Apple and Amazon could dominate Hollywood if they wanted to. Why haven't they done it yet?

This is the May 31, 2022 issue of the Wide Shot newsletter on the entertainment business. If this is forwarded to you, sign up here to get it in your inbox.

Ever since Apple and Amazon first plunged into the film and television industry, there has been an understanding among the people who make movies and TV shows that these companies—with their enormous influence and resources—could dominate Hollywood if only they wanted to.

Do they want?

Apple has become the first streaming company to win an Oscar for Best Picture with its $25 million acquisition of CODA. Amazon bought MGM for $8.5 billion, adding to its existing film and television business. These are no small feats.

But, so far, the technology takeover of the entertainment sector has been surprisingly modest.

Apple releases a dozen or so original movies a year, which is less than what Lionsgate theatrically distributed in the pre-pandemic period. MGM gives Amazon a large movie and TV library, but is relatively few in terms of new franchises. MGM’s share of the domestic box office in 2019 and 2021 was about 2% and 7%, respectively, according to data from the figures.

Amazon Prime Video captured 2.5% of US TV viewing in April, compared to 6.6% for Netflix, the Nielsen data show. The benchmarking company lists Apple TV+ in “Other Streaming” because the service accounts for less than 1% of viewership.

This does not necessarily reflect a lack of success. It could just be the systematic nature of tech companies. Early success can cause companies to get too sugary leading to very rapid growth. But the likes of Apple CEO Tim Cook and ex-Amazon chief Jeff Bezos (who was succeeded by Andy Gacy) resisted the siren song that previously slammed outsiders like AT&T and AOL.

Netflix’s recent stumbles have shown the risks of growing as quickly as possible, and there is significant concern that budgets across the company will decline. Traditional media companies are becoming more selective, Warner Bros. reports. Discovery auditing its $250 million deal with JJ Abrams Bad Robot production company.

If the hope is that tech giants will become the blank check writers in Hollywood, there is bound to be disappointment.

“Outsiders often get burned, and I think these tech guys are smart enough to figure that out,” said Stephen Galloway, dean of Chapman University’s Dodge School of Film and Media Arts. “We are always looking for an endless supply of money from abroad. But money is not without limits, they know.”

So why are they in the entertainment business, anyway?

The business of Apple and Amazon is no different from Netflix, which has one source of revenue – subscriptions.

Amazon made $469 billion in its most recent fiscal year from its e-commerce and cloud computing business. Apple’s $192 billion iPhone sales in fiscal year 2021 dwarf the global theater box office. These companies do not need to be in the film and television business. But here they are.

Amazon Prime Video’s goal is to keep Prime on customers’ smart TV screens and sweeten the deal for its subscription delivery offer, which recently raised its monthly fee from $12.99 to $14.99. The idea of ​​Amazon’s “flywheel” is that giving customers a better experience improves traffic, which fuels the rest of the business. Entertainment is part of that.

In keeping with its image as an “everything store”, Amazon’s palates gravitated from its early niche (“transparent”, “Manchester by the sea”) to mid-range fare such as “Jack Reacher.”

Apple TV+’s strategy is similar, although it lacks a robust catalog of older licensed titles like Amazon.

Apple’s video service exists to help keep customers using the company’s products and to better monetize its install base of 1.8 billion iOS devices. Apple’s Services division, which includes Apple TV+, is a growing part of the company’s overall business as the Cupertino company diversifies. At $5 a month, Apple TV+ doesn’t try to compete with Netflix.

Apple Store locations aren’t just powerful CODA and Severance marketing tools. It’s a way for Apple to promote its focus on quality. One of the reasons the company doesn’t produce dozens of movies a year is that it’s very difficult to be sure that seven movies in a given year are good, let alone 70. That’s why Apple has historically kept its hardware lineup mostly clutter-free. The person who buys the iPhone knows what they are getting.

Thus, Apple wants its film and TV selections to strike a certain balance: excellent quality and broadly appealing without going beyond the limits of taste. Notable examples include “CODA,” “Ted Lasso,” “Severance,” and “The Morning Show.”

They are taking steps to intensify their efforts

Both companies place big bets and spend a lot.

Dan Ives, an analyst at Wedbush Securities, expects Apple TV+, which is run by Jamie Erlicht and Zack Van Amburg, to increase its content budget to more than $12 billion next year, compared to its current annual spending of nearly $6 billion to $7 billion. dollar. The content budget of Amazon Studios, which is managed by Jennifer Salk, is $8-10 billion, and it is expected to grow.

“They decided to build it brick by brick,” Ives said. “I think shareholders want tech giants like Apple and Amazon to build it wisely, not just throw money at any cost.”

However, Netflix’s stumbles gave them a chance. “Ultimately, there was a fear that we would get to the point where the Netflix overgrowth story would come out in the middle of the night,” Ives said. “This is their time to shine.”

