Amazon.com Rips Up Netflix's Playbook

By Markets Fool.com

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Netflix may be dipping its feet into backing full-length features later this year, but Amazon.com is doing a cannonball into the bathtub.

The leading online retailer announced on Monday that it's going to start producing and acquiring original movies ahead of their theatrical release. The goal for the new Amazon Original Movies offering is to put out a dozen films each year. Now, it's not as if Amazon's going to break the bank here. CEO Jeff Bezos doesn't have a problem spending a lot of money now for something that will pay off later, but the dot-com giant is taking a realistic low-budget approach here, reportedly eyeing indie flicks with production budgets in the $5 million-$25 million range.

Netflix isn't exactly ignoringfull-length theatrical features. In fact, it beat Amazon to the punch. Netflix turned heads last year by announcing a four-movie deal with Adam Sandler that will play out in the coming years. It also struck a deal to bringCrouching Tiger, Hidden Dragon: The Green Legend-- the sequel to Ang Lee's wire-fu masterpiece -- to its streaming subscribers this summer at the same time that it hitsIMAX. Traditional multiplex operators will be sitting this one out, and it's easy to understand why exhibitors are laying low. How many people will pay up to see a first-run movie when that same ticket could buy more than a month of Netflix for an entire household?

The battle between Netflix and movie theater owners is not going to be pretty, and it's also why Amazon's brazen plan for what amounts to monthly movies has a strong chance of failing.

The silver stream
Amazon's plan is gutsy. It has hired a seasoned industry vet with a nose for hot indie projects to smoke out low-budget sleeper hits, but that's not easy these days. Everyone's attending the same film festivals, bidding up the buzz-worthy screenings.

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The bigger challenge may be Amazon's even more ambitious plan to shorten the window between a film's theatrical release and when it becomes available at the retail market. The goal of Amazon Original Movies is to make movies available to its Amazon Prime members -- at no additional cost -- just four to eight weeks after hitting the theater. Most movies can take nearly a year to hit the DVD, on-demand, and digital streaming markets after making their big screen debuts.

It's this window-tightening move that may ultimately doom Amazon's plan. After all, there won't be many exhibitors willing to screen low-budget movies that they know will be freely available online for tens of millions of Amazon Prime customers a month or two later. Moviegoers also aren't very likely to head out to catch them. Why would they when they know that they can watch them in the comfort of their own home -- legally -- a few weeks later?

Even if Amazon Original Movies lands on a hit -- and that could very well happened with an indie mogul Ted Hope on the lookout for movies and 12 shots a year to swing for the fences -- it will probably still fare poorly in its theatrical stint.

"Movie theatres are upset with us because they see that if everyone gets the choice they might actually enjoy it at home," Netflix CEO Reed Hastings toldThe Telegraphlast year in discussing the move to get behindCrouching Tiger, Hidden Dragon: The Green Legend.

The same sentiment applies to Amazon here. Exhibitors are unlikely to buy in with a move that nudges them one step closer to obsolescence, and that will limit the buzz that the films will ultimately receive on Amazon's nascent digital platform.

The article Amazon.com Rips Up Netflix's Playbook originally appeared on Fool.com.

Rick Munarriz owns shares of Netflix. The Motley Fool recommends Amazon.com, Imax, and Netflix. The Motley Fool owns shares of Amazon.com, Imax, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.