‘Air’ Profit Participation Plan Spreads Amazon’s Streaming Wealth

“Air,” which opened in wide theatrical release on Wednesday and stars Matt Damon, Ben Affleck, Viola Davis, Chris Tucker and Jason Bateman, details how a then-underdog Nike bet its footwear future on then-rookie Michael Jordan. The film dramatizes boardroom pitches and frantic business phone calls into a tale of how capitalism was pretzeled into supplying fortune and glory to members of a demographic rarely on the receiving end.

So it makes sense that the Skydance and Mandalay-produced film is the first from Ben Affleck and Matt Damon’s Artists Equity. One of the selling points of the venture is a promise of profit participation for both above-the-line stars and below-the-line artists. The Hollywood titans dipped into their own fees, along with money saved during production via artist-driven efficiency, to create a discretionary bonus system, insiders told TheWrap. 

Artists Equity is pitching the system as an old-school solution to a new streaming-era problem: Box-office-based bonuses are becoming outdated due to a challenging theatrical marketplace while streaming viewership is clouded in mystery. Yet the changing economics around streaming and new thinking about the value of theatrical releases are the very factors that have let “Air” and its unorthodox financial structure come to life. 

Artists Equity isn’t the only one dabbling in profit sharing

“Our goal with Artists Equity is to build a creator-focused studio that can optimize the production process with shared participation in the commercial success of projects,” said Affleck in a statement last November as he announced undertaking “Air.”

It’s far from the only one of its kind. Angel Studios, for example, bills itself as a crowdfunded entertainment empire specializing in — but not exclusively releasing — faith-based theatrical and streaming content like “Christmas with the Chosen” and last week’s “His Only Son.” CEO Neal Harmon said that “when people who are involved in the process of making the movie are stakeholders, they put more care into it. They are creating a production company where everyone gets a piece of the pie.”

Legion M CEO Paul Scanlan, whose company bills itself as fan-driven and-funded, agreed with those sentiments. “It’s an echo from the distant past,” he said. “When [Affleck and Damon] first entered this industry, they were probably making a lot more money on the back end than they are today,” Scanlan observed. A drive toward quality for streamers could lead to similar situations if only to motivate artists and filmmakers to go that extra mile, he added. 

Theaters as marketing

“Air” cost around $90 million to produce and Amazon paid $130 million to distribute the film, with the difference paid out to rights holders and producers. That made for challenging economics: Even before streaming gobbled up huge segments of casual moviegoers, there was rarely a time when an R-rated dramedy could earn enough at the worldwide box office to justify a $90 million budget, let alone $130 million plus marketing expenses.

Amazon is not releasing “Air” into 3,500 theaters this weekend because it expects to make a profit in raw theatrical revenue. Affleck’s other directorial feature “The Town” earned $154 million on a $40 million budget in late 2010, while “The Social Network” grossed $225 million that same season on a $40 million budget. A few years prior, $60 million flicks like “State of Play” and “Duplicity” were underperforming in relation to their budget, leading to media declarations of the death of the adult drama.

“Air” is getting a theatrical release partially because Amazon wants to remain in business with Artist Equity for stature and prestige. The other, more important reason is Amazon believes that even a money-losing theatrical release boosts the film’s awareness when it premieres as a streaming title on Prime Video. 

That was, as previously reported, the logic in Warner Bros.’ comparatively “responsible” multiplex release for “Magic Mike’s Last Dance,” as domestic distribution chief Jeff Goldstein explained it to TheWrap: enough to “cover promotional costs and perhaps earn a little money on the side.” 

The industry now knows that, with few exceptions, films that get a conventional theatrical release garner higher streaming viewership than do streaming-only titles. And for a company like Amazon that’s still trying to build its reputation in Hollywood, investing in theatrical distribution for streaming-intended features is itself a show of seriousness toward earning revenue and attracting top-tier talent.

“It’ll be hard to ignore if Amazon or Apple end up playing a significant role in helping mid-range and prestige films experience even more of a box office comeback in the next few years,” Boxoffice Pro chief analyst Shawn Robbins previously told TheWrap. For tech companies with seemingly limitless pocketbooks, commercial theatrical success for a given title is less important than the perception that the picture is a success between when it opens in theaters and debuts on streaming. 

And for stars Affleck and Damon, it shows they “still believe in theaters and they believe the multiplex is still a practical business,” said Gerber Kawasaki CEO Ross Gerber when speaking to TheWrap.

Splitting the profits when profits are scarce 

Nobody expects “Air” to gross enough theatrically to cover Amazon’s acquisition costs. The movie’s profit participation plan is partially rooted in professionally-beneficial altruism. Nonetheless, it’s an example of how streaming economics create a net good: a high-budget, well-received, non-franchise, star-driven studio programmer that helps theaters by virtue of its very existence and offers talented artists a bigger-than-usual piece of the pie.

Legion M will use an upcoming William Shatner documentary as its test case for profit sharing, but that’s a smaller company working with a sub-$1 million project.

Affleck and Damon showed a willingness to bet on themselves and a movie that once exemplified Hollywood’s bread-and-butter with money they presumably could afford to lose — while offering a payout to those who usually might not otherwise benefit. It’s the feel-good message of “Air” — one that its stars delivered on screen and behind the scenes, in an unusual scenario made possible by this tech-fueled moment in streaming.