How Amazon Buys and Licenses Independent Films

Amazon

Amazon Studios is growing its global reach with strong industry relationships and deference for traditional distribution practices.

This low-key strategy is fostering allies instead of enemies.

Unlike Netflix’s constant posturing as a disrupter, which no doubt they are, Amazon Studios is quietly securing output deals with international distributors and acquiring films at every major market, including Cannes.

Meta Strategy

Amazon, the e-commerce giant, started fully financing films several years ago to feed its Prime Video streaming service, which first launched outside the US in late 2016.

In a nutshell, Amazon’s overall strategy is to maximize the number of territories that films are distributed in to ensure the widest possible theatrical release. This approach creates more visibility once these films are available around the world on Amazon Video.

Amazon operates like a mainstream production company by working within the established confines of international sales and distribution.


Market Buyer

As a buyer, Amazon is primarily interested in acquiring worldwide rights instead of individual territories. There is no indication this will change anytime soon.

This all-or-nothing method makes it difficult to acquire visible market films, since many have already been presold in multiple territories. However, Amazon is willing to settle for remaining territories on highly sought-after films.

This was the case for Amazon’s most successful film to date, The Big Sick. The company signed several territories at Sundance in 2017. Beyond the US, Amazon Studios acquired rights in the UK, Germany, Spain and Japan, among others, and then licensed all-rights to Studiocanal in the UK, Weltkino in Germany, Inopia in Spain and Gaga in Japan.

What makes Amazon different is that for each territory listed above, they licensed back the streaming rights and continued to work closely with the distributors on marketing and releasing.

For the 7-10 films that Amazon Studios releases per year, they will license all the rights (PayTV, SVOD, etc.) to international distributors to create the incentive for maximum box office receipts. Amazon then licenses back the streaming rights based on box office performance-based rate cards. Download rate cards for Netflix in the US and iQiyi in China with the China Netflix Series.


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Market Seller

Amazon Studios also relies on a traditional approach for films they develop and produce in-house.

The company has built a strong relationship with FilmNation to act as its primary international sales agency. This working partnership started at Cannes in 2016 when they teamed up on Wonderstruck and The Wall. Although not an exclusive relationship for the time being, Amazon is not actively working with any other sales agencies, which is an obstacle and an opportunity.

Amazon is also signing output deals with international distributors, which could eventually conflict with its sales agency deal with FilmNation. The first announced deals include with Transmission in Australia and New Zealand, Scanbox in Scandinavia, Gaga in Japan and Telefilms in Spain and Latin America.


North American Strategy

From the outset, Amazon followed a traditional approach to theatrical distribution in North America. The company partners with Roadside Attractions and Lionsgate to handle releasing and marketing. However, more recently Amazon is exploring domestic self-distribution.

Amazon was likely already contemplating self-distribution prior to rumors that Lionsgate was for sale. However, given this eventuality, Amazon likely wouldn’t want to get stuck with the highest bidder.


Customer Approaches

Besides the contrasting business model approaches between Amazon and Netflix, both companies have entirely different customer objectives.

Amazon uses its streaming service as a value-add for its existing 100 million free-shipping subscribers.

If Amazon stopped providing films and television altogether, or only provided content that they produced in-house or acquired, customers wouldn’t likely cancel the service. Amazon’s customer loyalty is based on free shipping for everyday items not the streaming platform.

However, this could be much different if Netflix ceased providing third-party content as studios and large distributors build their own streaming platforms.


Final Take

Amazon and Netflix share the same technology, and in many cases the same subscribers, but both have diverse approaches to building distribution and production relationships.

Netflix is using junk bonds to buy into content relationships, which is fueling a spaghetti-against-the-wall approach to development. The company is not afraid to isolate parties that won’t bend to their will. On the other hand, Amazon relies on traditional business practices to foster greater corroboration with independent film gatekeepers.