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Amazon Movies May Crack Theatrical Windows, But It Won’t Break Them

Amazon Studios is the latest digital player that aims to upend the film distribution business by releasing films in theaters and on digital platforms earlier than its big studio rivals.

Day-and-date and short theatrical windows have long been used for niche films by distribs including Radius, IFC and Magnolia. But Amazon’s entry into the feature film business with Amazon Original Movies, led by veteran indie producer Ted Hope, is another major move by digital giants to disrupt the traditional Hollywood model.

It’s one more way that the theatrical industry is fraying under pressure from new, deep-pocketed players and changes in consumer habits. But Amazon’s entry into feature films is unlikely to convince studios to try earlier windows, despite the $30 million Sony’s “The Interview” made in its fire-sale release.

Major theater chains remain adamant that they will not show films that premiere simultaneously in the home or that ignore a 90-day delay between a theatrical premiere and a home-entertainment debut. Amazon plans to ignore those parameters — offering titles online four to eight weeks after they’ve played in theaters. Barring an “Interview”-style crisis, though, major studios can’t play around much with windows without risking a theatrical boycott.

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“You’ve seen the windows slip a little over the past several years, and they may slip a little further, but it won’t be that huge a change,” said Marla Backer, an analyst with Ascendiant Capital Markets. “Studios have so much money invested in these huge films, they’re not going to play games with their smaller budgeted ones. They need to stay on good terms for the health of their entire portfolio.”

Representatives for the country’s four largest theater chains — Regal, AMC, Carmike and Cinemark — did not respond to a request for comment, but an individual close to the exhibition industry said the expectation was they would refuse to show films that did not adhere to a 90-day delay.

They may have their work cut out for them. Netflix has already challenged the model with a high-profile deal to distribute upcoming Adam Sandler films on its subscription platform and plans to release a sequel to “Crouching Tiger, Hidden Dragon” simultaneously on Imax screens.

“Even without Netflix and Amazon, you’d have windows compression,” said Hal Vogel, a media analyst and CEO of Vogel Capital Management. “The public is no longer interested in waiting. The public wants things immediately. You can’t expect things to stay like they did 10 years ago at the height of the DVD business.”

But just how worried should exhibitors really be to Amazon’s first foray into the theatrical market?

Amazon is clearly looking to make its Amazon Prime business more attractive to consumers. At $99 a year, the service offers up two-day shipping and unlimited streaming of movies and TV shows on more than 600 devices on which the Amazon Prime app is available. That includes smart TVs, laptops, tablets and smartphones.

Yet Amazon finds itself in a content war with streaming services like Netflix and Hulu, not to mention all of the other VOD offerings run by cable operators like Comcast to Walmart’s Vudu and Best Buy’s Cinema Now — each of which are selling the same movies and TV shows from Hollywood distributors.

In order to attract more paying subscribers to Amazon Prime, Amazon sees original content as the main attraction. Golden Globe winner “Transparent” brought instant visibility to its content offerings — the same way “House of Cards” boosted the profile of Netflix. And it’s starting to attract notable filmmakers including Woody Allen, Whit Stillman, Steven Soderbergh, David Gordon Green, Paul Weitz and more to create TV shows through its Amazon Originals program.

Yet just as Netflix is edging into movies, Amazon could benefit from a buzzed-about film or two as well. Whether Amazon’s movies — it wants to produce 12 films starting this year — will get wide releases is another matter. With boosting Amazon Prime’s numbers the main goal, Amazon will likely book limited theatrical runs as a way to raise awareness for SVOD offerings.

Amazon has the flexibility to experiment, because the kind of films it wants to make are in the $5 million to $25 million range: Possibly higher-budgeted than many niche films, they could be the kind of creatively fulfilling projects that can attract top talent. They’re also the kind of films that major studios have eschewed in favor of superhero extravaganzas.

“Despite Amazon’s (and Netflix’s) success with TV shows, it’s very unlikely they’re going to have a blockbuster movie on their hands,” said James McQuivey, principal analyst at Forrester Research. “A nice niche picture, maybe. In the horror genre, easily; or perhaps something edgy and artsy, but not the kind of movie that’s going to run two months in theaters, anyway. So if theater owners protest Amazon’s announcement, it will mostly be instinct motivating their reaction, not any specific knowledge of Amazon’s likely success at picking and financing hit movies.”

Some analysts believe that there are steps Amazon could take to woo exhibitors, such as giving them a larger share of box office receipts.

“It all comes down to the economics,” said Erik Handler, an analyst with MKM Partners. “Everything is open to negotiation.”

When change does come, it may be because corporate resolve yielded to public pressure.

“Consumers don’t want and do not understand release windows,” BTIG Research analyst Rich Greenfield said. “We live in a connected world where there is no reason for a 90-day window before home video — as usual, innovation has to come from outside the traditional film industry.”

Todd Spangler contributed to this report.

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