Apple's 'Killers of the Flower Moon' highlights tech giant's film strategy shift

Apple (AAPL) wants to hook more viewers to its streaming platform — and it's using the big screen to do it.

Martin Scorsese’s new film "Killers of the Flower Moon," which was produced by the tech giant and distributed by Paramount (PARA), debuted in theaters this past weekend. The movie represents a strategic shift for Apple as the company more heavily leans into theatrical exclusive titles — films exclusively distributed in movie theaters, usually for over a month — to drive subscribers to its flagship streaming service Apple TV+.

In 2021, the movie industry deployed multiple experiments to combat the pandemic, primarily through hybrid streaming releases where a film would debut both in theaters and through streaming platforms.

That was the case for 2022 Best Picture winner "Coda," which Apple acquired for $25 million at the 2021 Sundance Film Festival. The film had an incredibly limited theatrical release in the US, debuting in just about 100 theaters, while simultaneously appearing on Apple TV+.

But studios including Apple have largely reversed that strategy as media companies more heavily favor lucrative box office dollars to subscriber numbers — the exception being Netflix (NFLX), which has committed to streaming-only releases.

That means the return of the exclusive theatrical window, or period when theaters have the exclusive rights to a piece of content. Post-pandemic, that window has settled at around 45 days.

"This certainly signals a transition period for [Apple] in terms of how they're going to approach content, especially with big prestigious productions and A-plus list talent like Leonardo DiCaprio and Marin Scorsese," Shawn Robbins, chief analyst at Boxoffice Pro, told Yahoo Finance.

The film, which was distributed by Paramount (PARA), notched $44 million in its global debut this past weekend — a lukewarm opening considering its estimated $200 million-plus price tag but still a notable feat given its long runtime, coupled with the ongoing actors strike.

The movie will eventually air on Apple TV+ once its theatrical run is complete, although the company has yet to reveal when that will be.

"Studios have certainly remembered how valuable that theatrical window is — and that includes new players like Apple," Robbins said.

'A win-win'

Apple has pledged to spend $1 billion producing movies for theaters. That bet, which includes upcoming titles like Matthew Vaughn's "Argylle" and Ridley Scott’s "Napoleon," matches rival Amazon (AMZN), who formulated similar plans to invest in box office releases last year.

Amazon closed its $8.5 billion deal to acquire MGM in March 2022 and saw major success with the release of "Creed III" earlier this spring.

"Both companies recognize this is a big part of where their bottom lines can lean on in terms of theatrical representation, and eventually, that's going to help their streaming libraries down the road," Robbins said, noting box office releases often serve as the first window of profitability for films.

"It's a win-win to be able to embrace both sides. ... Theatrical films still stand out in a way the streaming titles don't," he added.

Another benefit for Apple lies within its various revenue streams, with the bulk of its revenue stemming from iPhone sales — not the success of its films studio.

"Unlike other studios, this is a smaller piece of the pie for Apple," Robbins said, explaining that luxury of flexibility allows the company to experiment with different types of distribution windows and even different types of films.

"This is a very risk-averse industry," the analyst continued, noting a company like Apple is often more appealing to A-list actors and directors who'd prefer to pursue more passion projects as opposed to big blockbuster films. "Apple has historically proven itself to be one of those companies that takes risks."

One company that has yet to embrace the box office boom is Netflix (NFLX). Instead, the streamer has taken on the exact opposite approach.

"We are in the business of entertaining our members with Netflix movies on Netflix, so that’s where we focus all our energy and most of our spend," Netflix co-CEO Ted Sarandos said during a company earnings call last year. The platform has yet to pivot from that stance.

Netflix has played some original features in theaters, including 2018 breakout hit "Roma," along with more recent films like "The Gray Man," "The Irishman," and "Don't Look Up." However, those debuts had very short theatrical windows with much more limited releases than "Killers of the Flower Moon."

"At this point, Netflix feels more and more like a minority out of the major streamers in terms of how they're approaching their big production feature films," Robbins said.

But avoiding the theater is a strategic play for Netflix, too, with its management team consistently reiterating the box office does little to help its streaming-first mission.

"Driving folks to a theater is just not our business," Sarandos previously said. "Having big new desirable content drives value for our members and drives value for our business."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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