Apple is rocking big with Martin Scorsese’s Killers of the Flower Moon. The company recently signed a lucrative deal with technology heir David Ellison, Skydance Media. Amazon is playing “The Lord of the Rings: The Rings of Power,” which is expected to start in September. Amazon and Apple acquired the rights to live sports, dining in the TV and broadcast area.

As always during times of turmoil, there has been speculation rife about whether some high-profile, out-of-the-box film executives might land one of the big tech players.

Amazon has to figure out who will run the MGM movie arm after the departures of Michael De Luca and Pamela Abdi. But Prime Video chief Mike Hopkins is in no hurry, and the names in the rumor mill change from week to week. Apple already has the original film director at Matt Dentler, who reports to Erlicht and Van Amburg.

The big question that remains is whether streaming companies will fully embrace movie theaters. Hopkins said that MGM will increase its slate of theatrical films. Leaders of major movie theaters say there have been discussions with major streaming services to bring more films to the big screen.

Viewers have already put their biggest movies in theaters, but they get very limited viewing and don’t report box office numbers. Going forward, AMC and Regals the World will require tech folks to agree to an exclusive window for movie theaters, which means they won’t be able to put movies on their services until 45 days or so after they hit the big screen.

we will see. Theatrical releases require tens of millions of dollars in marketing and come with reputational risks. It feels bad when a studio tries to turn a movie into a must-see event and the movie blows up at the box office. Tech companies will not dive into this business of their own volition.

“These guys are investing in the growth business,” Galloway said. “They created a growing business.”

As successful as Top Gun: Maverick is, it doesn’t make the theatrical film a business to grow. It’s kind of the opposite of one.

The things we wrote

– The Amber Heard-Johnny Depp trial turned this former Los Angeles attorney general into a YouTube star. Anousha Sakoui profiles Emily De Becker, a former Los Angeles deputy attorney general turned YouTuber whose live commentary has drawn an audience beyond major media outlets like Fox or “Entertainment Tonight” on the platform.

– Caruso vs Katzenberg: The Los Angeles Titans – mayoral candidate Rick Caruso and DreamWorks Animation founder Jeffrey Katzenberg – squabble over “lying” and bullying as the election approaches.

– Powerful brokerage Disney is part of a “gang” that holds the strings in Anaheim, FBI records show. An FBI affidavit published last week identified an unnamed employee of an influential company who was a key participant in a “gang” directing the Anaheim government. Company A is Disneyland Resort, according to a person familiar with the investigation, and the employee is Carrie Noesella, Disneyland’s director of foreign affairs.

– More titles: Landmark theater chain acquires Laemmle’s Playhouse 7 in Pasadena. Hollywood Explainer: How to Get a Job as a Production Designer. After the Netflix layoffs, questions are being raised about its diversity efforts. Former White House Press Secretary Jen Psaki is joining MSNBC this fall.

Absolute Graph Attack: Netflix’s Momentum

Netflix subscriber losses may be beneficial to competitors, according to new data from Antenna, which uses transaction data to measure slowdowns in streaming services. The data lends credence to the idea that Netflix’s slowdown is at least partly due to stiff competition.

The analytics firm found that video streaming services enjoyed increases in subscribers who recently canceled their Netflix memberships. During the first quarter, rival services saw a more than 35% increase over the fourth quarter in terms of new subscribers who canceled Netflix in the last 30 days. Paramount+, HBO Max, and Peacock seem to be benefiting the most from Netflix’s struggles.

week number

“Top Gun: Maverick” debuted at the $156 million domestic box office over the four-day Memorial Day weekend is a win for Paramount Pictures and movie theaters.

This does not mean that theaters are back to full health, but it does mean that there is hope that this will be a healthy business for certain types of films.

The question is whether impractical support films can still work. Judd Apatow was probably right on the “Pivot” podcast when he argued that great movies can still work in theaters, even in struggling genres like comedy. Like in an elite flight school, though, the intermediate level would never cut it.

You must read…

– Angela Foo Explains why BuzzFeed News Union’s contract includes ghost protection. (Poynter)
– Mary McNamara On why Tom Cruise is, in fact, not “the last movie star”. (Los Angeles Times)
– Anthony Bresnikan In the televised future of ‘Star Wars’. (Vanity Fair)
– Jack Hough He raises the case for Warren Buffett’s $2.6 billion investment in Paramount. (Barons)

finally …

Mark Olsen expressed it well when he wrote about actor Ray Liotta, who died last week at the age of 67 and will forever be famous for his “Goodfellas movie.”

“But even in this segment, the actor showed incredible range,” my colleague wrote. Like Henry Hill, who went from arrogant young man in the street to earner of solid income to federal witness, Liotta had the primary danger that would define his character on screen, but he also brought tenderness and fragility—a lost research quality that made an even sympathetic character His actions are often reprehensible.”

“Field of Dreams” is Liotta’s other big role every obituary talks about, but he’s also been great on two recent projects, “Marriage Story” on Netflix and “No Surprise Move” on HBO Max.