Amazon announced this morning plans to produce and acquire original movies for theatrical release and for distribution on its Prime Instant Video service. The company's goal is to release 12 movies per year, with production starting later in 2015.
One key twist of Amazon's plan is to release movies on its Prime Instant Video service in the U.S. just 4-8 weeks after theatrical debut, significantly shorter than the typical 39-52 weeks that movies usually take before showing up on Netflix or other SVOD services. One obvious question arising from the shorter window to SVOD release is whether audiences might be reluctant to buy increasingly expensive theater tickets to Amazon's movies when they'll be on the service so soon after (a year of Amazon Prime costs less than taking a family of 4 to the movies, when including pricey concessions). If that proves to be the case, theaters themselves may be reluctant to show Amazon's movies.
By compressing its movies' SVOD release, Amazon is essentially forgoing both VOD rental and electronic sell-through (EST) windows. EST in particular has emerged as a strong window for Hollywood studios, with total download revenue up 30% in 2014 to $1.55 billion.
Another revenue stream off the table for Amazon's movies would appear to be premium TV (e.g. HBO, Showtime, Starz, etc.). With SVOD services like Amazon and Netflix increasingly on a collision course with premium TV networks, it's unlikely the latter would look to distribute the former's original movies.
To head up its new movies initiative, Amazon has brought in independent producer Ted Hope, who was behind Academy Award-nominated movies like "Eat Drink Man Woman" and "Crouching Tiger, Hidden Dragon," (which will have its sequel produced and distributed by Netflix). Netflix itself has recently indicated it too will expand into movies, having signed a 4 movie package with Adam Sandler, as well as the Crouching Tiger sequel.
Meanwhile, Amazon's expansion into movies signals the e-commerce heavyweight sees original content playing an even bigger role in driving its Prime subscription business, which was the main goal of its TV series. The company hasn't released any data on how much originals are moving Prime's subscription needle, but its recent Golden Globes wins for "Transparent" further legitimized Amazon as an alternative source of high-quality programming. Amazon also broke new ground last week, signing acclaimed director Woody Allen to his first-ever TV deal.
SVOD is already having a growing impact on traditional broadcast and cable TV, with Q3 '14 ratings among younger audiences plummeting almost 20% vs. Q3 '13. With Amazon and Netflix pursuing moves, the next question becomes what impact they'll have on Hollywood studios?