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On The Town with Matthew Belloni, NATO President & CEO Michael O’Leary touched on a wide range of topics — industry momentum heading into 2025, NATO’s new “Strength of Theatrical Exhibition” report, windows, among other important issues — as he and Belloni discussed the current state of theatrical exhibition.

Here is the full article from Puck:

Amazon’s Christmas Theater War

Deploying Dwayne Johnson’s ‘Red One’ to Prime Video after only 27 days has angered the theatrical industry and raised a pertinent question that will define this next hybrid era: Can Amazon leverage movie theaters more than theaters can leverage Amazon?

Matthew Belloni

December 20, 2024

Question: Do you consider Amazon a friend or foe of movie theaters? Gotta be a friend, right? For most of this year, Prime Video and its studio division have been positioning themselves as a savior of sorts to the theatrical industry, with plans to release dozens of big-budget movies in cinemas over the next few years. Amazon certainly pitches its theater plans when it’s trying to lure projects from Netflix and other buyers. And if you talk to theater executives, they’re counting on Amazon’s ambitions to compensate for pullbacks elsewhere, particularly in non-“event” films.

But, man, Amazon is a huge question mark, one whose motives and ambitions will be a driving narrative of the movie business in 2025. Consider what’s going on with Red One. Amazon MGM Studios has been jumping up and down to declare the Dwayne Johnson–Chris Evans holiday movie the most viewed in the history of Prime Video. Not mentioned in those press releases: The $250 million Santa kidnapping extravaganza landed on the service just 27 days after a theatrical debut that was buoyed by a massive, $100 million marketing campaign. That’s a dream for a film studio, which can reap the benefit of the same ad spend to lure butts to seats and eyeballs to TV screens. But it’s a far more compressed window from multiplexes to subscription streaming than is typically tolerated by theaters. If Netflix, for instance, proposed such a release schedule for a wide release, the major chains would likely extend a double middle finger and refuse to play the movie. 

Amazon distribution chief Kevin Wilson notified the big chains in advance of the short window on Red One. And, faced with a strike-hobbled slate of Hollywood fare, they agreed to take the film, which has so far grossed $94 million in North America—pretty poor, given its cost and the full-freight marketing. Despite acquiescing, however, the theater owners weren’t thrilled about this arrangement, per multiple sources, especially if it portends how Amazon will act in the future. Nor was Michael O’Leary, the head of the National Association of Theatre Owners, the lobbying group for exhibition. “I don’t think that is a sustainable model,” O’Leary told me this week. “I can tell you it’s not a sustainable model. It’s not one that we would support.”

Granted, Red One was in a somewhat unique situation. Originally greenlit for streaming, Amazon then followed industry sentiment and shifted toward theaters for big-budget titles. That meant a November 15 theatrical release, bypassing premium video-on-demand, and going direct to Prime Video on December 12, just in time for the Christmas deluge, putting it up against the Lindsay Lohan and Chad Michael Murray holiday dreck on Netflix, the Hallmark/Lifetime fire hose of Bulgaria-shot cheapo fare, and Elf on whichever platform will pay Warner Bros. some quick cash. Against this competition, Red One has been huge. Not a shock. 

But it is a cheat, and a big pivot from what the traditional studios are doing. Universal, which was first to break the 45-day theatrical window during Covid, initially put movies on P.V.O.D. after 17 days, if they opened to less than $50 million (31 days for bigger movies), then to Peacock after 45 days. Now Uni typically holds movies a little longer, waiting 75 to 120 days before going to Peacock. Movies like Conclave from Focus, its specialty label, still arrive on Peacock after around 45 to 60 days.

Other studios use flexible formulas, usually based on how the films perform in theaters. Warner Bros.’ Beetlejuice Beetlejuice, a hit in the U.S., appeared on P.V.O.D. after 33 days, then landed on Max after 92 days. Horizon: An American Saga: Part One, which was, uh, not a hit, went to P.V.O.D. after just 19 days, but still waited 57 days to premiere on Max. Disney, for its bigger movies, maintains a 60-day theatrical window before sending movies to P.V.O.D. or S.V.O.D. platforms.

Disney is the biggest theatrical player, and it also doesn’t market any other windows until more than six weeks after the release in theaters. That’s key, because moviegoers who use Fandango or other ticketing platforms will sometimes be presented with an option to buy a seat at their local theater or a rental for the same movie when it’s available—often mere weeks or even days later. Given the ancillary costs and hassles of a theater experience, it basically begs for a cost-benefit analysis—How much do I really want to see this movie now?—that’s not great for theaters, of course.  

Anyway, for O’Leary and the theater owners, there’s a big difference between P.V.O.D. (the higher-priced, individual film rentals) and electronic sell-through (iTunes and other film purchases)—both of which are premium offerings with relatively small reach—and the massive S.V.O.D. services, like Prime Video, which boasts more than 200 million customers worldwide, many of whom consider the platform “free” with Prime shipping. For that reason, sending a movie to Prime Video after 27 days is much different than even, say, offering it to P.V.O.D. after 17 days. “I had conversations last week with the folks at MGM-Amazon and have made it very clear that we understand the circumstances about Red One, but as an industry, we can’t support something like a 25-day window where it goes directly to a streaming service.” (Amazon declined to comment on those talks.)

