Over the last few years Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) have taken steps to infiltrate the film industry in the same way they've come to succeed in the TV realm. What both companies have learned is that it's a much harder road to travel.
While the rise of streaming media has overtaken the traditional network TV model, the disruptors still are going to have a harder time convincing theater owners to play in the same sandbox. Both Amazon and Netflix are coming in with different strategies, but the end goal is still the same…get into the Oscar game first.
Since neither Amazon nor Netflix release ratings or viewership information the best way to quantify their success is by how successful they are in the awards race. In order to prove they are major players they need that credibility and an Oscar nomination goes a long way in driving home that message.
To that point both streamers have invested a ton of money in the annual Hollywood awards season with the highest profile entry so far coming from Netflix's Beasts of No Nation. While the film failed to earn any Academy Award recognition, it did make a significant splash with many of the other top groups and guilds. This year Netflix is looking to try again with a slate headlined by the Brad Pitt vehicle War Machine.
Meanwhile, Amazon is just getting in the race and this year will have a number of contenders including the Sundance acquisition Manchester By The Sea and Woody Allen's Café Society. Luring Allen away from his deal with Sony (NYSE:SNE) was a big win because it not only gave Amazon some of that credibility I mentioned earlier, but it also gives them a "name."
Say what you want about the man's personal life choices but Allen has nearly 200 nominations across the various industry awards and that includes four Oscar wins (with the most recent one coming in 2012). His movies aren't always guaranteed a nomination but he's guaranteed to be in the conversation and that's just as vital for a company like Amazon and its investors.
The conversation also amped up this week when it was revealed Café Society has been selected to open the prestigious Cannes Film Festival. This will be a record third time an Allen film has been given that honor. While Allen's movies never play in-competition, it doesn't make a difference; the exposure alone is the prize.
This is part of the reason Amazon paid $20 million for the rights to the film. Yes, they vastly overspent, but they had to do it to stay competitive. The movie itself reportedly cost $30 million to produce, which is more than the typical budget on Allen's movies, so the director had more incentive to try a new path and that benefited Amazon. Remember Netflix just spent $90 million on a Will Smith action film so that should tell you both companies are playing with blank checks.
Investors are keenly aware though and they for the most part are okay with it because they understand the end game. These companies are going to spend and spend and spend until they climb to that next level and then spend some more to stay on that level. The caveat is that by reaching that level the rewards get higher and in turn so does your value and potentially your stock price.
The big question though is who will be the first company to get the theaters to play ball. Netflix's day-and-date release mandate is likely always going to exclude them from the running, but rivals like Amazon and controversial upstart Screening Room are trying work with the theaters.
What's actually ended up happening though is that despite Amazon's overtures of peace, the large chains are spooked by Netflix and in turn are being overly closed-minded. Unlike Netflix, Amazon still looks to secure theatrical rights despite the fact its talented team knows the major theaters are going to be resistant to any release strategy that has a streaming option after a short time period.
It's an uphill battle but Amazon's smart and its investors understand the logic. That's the thing about these particular types of shareholders…they aren't just buying into an company, they are buying into a idea. They understand the media industry is changing and they sense opportunity.
For now, Amazon just got a small boost in its quest to become the first of the streaming giants to score an Oscar nomination and that's just the latest chapter in this story.
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.