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How Netflix, Amazon & Indie $ Created Sellers’ Market

13 March 2016

From Deadline Hollywood:

The emergence of Netflix, Amazon and outside financiers in the auction process has transformed films and even books into an absolute sellers’ market. After Sundance saw Amazon scoop up numerous titles at premium including the $10M deal for Manchester By The Sea and Netflix post an astounding $20M offer for Nate Parker’s The Birth Of A Nation (he took $17.5M from Fox Searchlight for a traditional prestige theatrical release), we’re seeing the outsider influence in two big auctions going on right now. There is the Will Smith action film Bright, and the David Grann book Killers Of The Flower Moon: An American Crime And The Birth Of The FBI. In the latter case, at least one bidder surpassed $2M for an outright buy and word is this is headed for a $3M+ deal, because it hasn’t finished yet.

. . . .

Let’s take the book deal, first. When CAA put this out for bids, studios and producers loved it, even if it is period, not overtly commercial and execution-dependent. It is a sprawling story, the kind that attracts actors like catnip, and one that could even lend itself to a True Detective-like limited series. So when Deadline revealed the book and its bidders earlier this week, expectations were a nice six- against seven-figures deal. Now, word is that at least one outside bidder has stepped up to over $2M for an outright purchase, and the question will be, does price win this, or elements? And, will a studio pay more than it is comfortable with, to keep a promising project from getting away?

. . . .

It was unclear who the biggest bidder is, so some of this is fast and loose. Rumors pegged AG Capital’s Alex Garcia and Laura Walker while others suggested it was a financier on the James Gray-directed Lost City Of Z (Ascot Elite Entertainment Group?). There are also expectations that Netflix will enter the fray in a bid with producer Scott Stuber (he’s Universal-based, but Jason Blum and Scott Rudin have it for that studio), and PalmStar Media is also in the mix as well. All this could wind up making Killers Of The Flower Moon a book that sells for an enormous sum. For someone covering books for as long as I have, this is reminiscent of the stampede to win rights to The Horse Whisperer, the Nicholas Evans novel that was bought for $3M by Disney and turned into a 1998 Robert Redford film best remembered for launching the career of Scarlett Johansson.

. . . .

So what’s wrong with the economics being driven up by new buyers, when cost-conscious studios crunched deal largesse over the past few years? There is a danger, said one seasoned studio observer watching all this unfold: “The theatrical business, which is important for those of us who love film in theaters, depends on profit and loss. All studios are equal and compete equally in that regard. All of us at the studios have to make a profit. Like Amazon, Netflix does not have to make a profit. For them it’s all about their valuation on Wall Street, which comes only from the number of subscriber growth. So they actually have no P&L on individual projects. They can pay whatever they want. This is how Amazon drove every bookstore out of existence. Netflix wants to destroy the theatrical ecosystem. I admire them for it, from a business school standpoint. It’s true disruption. But, long term, the art form will suffer.”

Link to the rest at Deadline Hollywood and thanks to Judith for the tip.

Amazon, Books in General

21 Comments to “How Netflix, Amazon & Indie $ Created Sellers’ Market”

  1. “All studios are equal and compete equally in that regard. All of us at the studios have to make a profit. Like Amazon, Netflix does not have to make a profit.”

    Which shows the true roots of their problem. Not every movie attempt pans out, some bomb, not all ‘make a profit’.

    They’re just upset that there are more players bidding, much as trad-pub is upset that indies can bypass them in getting to their readers …

    • It goes back to trimming the overhead to increase the profit.

      Though personally, I like how the unnamed studio observer accidentally admitted that the studios do profit form every movie. Just like the trad publishers. 😀

    • “All of us at the studios have to make a profit.”

      Wait: isn’t it notorious that no Hollywood movie ever “makes a profit”, at least if you’ve signed any deal that gives you a share of the profits?

      Hollywood accounting is infamous for its lack of connection with objective reality. Heck, there’s even a Wikipedia article about it.

      https://en.wikipedia.org/wiki/Hollywood_accounting

      🙂

      One of the examples given in the article is Return of the Jedi. $475 million at the box office. $32.5 million budget. According to Hollywood accounting, it has never shown a profit.

  2. Sigh. Looks like PG needs to add “NDS” to his acronym list…

  3. I can’t read about some of these fights without irritation. Here in rural satellite internet land, with capped download capacities, the world of streaming video movies might as well be in another star system.

    At least I can eventually get disks from Netflix. But not Amazon. Everytime I see an Amazon Video ad, my blood pressure rises. I’m a Prime customer, I spend thousands on Amazon yearly, and I’m nothing to them in this area. When they get an exclusive, I’ll never, ever, get to see it.

    • Alas, it’s an infrastructure issue snd Amazon isn’t in the broadband business. Yet.
      Until they do there isn’t much they can do.
      Your best hopes lie with Google and the success of Project loon. It’s underway.

