Amazon Just Fired A Major Shot At Netflix

| About: Amazon.com, Inc. (AMZN)

Summary

Amazon and Netflix have similar goals for the streaming movie space, but different approaches.

On Thursday at CinemaCon, Amazon revealed it would no longer look to secure a short theatrical window for its films and instead go with the full 90-day approach.

The move brings theaters into the fold as partners and doesn’t alienate them in the way Netflix does with its unyielding “day and date” demands.

The end result will be Amazon’s films will get additional exposure and, as a result, additional revenue and awards considerations.

In the world of streaming media the two biggest players are Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX).

Each has their pros and cons and each has fiercely loyal customers; however, one key difference maker might give Amazon an important edge - its relationship with theaters.

As I've written previously, the battle for consumer dollars has expanded beyond the traditional big screen with streaming media taking a major role in the proceedings. Netflix started it last year with its Beasts of No Nations and will be a prominent player again this year alongside Amazon.

Yet while the end goal (of winning accolades and audiences) is the same, the approach couldn't be more different. Netflix enters the market with a day-and-date directive. In other words it is adamant any film released in theaters get a simultaneous airing on its platform.

Theaters hate that because it doesn't do them any good. They have no reason to waste a valuable screen on a film audiences will in all likelihood opt to watch online. The end result is only a handful of independently-owned theaters running the movie.

For Netflix that's fine because it just needs one New York and LA run to get awards consideration. The problem is that approach didn't get it as far as it hoped last year.

Now look at Amazon, which is coming into this differently. It recognizes the best way to counter Netflix is to get the theaters on its side. If Amazon can make the theater owners understand it values the theater-going experience and is not coming after their income, then its films will get a lot more exposure.

For investors that's the key. Added exposure means an added advantage in the awards race. Everyone assumed because Netflix was backing Beasts and it had a proven track record with content, it was going to be a major award player. Yet while the movie was in the hunt and did earn a few awards, it was shut out in the races that really mattered.

In the end a large part of the reason for that was voters didn't see it as a real movie and many decided not to vote for it as a result. That theory was recently backed up by the film's director, Emmy winner Cary Fukunaga, in an interview with Alec Baldwin's "Here's The Thing" podcast.

In a fascinating discussion Fukunaga is very frank about why the film didn't get support and the fact he still hasn't had a real follow-up conversation with Netflix about what happened. Now to be fair to Netflix, Fukunaga can't be too ticked off because he's now working with the streamer again on Maniac, a new series starring Jonah Hill and Emma Stone. Regardless it is still an excellent scenario that explains the problem facing the streaming revolution.

Now look at Amazon.

The company tried to take a similar simultaneous release track with its first film Chi-Raq. The difference was Amazon gave theaters a small window of exclusivity. The theaters in turn still passed, and outside of controversy around its subject matter nobody was talking about it in the media. The film fell flat.

Amazon though has learned from its mistakes and has since dropped the smaller window stipulation and will go to the traditional 90-day window. Marketing and distribution chief Bob Berney, a respected industry veteran, hammered home that message on Thursday at CinemaCon alongside Amazon studio chief Roy Price.

The annual convention in Las Vegas is a week-long showcase to exhibitors that previews the year's hottest projects. For the first time ever, Amazon had a presence and got some much needed facetime with theater owners.

The message was clear … we are your ally.

All the films we are acquiring and making will be released theatrically with aggressive marketing campaigns intent on bringing customers to your theaters.

-Amazon's Bob Berney

Make no mistake this is an important declaration. Amazon just came out and said to theater owners that it understands the sandbox they are playing in. It's no longer us or them, it's a partnership. Shareholders need to understand why this is a turning point.

Amazon's agreement to work with the theaters means its films will actually be seen in theaters. It will also make life easier for the studios Amazon partners with for those releases. Remember, unlike Netflix, Amazon's recent acquisitions include both theatrical and streaming rights.

Amazon will of course handle streaming but will work with a partner of its choosing for theatrical. In fact, the company's other big CinemaCon news was that it had signed a deal with Lions Gate (NYSE:LGF) to handle the theatrical run for its Woody Allen film Café Society, which will be the director's first wide release since 2003. Given Allen's films are usually platformed out and utilize a limited run model, that's a big deal.

Amazon will also team with Roadshow Attractions for the distribution of its buzzy Manchester By The Sea, which is an early Oscar hopeful. And let's be honest, that's the end game here. Amazon wants to be the home to Academy Award winning content because it knows that will add subscribers and that's vital to its investors.

Adding customers is the lifeblood of Amazon's Prime service and this change in strategy will serve that end goal. Netflix is still going to be a force to be reckoned with, but Amazon just gained a powerful advantage that will make this awards race a lot closer and more interesting to watch.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.