While 2023 was a big year for Netflix (NFLX), Disney (DIS) and Warner Bros./Discovery (WBD) (i.e Max), investors need to make sure they aren’t forgetting about Amazon’s (NASDAQ:AMZN) and Apple’s (NASDAQ:AAPL) presence in the world of streaming. While not fully dedicated to content, the companies have made significant strides in the past 12 months that will increase their competitive advantage in 2024 – and not always in the ways you would expect.
First as always, some background.
In a lot of conversations Amazon and Apple still seem like outliers when it comes to streaming entertainment. Amazon will always be better known as a leading e-tailer and Apple will be tied to hardware until the end of time.
Neither will ever be the “biggest” streamer, but that’s also the point.
These companies did not enter this space to challenge Netflix and the like for ultimate supremacy – they entered it because they saw a way to expand and fuel their base. What makes Amazon so powerful is they are a year-long catch-all option for subscribers – movies, music and games compliment the all-powerful free two-day shipping perk. Yes, Amazon has monthly options as well, but they still stick with the full original yearly plan because in many ways it’s still a better deal.
Apple’s approach took that “collection of services” approach and evolved it by going in the complete opposite direction – everything is a la carte. Yes, you can bundle, but they were very careful about what went into each package… some of the more top-tier offerings are only in the most expensive package. Still, combined it can be cheaper than Amazon and depending on which products you want, cheaper than Netflix, Disney and WBD/Max.
It’s really a six of one, half-dozen of the other scenario based on how you want to divide it. Still, both offer things you can’t get with the other big streamers and some of the mid-tier ones like Peacock and Paramount+. In total the offerings from Amazon and Apple and very similar with the main exceptions being Amazon has fast offerings and Apple has a fitness program.
That’s the other misnomer – streaming is not just TV/movies. Streaming encompasses a number of buckets which is why Amazon and Apple have become solid value players.
But yes… movies/TV remain the bread and butter.
The catch with that for Amazon and Apple is that if they can’t stand on the “quantity” side of original content, they need to rely heavier on the “quality.”
And before we go further, you have to only look at “originals” here…acquired content is temporary and ever-changing where originals are more likely to be around for a while. Originals have to become your core, and even Apple, which is often knocked for not going the acquired route, has built a solid roster of originals that merit the cost of a subscription. Yes, they recently (significantly) raised their price…but that’s also because they’ve shown they can and do make solid content that many see as worth the price.
In 2023 we began to see both companies begin to showcase more of that quality and how they will differentiate themselves going forward.
I want to put the focus on Amazon in this piece, but I’d be remiss to not bring in the Apple side as you can see similarities.
With Amazon, it has begun to return to its pre-COVID approach of letting its movies go to theaters pre-streaming. It worked well in the past and was only discontinued due to the pandemic. Remember Amazon became the first streamer to win an Academy Award for a top-tier category with Manchester By The Sea, beating Netflix to the punch as it didn’t snag its first big award until a few years later with Roma.
And both were eventually beat to the punch for the top prize by Apple for CODA – but I’ll get to that in a minute.
While CODA was forced to be “streaming only” due to COVID, bypassing an exclusive window for movies has always been a “thing” for Netflix that drives award voters nuts. Amazon, by including theaters, was seen as embracing the voters which naturally translated into more support and wins.
That was revived last spring when, in a last-minute move, Amazon moved its Air movie – about the creation of the Air Jordan Nike shoes – from stream to screen and saw solid success. The movie’s $20 million second-place box office opening was considered a win because it showed a smarter adult-centric movie that wasn’t in 3D or about super heroes could still perform in today’s market.
Amazon ended the year with a similar announcement around this year’s heavily anticipated Red One project which will re-team Dwayne Johnson with his Jumanji director Jake Kasdan and Fast & Furious writer Chris Morgan. The movie will also co-star Marvel mainstay Chris “Captain America” Evans.
The timing of the announcement also is interesting as this year Amazon’s big holiday movie was Candy Cane Lane with Eddie Murphy, but that went “streaming” only. You have to wonder if Amazon felt they left money on the table by not going theatrical first – a potential mistake they don’t want to make with what they see as a new franchise with Johnson.
