Sony, Alamo DraftHouse & The Value of Being Sub-Scale, Dynamic and Product-Oriented
With Sony’s acquisition of dine-in movie theater chain Alamo Drafthouse, we have entered a post-Paramount Decrees world. The 1948 Paramount Decrees prohibited studios from owning theatrical distributors. The practice was a problem when theaters were the only distribution option for movies. Vertical integration made it all but impossible for smaller theaters to compete. A federal judge ended the decrees in 2022 at the request of the Department of Justice.
Sony announced the acquisition “reinforces [Sony Pictures Entertainment’s] long-held commitment to theatrical exhibition and continued initiatives in experiential entertainment.” Alamo is a chain of 35 smaller cinemas, whereas AMC Entertainment owns and operates 900 theatres and 10,000 screens worldwide. The question is what this small-scale bet from Sony will mean in practice.
I wrote last month that “theaters are consumer touchpoints that price 'big IP' independent of the existing relationships consumers have with each company via streaming services and theme parks.” Technology-first platforms like Netflix and Amazon help consumers to stretch their dollar across more offerings. Netflix includes gaming with no ads and no in-app purchases as part of a membership. Amazon Prime offers free tickets to its members for exclusive advance screenings of Amazon movies and series at AMC Entertainment theatres. If Sony offered something similar, that “would go a long way to driving more attendance at the theaters" at a time when annual ticket sales are at barely half of pre-pandemic levels.
But, unlike Amazon (200 million Prime members) and Netflix (271 million members), Sony Pictures Entertainment does not have a subscriber base at an extraordinary global scale. It mostly gave up on streaming in 2019 when it sold a majority stake in ad-supported streamer Crackle. Instead, it owns Crunchyroll, a niche service for fans of anime with over 13 million subscribers worldwide. In the Crunchyroll model, these fans are monetized across a portfolio of distribution options like theatrical releases of new anime content, sales of home entertainment products (e.g., DVD box sets), licensing and secondary distribution.
Against the backdrop of Sony’s Hollywood competitors struggling to figure out viable subscription streaming models, an important question looms: Why is the lone major Hollywood studio to bail on streaming now the first to connect the dots between traditional wholesale and newer digital retail media business models?
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✅Key Takeaway✅
The best foundations for dynamic, growing media businesses in a consumer-first, retail-first media marketplace are agnostic to the objective of achieving scale in any one vertical. Instead, they achieve a smaller scale across multiple distribution channels.
#sony #netflix #primevideo
