Amazon today announced a definitive agreement to buy MGM (Metro-Goldwyn-Mayer) for $8.45 billion. Amazon said that MGM’s filmmaking prowess “complements the work of Amazon Studios, which has primarily focused on producing TV show programming.”
Buying MGM would let Amazon add plenty of movies to its Prime Video streaming service. It’s not clear whether MGM’s theatrical-release strategy would change. “Amazon will help preserve MGM’s heritage and catalog of films and provide customers with greater access to these existing works. Through this acquisition, Amazon would empower MGM to continue to do what they do best: great storytelling,” the merger announcement said.
Amazon said the purchase “is subject to regulatory approvals and other customary closing conditions” but did not provide an estimated closing date. The acquisition announcement came about a week after news reports revealed the negotiations.
“The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team,” Mike Hopkins, senior VP of Prime Video and Amazon Studios, said in the press release. “It’s very exciting and provides so many opportunities for high-quality storytelling.”
The pending purchase “has an equity value of $6.5 billion, people familiar with the matter said,” according to The Wall Street Journal. “Including debt, the value of the deal is $8.45 billion, Amazon said.” Buying MGM would mark Amazon’s second largest acquisition after its $13.7 billion purchase of Whole Foods in 2017.
Hopkins noted that “MGM has a vast catalog with more than 4,000 films—12 Angry Men, Basic Instinct, Creed, James Bond, Legally Blonde, Moonstruck, Poltergeist, Raging Bull, Robocop, Rocky, Silence of the Lambs, Stargate, Thelma & Louise, Tomb Raider, The Magnificent Seven, The Pink Panther, The Thomas Crown Affair, and many other icons—as well as 17,000 TV shows—including Fargo, The Handmaid’s Tale, and Vikings—that have collectively won more than 180 Academy Awards and 100 Emmys.”
The Handmaid’s Tale has been a huge hit for Hulu, a major rival to Prime Video. The show’s season 4 premiere was “the most watched Hulu Original ever, series or film,” with about 1 million viewers, Deadline reported this month.
Amazon won’t have total control over Bond
Amazon won’t have creative control over the Bond franchise, The New York Times noted. “Amazon will own only 50 percent of the spy franchise,” the Times wrote. “The balance is held by Barbara Broccoli and her brother, Michael G. Wilson. The siblings also have ironclad creative control, deciding when to make a new Bond film, who should play the title role, and whether television spinoffs get made. (They have blocked such efforts in the past.)”
As Variety wrote last week, “Insiders believe that Broccoli and Wilson would likely nix any plans to debut Bond films on Amazon’s streaming service Prime Video and would insist on a theatrical release, as is their contractual right… The producers have also been resistant to have Bond pop up in spinoffs or television shows, the kinds of ancillary properties that could prove highly lucrative. Moreover, the films have been heavily licensed to cable networks and streaming platforms, which could complicate matters.”
The Bond film Skyfall already comes included with a Prime Video subscription. All other films in the series require a separate rental or purchase on Prime Video, usually $4 to rent and $14 or $15 to buy. Amazon would presumably choose to make many or most of MGM’s films available in the basic Prime Video subscription once it owns the company, but it could continue charging rental and purchase fees for some films to make more money.
Amazon faces antitrust scrutiny
Amazon’s attempt to buy MGM could get some pushback from US regulators, as the company has faced plenty of antitrust scrutiny—though mostly for its online retail sales business. In addition to a congressional report that found that “Amazon has monopoly power over most third-party sellers and many of its suppliers,” antitrust scholar and noted Amazon critic Lina Khan is slated to fill an empty slot on the Federal Trade Commission, pending Senate approval. The District of Columbia sued Amazon yesterday, alleging that the online retail giant violated antitrust law with most-favored nation policies that prevent sellers from offering products at lower prices on other websites.
MGM would help Prime Video compete more effectively against the giant Netflix. MGM’s boost to Prime Video could also help Amazon’s retail sales indirectly because of how Amazon bundles its major services into a single $120-per-year Prime subscription that includes Prime Video, Amazon Music, Prime Reading, faster shipping on retail purchases, and other services.
Several major film studios are already owned by either a tech or telecom company. Comcast owns Universal Pictures through its NBCUniversal subsidiary; AT&T owns Warner Bros. and New Line Cinema through its WarnerMedia division; and Sony owns Columbia Pictures and TriStar Pictures. AT&T bought Time Warner for $108 billion in 2018 and last week announced a deal to spin out the unit into a separate company that would be combined with Discovery, Inc. AT&T said the spinout will take a year to complete. Walt Disney Studios is the other major film studio.
MGM Board Chairman Kevin Ulrich said that “the opportunity to align MGM’s storied history with Amazon is an inspiring combination.” Ulrich is the CEO of hedge fund Anchorage Capital, the top shareholder in the holding company that owns MGM, reportedly with a 35 percent stake.