With Apple, this year also saw its long-in-the-works deal with Paramount for its Killers of the Flower Moon begin to bear fruit. The arrangement is similar to what Amazon has in place for many of its projects, except instead of self-distributing they teamed with Paramount which gets first window – before it comes to the service. The idea – like with Air – is while the “new” factor is what makes money in the first frame (i.e. theaters) the “buzz” factor is what drives subscription success.
Moon also is well over three hours – so watching from the comfort of your own home may be preferable.
Beyond that Moon is a big awards player and that type of exposure will lure in viewers. And for the millionth time, awards do matter to Apple and Amazon. These are not cheap campaigns to run and that’s because they get results… and if you don’t believe me I’ll again direct you back to Netflix’s own theatrical head who went on record about the value of awards in a WSJ piece a few years back.
The other area here in common is sports and for Amazon, coming off last year’s launch of the NFL’s Thursday Night Football franchise, you can see some added comfortability in the space. This year the company doubled-down on “added” elements such adding different audio-feed options and a full “AI” driven view where machine learning projections are displayed during the game.
That expansion also came into focus towards the end of 2023 as reports surfaced Amazon was looking at bailing Bally’s Sports out of its deal and taking on a full slate of regional games across MLB, NBA and NHL.
As you may remember Bally’s had a rough year which left a lot of their games in flux as they defaulted on the payment for those contracts. Amazon potentially coming in here to take on those cost could be a big benefit. We know Amazon has had success with the NFL and this type of deal would help them grow out that portion of the business even further. It also would allow them to air games from some of today’s top teams and markets – that goes hand-in-hand with the deals they have with the NY Yankees, Brooklyn Nets and Seattle Storm.
Remember sports is a huge difference maker for Amazon and Apple – as both are not simply mirroring a feed from a linear/cable channel. Amazon owns sole distribution rights to Thursday Night Football and Apple owns and created a special platform for Major League Soccer.
These are fully built productions that go beyond a simple simulcast.
That’s the other thing… a lot of these big league deals are locked up for years, but over this year we’ll see a handful come up including the NBA. Currently the league has deals with ESPN and Turner/WBD (with The Finals airing on ABC) but that deal comes due in 2024, and while it’s expected ESPN/Disney will do what is needed to keep them, the jury is out with Turner.
The company has been in cost-cutting mode since David Zaslav took over and while basketball does extremely well for them, it’s a coin flip on what he wants to do. That’s a story for another day, but that story could easily end up that Apple, Amazon or even Netflix pull off a deal to gain rights.
That also may explain why the Amazon deal is facing some resistance in that Bally’s “gesture.”
According to a report by the NY Post, Major League Baseball has rejected Amazon’s deal because part of the ask was for a multi-year deal. MLB would rather just make a deal directly with Amazon when those rights go back on the market in 2025.
In all cases though it really comes down to if the price is right because we’ve seen both Amazon and Apple walk away from “sure thing” deals. Both have seen instances where the cost got to high and the presumed return on investment ended up to low.
You may recall while Apple went after the NFL Sunday Ticket rights it eventually backed out when it saw the arcane rules that come with the package. In other words, if Apple couldn’t shake up the field as it did with MLS it didn’t want to put in the time and money – and rightfully so. What Apple has done this year with MLS is game-changing because it is truly an “all-in” location for soccer fans with no blackouts.
Combine that with the rights to the Super Bowl halftime show and you can see a clearer picture of the company’s goals.
If they can’t evolve an area they’d rather not be in it in the first place.
That type of thinking is what makes them and Amazon such savvy players. You can see the learnings unfold in real-time about what works and what doesn’t.
Specifically at Amazon you can see sports work (live broadcast + sports-centric documentaries), you can see going theatrical first works and you can see people really like the “catch-all” aspect. More importantly though you can see a willingness to pivot toward the consumer’s preferences.
That said, both Amazon and Apple on a three-dimensional board while their other rivals are stuck on a flat surface. While the pair may not be fully in the entertainment/content/programming space they seem to be learning lessons those who are haven’t fully grasped yet.