Why Amazon is buying MGM holdings and James Bond for $8.45 billion

Update, March 17, 10 a.m.: Amazon’s $8.45 Billion Deal Is Closed And The Company announced that MGM will join Prime Video and Amazon Studios.

Big tech companies have been eyeing big media companies for years, but they’ve never come together before. Now it’s finally here, it’s probably happening: Amazon is getting ready to pay $9 billion for MGM Holdings, the Hollywood studio that brings James Bond, and a few other things like the Pink Panther movies and The Handmaid’s Tale TV program.

Which leads to some questions. Why now? Why Amazon? Why MGM? And just as importantly, are regulators letting it happen?

Short answers here: The media world is consolidating and there are not many targets left for a potential acquirer. Amazon has spent many billions on video without showing much, and thinks owning a studio — and, crucially, the rights to the intellectual property the studio owns — could help make really great movies and TV shows. that you really want to see. Not so much because it wants to own streaming, but because it wants you to keep coming to Amazon. Meanwhile, MGM has been trying to sell itself for years.

And the way regulators react to this will be fascinating: Amazon will argue that it’s too small in video to pose a competitive threat. On the other hand, Amazon is already in the crosshairs of regulators. In theory, that’s for running a marketplace and selling its own items in the same marketplace, but really just to be so… big. So this is like waving a red flag for people like sen. Amy Klobuchar and challenge her to charge.

Now that we’re done with the CliffsNotes, a little context about Amazon and Hollywood, which is still one of the weirder media stories of the past decade:

Amazon has been making and buying its own TV shows and movies since 2013 — the same year Netflix started streaming its own stuff with House of cards† But you probably don’t remember Amazon’s first shows – Alfa Housebetas† – and you probably can’t think of many Amazon shows at all, except Transparent and a few others. That gives you a sense of how Amazon’s attempts to break into Hollywood have been all over the place, despite Jeff Bezos spending a lot to get it done.

However, Bezos is still trying: Amazon sinks at least half a billion dollars into a… Lord of the Rings TV show, and $10 billion over 10 years to show an NFL game once a week. And now, probably, another one $9 billion for MGM

Does this mean Amazon is finally getting ready to take on the streaming heavyweights – Netflix, Disney and maybe WarnerMedia/Discovery?

Amazingly, the answer is no: the company is indeed more serious than ever with video. But it plays a different game than the “real” streamers. Amazon doesn’t want to compete with Netflix or the other biggies for watch time and subscription fees. It just wants you to watch a video and spend some money.

That’s because all of Amazon’s “premium” video is bundled into its Amazon Prime subscription offer, which gives you free shipping and other goodies. It is Amazon’s most powerful weapon. Bezos has been saying for years that you get things like: Transparent made you much more inclined to hang out and order a pair of shoes — or at least keep paying for Prime.

What Amazon says less often, but is also true, is that it has built a really nice business selling subscriptions to video services from others — services like Discovery+, for instance. Amazon sells those subscriptions through its “channels” offering, and it keeps a large chunk of the money you pay for them each month. To do that, it’s helpful to have things like: Jack Ryan, the series starring John Krasinski as Tom Clancy’s analyst/action hero, to get people to watch video on Amazon. Come for the free shows and maybe buy a few more.

So Amazon doesn’t want to dominate Hollywood. It just wants a hold. But even that support was hard to get, and Bezos has been convinced for a while that the way to get it isn’t through niche shows like Transparent more – it’s by buying or making big blockbusters that a lot of people will watch.

That explains Under the spell of the Ring and the NFL, and that explains MGM: It gives Amazon a giant movie brand that everyone has heard of and still wants to watch — James Bond — and then a bunch of other stuff that might one day turn into something. MGM owns the rights to: rockywhich has already turned into multiple movies, but maybe there is a way to make a Rocky Extended Universe.

What the hell is a Rocky Extended Universe? Nobody knows! But that has been the conventional wisdom in Hollywood in recent years. Nobody knew you’d want to watch movies about the Guardians of the Galaxy, or a TV show about Wanda Maximoff and vision† But now that Disney owns Marvel, it has mined the company’s shop of obscure superheroes and turned them into giant, popular glasses. That’s the script.

And that script, by the way, requires you to own the stuff instead of renting it. Disney and Comcast and all the other major media companies used to be okay with letting streamers like Netflix and Amazon borrow their old TV shows and movies, but those days are over. Meanwhile, it also becomes more difficult to find other studios that make great movies and TV shows for you. For example, Sony, which used to make things for everyone, is now off the table because it has long-term deals with Netflix and Disney. Amazon had to buy something.

So: Amazon is betting billions — if the deal goes through, it will be the company’s second-largest purchase, after paying $13 billion for Whole Foods — on a Hollywood acquisition that could give it the opportunity to do something. to become more competitive, in a sideline, against people who compete very seriously only in that industry. If regulators allow it.

Amazon’s argument against the world’s Klobuchars, by the way, will be clear: they’re a minor player in entertainment, and the acquisition won’t diminish consumer choice.

On the other hand, if you didn’t like the fact that Amazon runs a store that sells batteries and sells its own batteries in that same store, you might see similar parallels to running a movie store and selling your own movies. Or maybe you just have a problem with one of the most powerful companies in the world using its billions to buy anything. We’ll find out.

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