‘Amazon-ics’ — The Tech Giant’s New Hollywood Math

/ Jan 26, 2015


Amazon is the new kid on the theatrical motion-picture block, having just announced its Hollywood studio-like ambitions to produce roughly 12 films per year (at very indie-like budgets of $5-$25 million each). Amazon already is a major player in OTT video, of course, with both Amazon Prime (which offers HBO-like original programming) and its “under the radar” stealth YouTube-like short-form video platform, which continues to grow in prominence. Bottom line: Amazon is now a full-fledged media company. After all, it just won its first highly-coveted traditional media accolade — a pair of Golden Globes.

But, is it? After all, despite its media trappings (or in spite of them), make no mistake, Amazon still is — and always will be — an e-commerce company first and foremost. Everything else is just bait, luring you into its infinite store of possibilities that Amazon monetizes in bulk and at low, low margins. THAT, my friend, is Amazon’s business model. Get you into the store, keep you there, and make it easy for you to whip out your credit cards.

That means that video content — in whatever form it may take (premium shorts, licensed movies, original programming like “Transparent,” and now theatrical motion pictures) — is the marketing pre-show for that main feature of shopping. In other words, content is a marketing spend, plain and simple. And ultimate storytelling success is not measured by traditional Hollywood metrics (box office receipts). The only metrics that matter to Amazon are traditional retail metrics.

That means that Amazon’s business model is fundamentally different than that of any pure-play entertainment company. Pure-play motion picture studios like Warner Bros. and pure-play entertainment distributors like Netflix can monetize one thing and one thing only — the video content itself. Their sole metric of success relates directly to the motion picture content (box office/ancillary revenues and subscription numbers, respectively).

Not the same case for Amazon. Individual motion-picture/content rules and metrics simply don’t apply. There are no box office receipts to tally. No pure-play subscribers to count. This is retail baby! Amazon Studios succeeds if its motion pictures drive bodies into its virtual super-store and those bodies shop, shop, shop.

That means freedom. Business and creative freedom. Case in point: Amazon’s Golden-Globe winning original series “Transparent.” “Transparent” is content built not for a mass audience, but rather for a passionate niche audience — and that is good enough. No pressure for it to “succeed” in a traditional studio way.

And Amazon’s newly-announced indie-like theatrical film strategy follows that same playbook. Produce “smaller” films for passionate niche audiences (niche audiences that it has already identified precisely via the deep shopping metrics and profiles that it has capture on each of us — and continues to capture on each of us — via our ongoing shopping habits). Release those small films theatrically first (both domestically and internationally), thereby marketing Amazon to passionate audiences in a highly visible new way. Collect whatever box-office receipts that come (which is seen as being pure gravy). Perhaps also collect some industry accolades for them (after all, underlying economic freedom leads to creative freedom, which may lead to more celebrated films), which is more great marketing. Subsequently, exclusively feature them on Amazon Prime (more marketing).

THAT is Amazon-ics.

The studios don’t have it. Netflix doesn’t have it (although Netflix’s pure-play subscription model also allows for more business and creative flexibility as well in its pure-play model, because the only metric that matters is overall subscription growth; hence Netflix’s own revolutionary moves that have led to the two phenomena of “binge” viewing and true “day-and-date” theatrical/digital release.

Interestingly, other major tech titans have something like it. Apple, Google, and Samsung similarly use content as advertising to drive their underlying core business models of hardware sales and advertising — not primarily to monetize the content itself. Again, that leads to more business and creative freedom. Here is my recent discussion in that regard.

What does this mean for filmmakers and we, the audience?

Right now, indie filmmakers should rejoice because they have a new potential home for their labors of love, the success of which is not measured solely by the box-office revenues they generate. That means more creative, original, and fresh stories will be told.

And that means more movie variety for all of us.

Check out more of Peter Csathy’s thoughts on the digital media space at the Digital Media Update.

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