Netflix And Amazon Continue To Redefine What It Means To Be A Studio (Studio Series)

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For the past couple months, we’ve been meeting here once a week to take a look at each of the major studios, as well as some of the smaller ones. Looking at each of those involves a fair amount of research, but also comes with concrete box office numbers that tell something of a story.

With today’s installment, it’s going to be a little different, out of necessity, because there aren’t any real box office numbers for Netflix and Amazon Studios. Instead, there are metrics to which we are not privy, and viewer numbers that are not available. A precious few films from either company see the inside of movie theaters, and those that do are actually put there by other distributors, thus those numbers and that market share go to the companies actually doing the distributing.

There’s another side to this, too. Once we pass Labor Day, this series will shift to television and, unlike all the other operations covered here during the Studio Series, these two companies will be covered once again, though in a different vein. And with a similar preamble.

The film business is different from the television business, as we know, and we’ll get into the latter when the time comes, but in the Venn diagram of those two sides to the business, one thing that does overlap is licensing fees. Both Netflix and Amazon are able to turn their investments into money by licensing out the various content, though unlike everyone else we have covered (or will), both have a steady stream of revenue coming in each and every month thanks to millions of subscribers.

So while every other distributor makes money through the box office receipts of their movies — as well as ancillary rights, streaming, VOD, DVD and all the rest, of course — Netflix and Amazon must take a different route.

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But it’s because of this route that they are both able to purchase projects outright, like the currently streaming Paul Rudd film The Fundamentals of Caring and the Ellen Page-Allison Janney drama Tallulah (above), both of which were purchased by Netflix for prices in the mid-seven figure range at Sundance this year. It also allowed the company to make the largest bid for Nate Parker’s award-winning — and keenly anticipated — historical drama Birth of a Nation. Netflix offered Parker and his producers $20 million for the film at Sundance, but the company was rebuffed for slightly less money ($17.5 million — a record nonetheless) and a conventional theatrical release courtesy of Fox Searchlight.

It’s all of a piece with deals like the much publicized, and much debated, deal the company has with Adam Sandler, paying the actor $80 million for his next four movies, all of which will be Netflix originals that will stream exclusively on the service. To say that Netflix boss Ted Sarandos had his wisdom questioned is putting it lightly, but he announced that the first two films on the deal — last year’s The Ridiculous 6 and this summer’s The Do-Over — were the most-watched films on the service in the first month of its release.

Of course, as noted above, since there is no way to properly monitor Netflix’s numbers or metrics, we sort of have to take his word for it. Still, one has to assume that there is not a bottomless pit of money to spend and, at some point, some kind of revenue has to come in. From what we know about Netflix, it takes in approximately $7 billion annually from subscriptions, spending about $5.5 billion of that on content. Okay, but the valuation of the company, as of last fall, is $42 billion, which is almost as much as Time Warner and Twenty-First Century Fox, whose content Netflix often streams. That means that, while it’s spending so much of its money on content, thus lowering its revenue, investors are still assuming that it’s a growth machine for years to come. To reach its valuation, though, it will have to get up to about 250 million subscribers worldwide. That’s roughly one in every five households on the planet.

As of the fourth quarter of 2015, the number of actual subscribers was 75 million. That’s a lot of room for growth.

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Still, looking ahead, Netflix has over a dozen “original” movies scheduled for 2016 premiere (and I use quotations with “original” because it signifies a movie premiering on the service, not necessarily developed and financed by it), with at least a couple of those — like Brad Pitt’s War Machine and the Molly Shannon cancer dramedy Other People — expected to earn some awards talk. On top of that, if we have learned anything from the company’s behavior of late, it will definitely be a fierce buyer with which to be reckoned come Toronto, Telluride, and Sundance.

Additionally, there is also the big move the company made back in March, when it topped other buyers by spending $90 million for the film project Bright, written by Max Landis, to be directed by David Ayer, and starring Will Smith and Joel Edgerton. What’s interesting about the deal is that the movie itself is only costing $45 million to make, which means the company doubled up on its commitment so as to buy out the considerable backend of the players involved, since the movie is meant for the company’s worldwide subscribers, which means no box office grosses. That is a pretty hardcore statement to make about the future and the waves it plans to make.

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Meanwhile, Amazon is a little different. It actually finances most of its own films, and unlike Netflix, tends to use other distributors to get at least some of its projects into theaters. A prime example is last year’s Spike Lee joint, Chi-raq, which, admittedly, didn’t even clear $3 million in grosses. Two movies set for release soon are Complete Unknown, with Rachel Weisz and Michael Shannon, and the new Jim Jarmusch film Paterson. The first movie hits theaters in two weeks, thanks to IFC Films, while the latter is coming from Bleecker Street at the end of the year.

While it still streams its films using its Amazon Prime feature, it is making an effort to compete on the theatrical level with other distributors. Of course, the fact that Amazon Studios is a part of a $240 billion company that does not limit itself to content gives it a marked advantage over everyone else. It can spend more money and take more chances, though just because it can doesn’t mean it does. Budgets are reasonable, and excellent talent is attached. A perfect example is Jarmusch’s Paterson, which stars Adam Driver. Jarmusch has as much indie cred as … well, as anyone on the planet, really, and if he’s willing to go to Amazon it’s not hard to imagine a host of regarded filmmakers getting in line to follow suit.

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Amazon has at least four more films that have wrapped filming, is in the works with Woody Allen’s next film, and has backed the long-suffering, decades-in-development The Man Who Killed Don Quixote from Terry Gilliam. Plus, Amazon has projects in the pipeline from Barry Levinson, Jill Soloway, Mike Leigh, and Joseph Gordon-Levitt, which means that the company is not just throwing around money willy-nilly in an attempt to play with the big boys, it’s actually attempting to make a mark of quality, too.

While we’re handicapped by a lack of certain information, there is one thing that is abundantly clear: just as they have in TV, Amazon and Netflix have very quickly become major players in the film world, and their stature is only going to improve. In fact, with the release of Joshy this coming weekend, Hulu is now poised to join them.

In other words, it’s a brave new world out there. Change isn’t coming, it’s already arrived.

For more entries in our studio series, click here.


ProfilePic adjusted 2 is a filmmaker and journalist who has spent close to two decades in the independent film world and writing about Hollywood. Aside from being a screenwriter/director and Tracking Board columnist, he is also a senior editor at SSN.

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