AMZN Amazon.com Inc

By Ben Fritz and Laura Stevens 

America's biggest online retailer is now the first internet company to earn an Academy Award nomination for best picture.

Little more than a year after launching its original movies business, Amazon.com Inc.'s drama "Manchester by the Sea" earned six Oscar nominations Tuesday, including best picture.

The film's nominations included two for writer and director Kenneth Lonergan; and for lead actor Casey Affleck; supporting actress Michelle Williams and supporting actor Lucas Hedges. The Iranian drama "The Salesman," for which Amazon also holds U.S. distribution rights, received a nomination for best foreign-language film.

Amazon bought the distribution rights to "Manchester," a somber drama about recovery from grief, at last year's Sundance Film Festival for $10 million. It was the second-costliest acquisition of the 2016 event.

The e-tailer has also made the biggest acquisition so far of this year's Sundance: $12 million for comedy "The Big Sick," according to a person close to the deal.

Both purchases show that Amazon wants to be taken seriously as a player in the prestige-movie business, which has shrunk in recent years as major studios like Walt Disney Co. and Time Warner Inc.'s Warner Bros. have exited and established players like Weinstein Co. have struggled.

Amazon Studios chief Roy Price says the traditional studios' retreat represents an opportunity for his company to carve out a distinct identity that pairs well with its original television shows, including the Emmy-winning "Transparent." The films and programs stream on Amazon's Prime Video subscription service.

"If you bring to customers really distinct, excellent, artful, memorable films worth talking about, then I think you have added value," said Mr. Price, a 12-year Amazon veteran who previously ran the company's video-on-demand service after a stint developing animated television shows for Disney.

Prestige movies have the added benefit of typically appealing to more educated, affluent viewers -- the same kind of people likely to pay $99 a year for Prime, whose primary selling point is unlimited two-day shipping.

"They are often very good retail customers," said Mr. Price. "So that's not a bad thing."

Analysts estimate that Amazon now has more than 50 million Prime members in the U.S. -- a number the company won't confirm -- a group that typically spends significantly more with the retailer than others do. Amazon has been tacking features on to Prime to spur growth, including book downloads and music streaming.

Tuesday's seven nominations should draw more attention to Amazon Prime movies and reinforce its identity as an alternative to the superheroes and sequels favored by the major studios.

Netflix Inc. also releases prestige films, but they are part of a broader slate that also includes Adam Sandler comedies and a coming big-budget action movie with Will Smith. Netflix earned its fifth Oscar nomination this year for documentary feature "13th." All of its prior nominations have been in the same category.

Amazon has in the past year released 15 movies, from well-known filmmakers including Woody Allen, Spike Lee, Nicolas Winding Refn and Jim Jarmusch.

Its post-Golden Globes party earlier this month was one of the glitziest thrown by any studio, packed with A-listers like "Manchester" producer Matt Damon, Chris Hemsworth, Ben Affleck, and Billy Bob Thornton. Amazon CEO Jeff Bezos hobnobbed with stars at the event; later that night, as he sipped champagne in his tuxedo at a party thrown by talent agency William Morris Endeavor Entertainment, he told a reporter, "I had a really great time tonight."

In addition to a strategy centered on arthouse films, the company offers producers access to its extensive digital-marketing capabilities. Its movies are highlighted on the Amazon-owned IMDb, the most popular movie website, and on the lock screens of its Kindle e-readers.

Though it initially toyed with streaming movies on Prime shortly after they made its debut in theaters, Amazon quickly realized that to attract top-tier filmmakers, it would need to respect traditional "windows." Its movies now don't usually reach Prime until at least five months after they debut in theaters.

It is an unusual tactic for the company, which is known for shaking up business models when it enters new markets.

"I don't think our intention today and for the foreseeable future is to be disruptive to the existing ecosystem of independent film," said Jason Ropell, Amazon's world-wide head of motion pictures. "Most of what we've done is really to be supportive of the space."

"Manchester" has grossed $39 million, a solid number given the price Amazon paid for distribution rights and its subject matter. Some other releases haven't fared so well, including Mr. Refn's "The Neon Demon," a horror movie set in the fashion industry, which grossed just over $1 million.

Though the company uses data to understand the types of programming Prime subscribers enjoy, it largely relies on the oldest of Hollywood tools, executives' guts, to pick movies. Its small staff includes respected indie-film veterans who had been struggling to find a place in an increasingly unwelcoming Hollywood.

In the future, Amazon says it will rely less on festival acquisitions and release more movies it develops and produces itself, including "Last Flag Flying," from Richard Linklater, director of "Boyhood." "Last Flag Flying" comes out later this year.

"Having had more time to put together these projects, I think on average they will have a higher budget and higher box office," said Mr. Price.

Write to Ben Fritz at ben.fritz@wsj.com and Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

January 24, 2017 10:10 ET (15:10 GMT)

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