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Investing

Amazon Goes Crazy For Hollywood

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Updated Published

via Wikimedia Commons
Amazon.com Inc.  (NASDAQ: AMZN) is hoping to take the guesswork out of making hit movies.

According to the Wall Street Journal, the world’s largest Internet retailer is setting up a business called Amazon Studios that will award filmmakers a collective $27 million so they can develop features for major Hollywood Studios.

Filmmakers will be able to submit feature films and scripts to the site where users can review projects and even revise them.  If people seem to like the project, then Amazon will get the film made by Warner Bros., a unit of Time Warner Inc.  (NYSE:  TWX).  Amazon will try other  studios if Warner Bros. takes a pass.

” By exposing the projects to many eyes, Amazon hopes to test out the commercial viability of any single idea before spending significant development money on it,”  the Wall Street Journal says.

On paper, the idea seems crazy.  How will egotistical Hollywood writers and directors respond to feedback from their fellow wannabe Steven Spielbergs?  Moreover, how will credit be assigned if filmmakers use the ideas of the commentators on the website.  It sounds like a series of expensive lawsuits waiting to happen.
The idea of testing out movies on audiences is as old as Hollywood.    But there are just as many stories out there of films which tested well and bombed at the box office and vice versa.  For instance, the previews of the notorious box office bomb  “Ishtar” went well.  Investment bankers have even developed sophisticated mathematical algorithms to help them find the next “Avatar.”  Their track record is mixed as well.
Like it or not,  financing movies is a crap shoot.  Why do you think Hollywood is addicted to tent pole franchises like “Iron Man”, remakes of previous hits and classic television shows?  People like the familiar.  It’s the cinematic equivalent of classic rock, but it’s ultimately unsatisfying.  That’s why it’s hardly surprising that box office receipts fell between 2006 and 2009.
Amazon has repeatedly proven its naysayers wrong.  Investors laughed at the idea that people would buy books without going to a store.  They questioned whether electronic books would ever go far.   Moreover, critics often argued that Amazon never stood a chance against larger rivals such as Wal-Mart Stores Inc. (NYSE:WMT).
The company has proven its naysayers wrong.
Maybe Amazon will conquer Hollywood like it has everything else.  Unfortunately, financing movies is more of an art than a science.  No one really knows for sure why some movies flop and others soar.  People who thought that they have broken Hollywood’s code wind up being wrong. Amazon, though, is so successful that it can afford to get it wrong for a long time.
–Jonathan Berr
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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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