    • To be fair, I’m not sure what Amazon could do about your inadequate internet access. That said, cable in this country is the monopoly everyone should actually be worried about. However, it is slowly destroying itself through the industry’s unwillingness to face reality.

      Meanwhile, one of the candidates (I think Bernie Sanders) mentioned how far behind the US is in terms of broadband, and the issue was blown off. Every candidate should be on board with making the internet more accessible in America.

      • I think she’s saying that if you can’t really get Amazon Prime Video or Amazon Underground because of lack of broadband Internet access, and they’re making Prime more expensive to pay for these new services, there should be a non-broadband option that is a cheaper Prime.

    • It’s probably a little late to answer this….

      Every time you’re in a town with Internet, or at McDonalds with Internet along the highway, or whatever, you can use their wifi internet to download and save Amazon Prime Video onto your tablet/phone/laptop. (Or your desktop, should you haul that along.)

      You will have three days to watch whatever you download for free.

      If you buy whatever it is, you can keep it forever. (Although in that case, you might as well buy it on DVD/Bluray.)

      Of course, it is possible that you might get your download kinda screwy, but it’s at least one way to do it.

    • check for wireless Internet in your area. I pay for Internet for my Sister who lives in rural Michigan and they are surprisingly cheap for someone who lives out in the middle of nowhere (they live two miles outside of the nearest ‘village’, about a 30 min drive from the nearest ‘town’)

  4. I wasn’t aware Amazon had driven every bookstore out of existence. I guess those thousands of ABA members are just faking it.

    Such angst!

    The studios have been squeezing Netflix for higher fees and less exclusives. Did they think they wouldn’t react?

    People in old media have… odd… perceptions. The things they do are by definition good and proper no matter the pain they inflict on others. But let them be even mildly challenged or inconvenienced and it’s “Crisis time!”

    Like, nobody griped when Penguin and RH shacked up, reducing the number of bidders for manuscripts putting control of a quarter of the US trade book business in the hands of one company that can decide what gets published or not and who gets payola support and who gets to sink or swim with no support. But let one retailer get enough market share to be able to stand up to the cartel and suddenly it’s “Boo hoo, government save us!”

    Puh-lease!!

    I know they’re not going to shrivel up and die anytime this century but I would lovd to live long enough to see the authopsy when the whole rotten system falls apart.

  5. Disruptive innovation fells another industry – and the old-timers are crying foul. News at 11 – oh, no, right now.

  6. The problem with that is that it assumes the studios are ONLY in the business of movies… and this isn’t true. Universal, for example, also has a theme park and TV and a load of other things. Many studios make money off of their products that are distributed by Netflix and Amazon… just like books.

    Studios have their fingers in many, many pies… so while a movie can fail, it doesn’t mean the movie failed, per se…

    Netflix is challenging them on original content, on TV, and that’s interesting, but Netflix still doesn’t do theatrical distribution, which is very different…

    In fact, BIRTH OF A NATION (the Sundance fave) was hotly pursued by Netflix and others, but eventually the producers went with another company for lower prices because they specifically wanted theatrical distribution guarantees…

    So right now, no one really knows, but whomever it was that’s quoted in that article is just demonizing Netflix like Big Pub does to Amazon… p****** on them, while at the same time taking their money…

    More financiers buying more product and making it widely available is a good thing for consumers, imo.

  7. New players and money involved and new ways of viewing. Wow. That’s never happened before.

    “This is how Amazon drove every bookstore out of existence.” Huh, still got a Barnes and Noble here and indie bookstores are making a comeback as the megachains vanish and fade. Most of the damage done to indie bookstores was done by the megachains and the complicity of publishers, before Amazon even existed.

    And, yeh, profits, in Hollywood? Guess that’s why only naives ever sign for a percentage of profit. Get the money up front and run.

  8. ‘ … This is how Amazon drove every bookstore out of existence. Netflix wants to destroy the theatrical ecosystem …’

    I smell Special Snowflake Syndrome.

  9. How come every time one of these established industries faces sharing a tidbit of the revenue, they get all waily-waily about “art”?

  10. “It’s true disruption. But, long term, the art form will suffer.”

    Wrong. If it goes the way ebooks is going – with an explosion of subgenres – it means that tentpoles might fail. It feels to me like Hollywood only does remakes of remakes. I have Netflix and I like some of their quirky series. I had Hulu and liked some of theirs. They were different that the typical network fare, thank heavens!

    I think it means that more stories in general will get air time. Like the plethora of good indie books out there now. Netflix and Amazon need to take a different path than the established studios and networks and that should be good for the “art form”.

  11. It’s true disruption. But, long term, the art form will suffer.

    They said this about TV. Cable. VCRs. The Internet.

    Movies, perhaps, have suffered in quality as Hollywood chases ever more profit. But I think the disruption in TV has given us a new golden age of choice and quality in shows.

  12. Netflix doesn’t have to make a profit????

    Since when? Eventually, if they don’t make a profit they don’t meet payroll. Their ISP bills have to get paid as well.

    They are long past the point where Investor money will pay the bills.

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