The Incredulous Profit And Loss Of Amazon Studios

In the new world of entertainment, technology companies have changed the game.

Whereas traditional studios and indie distributors often look at a film as its own profit-and-loss statement, estimating what they can pay to buy it, market it and release it and how much they expect to get back…technology companies on the other hand seemingly have a much different metric.

Take Netflix for example.

Spending $10 million on a documentary like American Factory or $180 million on a Michael Bay movie like 6 Underground may not directly drive actual profit dollars, but if having those movies cause a certain number of subscribers to not cancel their memberships, churn out, or better yet…attract new ones? Well, then those dollars are perfectly reasonable to spend, as far as they’re concerned.

Of course, Netflix still isn’t profitable (yet), so take that for what it’s worth.

But what about Amazon Studios?

While, in the beginning, they opted to hire other distributors to release their movies (to pretty decent success, a la Manchester By the Sea), they eventually chose to steer the ship themselves starting in 2018. At that point, they built their own internal distribution and marketing teams to handle the films they were bankrolling, acquiring and releasing. And as a part of that, at recent film festivals, under the leadership of Film & TV Chief Jennifer Salke, they spent close to $50 million snapping up films for their release schedule. There was no question they were hungry to control their own fate.

But how exactly did their fate actually turn out?

We decided to crunch the numbers, looking at what they paid to film or acquire films (with links to the articles calling out those numbers or ballpark numbers), then estimated what they spent to market those same films utilizing well known data in the trades or data that was provided to us by those in the know, behind-the-scenes, or who worked directly on these projects doing marketing, grass roots, publicity, social media marketing and the like. Our goal here was to see…after all they spent, did they make any profit or did it land them in the red.

Before we make any determinations, why don’t we look at the numbers, courtesy of Box Office Mojo:

Amazon Studios Self Released Titles: Budget/Cost (P&A Cost)

Wonder Wheel (2017): Budget $25 million ($30m)
You Were Never Really Here (2018): Purchased for $3.5 million ($5m)
Don’t Worry, He Won’t Get Far on Foot (2018): Budget $3.5 million ($5m)
Life Itself (2018): Purchased for $10 million ($30m)
Beautiful Boy (2018): Budget $25 million ($30m)
Suspiria (2018): Purchased estimated at $5 million ($3m)
Cold War (2018): Rumored purchase price at $4 million ($15m)
Peterloo (2019): Purchased for half of ($21m) budget at $10 million ($3m)
Photograph (2019): Estimated purchase at $1.5 million ($2m)
Late Night (2019): Purchased for $13 million ($35m)
One Child Nation (2019): Purchased for high-six figures; $900,000 ($2m)
Brittany Runs a Marathon (2019): Purchased for $14 million ($20m)
Honey Boy (2019): Purchased for $5 million ($5m)
The Aeronauts (2019): Budget $40 million ($5m)
Invisible Life (2019): Estimated purchase at $1.5 million ($2m)
Les Miserables (2020): Purchased at $1.5 million ($2m)
Seberg (2020): Budget $8 million ($3m)

Total Spend on Amazon Studios Title Budget: $164 million
Estimated P&A Spend: $197 million

Total Investment in Amazon Studios Slate to Date: $361 million

Total Box Office: $51,548,969

Total Box Office to Amazon (40% of Gross): $20,619,587

So. Amazon Studios spent (with a 5% +/- margin of error) over $360 million to generate around $20 million in net cash back to them in the theatrical window, or a return of 5.555%. For those who aren’t in the know, studios often generate anywhere from 38-45% of the theatrical box office, depending on how successful a film may be for exhibitors. In this case, we’re using 40% to calculate.

But that’s just theatrical. What about everything else that comes after the theatrical window; realizing of course that some of Amazon Studios movies had barely a theatrical window at all or they didn’t report any numbers (read: The Aeronauts, The Report, et al).

The digital and ancillary windows, remembering of course that in some scenarios Amazon doesn’t even make their films available to buy and rent on their competitors’ stores and puts them straight to free-to-watch on Prime Video, often represent about 60% of the overall lifetime revenue. For this exercise, if we assume that the box office of $20 million is just 40% of the overall lifetime revenue, then that means that Amazon Studios’ overall take for this entire slate should land somewhere in the $50 million range (theatrical + ancillary). When you subtract that from the overall spend (acquisition, budget and P&A), they’re still losing about $310 million dollars since they started this whole experiment back in 2018.

So. Is that good?

Does Amazon Studios consider a $310 million dollar loss as the “cost of doing business”? Do they believe that these movies drive more Prime members to buy protein bars and adult diapers? Do they generate more deals with more talent because they spent more money on previous releases? Does a Late Night media blow-out allow for them to get another high profile movie because the talent sees how much they spend?

In any other standalone entertainment business, a $310 million dollar loss is a career killer, not to mention a company killer. Just look at Relativity. But for technology companies, $310 million is just a drop in the bucket. When your stock price is (still) trading for over $1500 a share, something like $310 million isn’t generally an issue.

But if you’re Jeff Bezos, you don’t wanna even lose $100 million.

Rumor has it, there have been many a time over the last year or two when the big finance dudes from Seattle found their way back down to Culver City to ask questions. Just why these movies? Why spent that? The team at Amazon Studios is going to get a Megan Ellison smackdown if they’re not careful.

Or perhaps they’re getting one now, as you read this.

Because $310 million?

That’s gotta hurt.

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