The Franchise Ambitions of Amazon Studio

Along with other tech-media hybrids like Netflix and Apple, Amazon continues to reshape the contemporary media landscape. In the Digital Incubation Think-Tank, we have researched these and other changes emanating from the tectonic shifts due to the collision of Silicon Valley and Hollywood. This post provides an overview of Amazon’s film and television industry involvement, as the company has expanded from an indie, prestige strategy to one increasingly focused on blockbusters.

Amazon’s film and television strategy began years before the 2010 establishment of its Amazon Studios division. Back in 2006, Amazon had set up Unbox, which provided a means to distribute content through electronic sell-through (i.e., the sale of digital video); then, in 2008, the company acquired Without a Box, a service that artists used for submitting films to festivals. Also, in 2008, Amazon partnered with Twentieth Century-Fox to develop an adaptation of the fantasy book The Stolen Child, but the project never came to fruition. The partnership would have found Amazon not directly financing the production but rather using its platform to market the film and to potentially sell an array of licensed merchandise.

Despite this head-start, Amazon’s original content initiative did not debut until 2013, with its first slate of television series. When it opened in November 2010, Amazon Studios focused on using the technology behind Without a Box to solicit and develop film and television scripts based on user feedback. By 2012, though, the division had already started to expand beyond public outreach and into more traditional Hollywood practices. That spring, Amazon partnered with the Writers Guild of America to develop projects from established writers. In September 2012, Amazon Studios announced development on an action film titled Burma Rising, from Che: Part Two (Steven Soderbergh, 2008) writer Benjamin A. van der Veen. Although it never entered production, Burma Rising indicated Amazon’s interest in using commercial content to supply its growing line of Kindle devices.

The initial focus on commercial and democratically-selected film content did not last long. Because Amazon Video adds value to the Prime program (whose membership includes free two-day-or-less shipping), Amazon desired to amass a large enough library of content that subscribers would consider valuable. Indie and prestige film and television content presented a relatively inexpensive means to scale while also acting as a beacon for talent and consumers. At the same time, Amazon Studios’s public efforts failed to generate tangible results—that is, until an established filmmaker, Spike Lee, partnered with Amazon Studios for his 2015 film Chi-Raq.

Amazon continued to concentrate on distributing prestige programming. In 2016, for instance, it acquired Manchester by the Sea (Kenneth Lonergan, 2016) at that year’s Sundance Film Festival for $10 million—doubling offers from rivals like Fox Searchlight and Sony Pictures Classics. This exorbitant payment and the film’s Best Picture win at the 2017 Academy Awards underscored Amazon’s commitment to independent cinema. Then in 2017, Amazon Studios announced its move into self-distribution, although it has maintain some co-distribution arrangements.

More recently, competition from Netflix and the impending arrival of studios’ own SVODs has driven Amazon to invest in blockbuster, franchise films. Whereas Netflix and Amazon had picked up six Sundance titles each in 2016 and another ten and twelve, respectively, the next year, they opted not to buy any in 2018. The decision to forgo all acquisitions suggested that both companies had expanded, or even shifted, their attention to more mainstream features. In other words, Netflix and Amazon had begun to prioritize franchisable, blockbuster films over festival fare. In fact, just one month before Sundance 2018, Netflix had found its first hit film with the $90-million buddy cop/fantasy/action film Bright (David Ayer, 2017) and quickly announced a sequel. Amazon’s own Sundance inactivity reflects a pivot away from films carrying $5-million budgets to those costing closer to $50 million. With Netflix providing an extended theatrical run for Alfonso Cuarón’s awards-hopeful Roma, the future of indie and blockbuster films at Netflix and Amazon remains in question. Likely, both companies will pursue a strategy similar to that of Hollywood’s legacy studios by offering a diversified programming slate supported by franchise-friendly tentpole films.

In television, Amazon has similarly expanded from prestige content to programming with broader appeal. With a significantly smaller operating budget than that of Netflix, Amazon Studios has prioritized quality over quantity. Amazon debuted its first slate of television series, branded Amazon Originals, in 2013 and pursued an atypical distribution tactic: releasing pilot episodes to Amazon users whose opinions executives, supposedly, would consider when ordering a show to series. Throughout 2017, Amazon Studios had deemphasized ordering series based on audience testing of pilots in favor of straight-to-series orders—a tactic used for high-profile shows like Goliath (2015-Present) and Tom Clancy’s Jack Ryan (2018-Present). Then, in April 2018, it announced the end of its script solicitation program for both film and television projects. This announcement followed in the wake of several industry veterans joining the executive ranks of Amazon Studios.

These changes suggest that Amazon Studios has adopted a more traditional Hollywood model centered on tentpole projects. In September 2017, CEO Jeff Bezos demanded that Amazon Studios develop a competitor to HBO’s Game of Thrones (2011-Present). Three months later, the studio announced it had acquired the Lord of the Rings (LOTR) television rights for approximately $250 million; subsequent reporting revealed that a five-season order would push total costs—after production and marketing—to $1 billion. The series is scheduled to debut in 2021. For Peter Nelson, lawyer of LOTR film franchise (2001-2014) director Peter Jackson, Amazon’s massive expenditure demonstrated the cost of competing in the contemporary television environment: “We are in an era where streamers are bidding up the price of programming. I think Amazon is taking a page out of the studios’ emphasis on franchises. They also are realizing that with the overproduction of television, you need to get the eyeballs to the screen, and you can do that with franchise titles.” The LOTR deal signals that Amazon will focus on content capable of cultivating franchisable storyworlds to support other planks in its platform and to differentiate its film and television offerings from those of other tech-media hybrids.

Of course, these media strategies are designed to support Amazon’s core ecommerce business. In fact, online retail still drives the majority of the company’s profits (along with its Amazon Web Services cloud computing service). With its core business rooted in retail, Amazon’s investment in film and television content functions as a means to grow out its ecommerce business. Franchise content will prove particularly helpful on this front, as Amazon’s internal media brands can fuel merchandise sales and licensing. Already, Amazon offers a variety of subscription and discovery boxes and has begun partnering with Loot Crate to provide mystery boxes of pop culture paraphernalia. As media licensors and licensees alike embrace direct-to-consumer online sales, Amazon’s expansion into franchise fare coupled with its existing ecommerce platform puts the tech giant at a distinct advantage over legacy Hollywood studios and its Silicon Valley rivals.

Next week’s post will look at how Amazon has brought a similar mindset to its video game strategy, which includes not only its Amazon Game Studios development and publishing division but also the Twitch live-streaming video subsidiary.

Posted by James Fleury

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