Lines in the Sand

Okay, but what, exactly, can the theaters do about this? After all, Amazon would argue that three weeks of exclusivity in theaters is better than zero weeks, and the $94 million Red One has generated domestically is money the theaters would forgo if they drew an arbitrary line in the sand. Most movies have all but exhausted their earning potential after four weekends in theaters, anyway. And even if not, Red One remained on 3,000 screens last weekend despite appearing on Prime Video, and it still generated $4.4 million in U.S. ticket sales. Would it have grossed more if it wasn’t available at home? Maybe. But probably not much more. 

Courtenay Valenti, Amazon’s film chief, joined the traditional studios in preaching to the Times this week about how theatrical releases boost viewership on streaming. That’s true—and obvious, given the large marketing spends attached to the theater push. It’s why the industry—Netflix excepted, of course—has mostly retreated from the Covid-era strategy of making pricey movies for streaming only. But the shorter the window in theaters, the bigger that boost for streaming, and that’s what Valenti cares most about, right? Her incentive is to leverage the theaters for her actual business: a global streaming video service that ultimately allows Amazon to sell more toilet paper.

Interestingly, it’s also true that several titles this year, particularly kids’ movies, have held on in theaters despite being available at home—albeit on P.V.O.D., not S.V.O.D. Universal, in particular, notes that it saw little to no cannibalization on Twisters, Despicable Me 4, and The Wild Robot, all of which did decent business in theaters even while available to rent or own. At the same time, the P.V.O.D. window has accounted for $1.5 billion in consumer spend on Universal movies since the model was retooled during Covid, according to the studio. That money helps cushion the blow from flops and pay for more potential blockbusters… to play in theaters.

But that’s kinda not the point, at least not when it comes to the widely available S.V.O.D. platforms. Short windows may not cannibalize individual titles like Red One, but they train audiences to expect speedy delivery to the streamers, which in turn depresses demand for theatrical movies in toto. That was a general lesson of Netflix and all the Covid-era experimentation, and it’s why these non-Netflix studios are maintaining their longer S.V.O.D. windows for movies that have a shot at a theatrical audience. (I’m excluding tiny indies here… and don’t get me started on Lionsgate and its aggressive P.V.O.D. windowing.) Pay a high price for movies in theaters, pay a higher price for movies on demand a few weeks later, or pay only your S.V.O.D. subscription price when the movie arrives there way later: That seems to be a sweet spot compromise for meaningful theatrical releases that both sides can live with.     

So, if Amazon attempts to pull a Red One move with Red Two: The Easter Bunny’s Revenge or another big-budget release, would the major theaters refuse to play it? “I do not believe that you are going to have great receptivity to a situation where you’re going straight to an S.V.O.D. after 25 days,” O’Leary told me, choosing his words carefully because he can’t speak for individual members. “I don’t think that is going to be something that will work on a repeated basis. And I’ve conveyed that to the folks at MGM-Amazon.”

The Apple Question

Oof. And remember, theater owners consider Amazon one of the good guys. At the CinemaCon convention earlier this year, Amazon MGM Studios put out a press release with Valenti saying that by 2027, she will release 14 to 16 movies a year that “demand to be seen in the theater.” That would more than triple the Amazon MGM theatrical output this year. Mike Hopkins and Jen Salke, the top Amazon content executives, are expected to attend CinemaCon in March, where Amazon MGM will present to theater owners for the first time and explain why the world’s largest digital retailer really cares about the brick-and-mortar theater experience. It’ll be interesting to see.

Apple, on the other hand, isn’t even pretending to care about movie theaters anymore. O’Leary still calls Apple a “partner,” though he’s as nervous as the rest of his members about this summer’s move to scrap the theatrical release for George Clooney and Brad Pitt’s Wolfs. “When decisions are made that impact the theatrical window after the movie is somewhere in the process, that’s not a positive and constructive way to move forward,” O’Leary told me. “So that has certainly been conveyed. But I also think that they are putting a lot of time and energy and resources into F1.” That’s true, but after that release via Warner Bros. next summer, what then?

Now that the Hollywood studios have, for the most part, reprioritized theaters (unless you’re Clint Eastwood), and Netflix has declared itself a platform for pricey TV movies (unless you’re Greta Gerwig), windowing remains the real battleground. Amazon hasn’t articulated its general theaters-to-Prime Video policy, but if the cheerleading for the Red One numbers is any indication, the strategy will be aggressively weighted toward using theaters to power streaming as quickly as possible. 

For multiplex owners, the last thing you want is for the theatrical release to become a quasi-marketing play for streaming—something designed only to reimburse prints and advertising expenses and provide an imprimatur of “theatricality” in service of the home video release, like how film festivals and their fancy logos are leveraged by prestige movies to connote an aura of quality.

Amazon may be positioning itself as the friendly neighborhood streamer to the theater industry, but like Netflix and Apple, it ultimately cares only about its global streaming ambitions, not its ability to make money in a declining business. And that incentive isn’t changing, despite the “commitment” to the multiplex. The question is whether Amazon can leverage theaters to achieve its actual goals more than the theaters can leverage Amazon to serve theirs, and what victory looks like for both sides.