentially, theater owners could hold the line and refuse to show Amazon Studios' movies in a shortened window, fearing that capitulation would invite other studios to push that same envelope. However, if Amazon comes up with a big hit (or several hits), they risk losing out on any revenue at all. My guess is that there will be big pressure in that community to refuse the shorter window, and that it will take a new strategy, a potential mega-hit, or more Amazon money to overcome resistance.

Who will benefit?

Anytime that a new source of financing hops into the arena, the pie gets bigger for the talent, creative, and production folks. So, directors, writers, actors, and other elements of the movie-making craft will clearly benefit. Amazon certainly stands to benefit, but only if the movies are successful. Other movie studios could also benefit. The current windowing strategy has remained because it has proven to optimize the ongoing revenue production from a motion picture.  If Amazon’s experiment is able to find a formula to derive greater revenues in our evolving video marketplace, other studios will be quick to follow. If that occurs, then the companies providing online video delivery capabilities will also benefit.

Will Amazon Studios movies be successful?

That is a great question – one we may not be able to answer until the initial trailers or actual release. Successful movie making is a strange, creative alchemy. It requires the direction, acting, writing, effects, marketing, and production to all work well, and even then it may not resonate with viewers. Great directors and actors make bad movies all the time. There is no guarantee that all of the right elements will be in place for Amazon. In its planned year of 12 movies, it might have 12 mega-hits or 12 stinkers. The odds say that not all will be a smashing success, but you never know. That’s show biz.

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