Amazon made important strides in 2016, winning Emmy Awards and attracting major talent to its innovative online pilots and day & date theater/online releases. A look back on its recent history and a number of forecasts on its future will show just how innovative Amazon really is.
From Amazon “Unbox” to Amazon Video
Launched in 2006, Amazon Unbox was rebranded in 2011 as Amazon Instant Video. Bundling it with Amazon Prime’s unlimited free delivery service spurred initial growth. Then the acquisition of European SVOD player Lovefilm in 2011 pushed its international footprint to the UK, Germany, and Austria. It has since rolled into Asia via Japan (2015) and more launches are due for India, France, Italy and Spain by the end of 2016. Last April, adapting to an extremely competitive market, Amazon Video in the US was recast as a monthly standalone service at $8.99.
In the burgeoning video on demand (VOD) market, Amazon has become Netflix’s fiercest competitor. Its downstream video ranking rose to No. 3 behind Netflix and YouTube (Sandvine traffic analysis) from outside the Top 10 in just 3 years.
Amazon garnered Emmy Awards for its original production, Transparent, in January 2015 – capping off an original content strategy started in 2006 with Ridley and Tony Scott. When Amazon moved to commission original series in 2013, it devised a new online pilots strategy that in essence reversed traditional broadcasting wisdom. Democratizing the process, Amazon looked to future customers in deciding which original series would be picked up for full “seasons.”
In 2014, Amazon announced a commitment of $1.3 billion to video content. On an earnings call in July 2016, “Amazon CFO Brian Olsavsky said that [it] will ‘nearly double’ its investment in all types of video, while ‘tripling’ the amount of Amazon’s original content, over the rest of the year.”
Amazon improves funding opportunities for independent film and television
Amazon’s innovations, artist-friendly approach, and status as a deep-pocketed “new entrant” has attracted world-class creative talent, Woody Allen being just one of the standouts. After three seasons of original TV content, Amazon added Amazon Studios in 2015, enlisting veteran independent producer Ted Hope to build up “Amazon Original Movies […] synonymous with films that amaze, excite, and move our fans, wherever customers watch.”
His people made a splash at Sundance 2016 in January, competing with Netflix to buy independent films in megamillion deals that had long been absent from the market. Ted Hope brought in more industry experience with Bob Berney, former CEO of indie film distributor Picturehouse. His team is working hard so that top talent can change the perception of SVOD/VOD releases.
The market for independent films has significantly changed: large studios (except for Sony Pictures Classics) terminated indie sublabels, upstart indies have fallen on hard times, (Alchemy filed for bankruptcy). The prime strategy for theatrical releases, meanwhile, remains big budgets productions.
Outlier-type projects suffer from lean budgets (for comparison, newcomer Bryan Singer was able to raise $6 million in 1994 for his Usual Suspects while most indie first-timers can’t count on more than $1 million in 2016 dollars today). They’ve been waiting for new entrants such as Amazon and Netflix to help balance the market in favour of acquisitions.
As summarized by Vanity Fair: “Netflix and Amazon are hardly new companies, but the way they’ve changed the acquisition landscape this year at Sundance does feel like a seismic shift. Last year neither company bought any films at Sundance, while in just the first four days of this year’s fest they combined to pick up seven films for a total price tag of over $30 million. That’s a hell of a lot of $8.99-a-month’s and Prime subscriptions.”
Kyle Chandler (left) and Casey Affleck (right) lead the cast of Manchester By The Sea, to be released in the US on November 18, 2016
Amazon closed the biggest deal of the festival, paying $10 million for the rights to Manchester By The Sea from indie director Kenneth Lonergan. In exchange, Amazon can roll out combined theatrical and digital releases during crucial fall slots typically reserved for contenders during the film awards season. Actors and directors might be thanking Amazon for their support at the next Oscars, which would be a significant first.
The future: a mini-bundle of premium content
I noted Amazon’s influence last December in a recap 2015’s top trends: “Content owners and creators are understandably quite happy to see Netflix finally experiencing some competition and there is an exclusivity window battle going on for top-level content, which is driving SVOD rights prices.”
Competition has clearly heated up in 2016 between the two main SVOD players, especially in attracting talent with a hands-off approach and a seemingly endless appetite for equitably funded content.
Amazon has developed a shrewd strategy of add-on digital subscriptions from Starz, Showtime, and Lifetime. That makes it more than a worthy challenger to Netflix, in line with my prediction of a coming OTT/SVOD bundle aggregator in the digital space, reminiscent of analog cable days.
This plan should let Amazon compete with Netflix without “breaking the bank” for content. It may also make a potential Amazon set-top box a viable alternative to AppleTV and incumbent cable carriers.
Hulu bringing on TimeWarner as an investor and rolling out a livestreaming service (trying to be the online “skinny bundle”) only intensifies the competition. Netflix, with the largest direct footprint for a content service, is now available in more countries than the UN. What’s more, it’s negotiating exclusive worldwide rights to its acquisitions. That could lead Amazon to spend even more on original content. The combination of all these heavily funded SVOD/VOD players truly makes this a great time to be a content producer.
Posted in: Business Practices