Why Amazon spent $8.5 billion to land MGM

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Amazon bought MGM for its history, but not necessarily for its standalone future.

The e-commerce giant surprised Hollywood on Thursday by announcing the completion of its $8.5 billion acquisition of MGM, an iconic Hollywood brand whose presence in the modern entertainment industry has diminished over time and many changes. ownership since the mid-1980s.

The Federal Trade Commission had suggested it might oppose Amazon’s purchase of MGM, raising the prospect of a long fight. On the heels of Thursday’s closing announcement, the FTC again raised the threat of a future suit challenge.

Analysts expect the tech company to try to mine MGM’s best-known pieces of intellectual property for future gain, but don’t think the studio has a long way to go as a separate entity. and influential.

“The reason for the acquisition seemed to be after the headlines, the intellectual property, which of course, first and foremost meant the James Bond franchise,” said Peter Newman, head of the MBA/MFA program at the Tisch School of the Arts. at New York University.

For now, the bulk of MGM’s roughly 800 employees are expected to move to Amazon, where the company will, at least initially, operate as an independent label. This includes the studio’s film group president Michael De Luca and film group president Pamela Abdy, who have been credited with landing a slew of hot projects. Both will report to Mike Hopkins, head of Prime Video and Amazon Studios.

If he stays, De Luca has deep connections within the creative community that could serve Amazon well as it seeks to bolster its content. At MGM, he landed Paul Thomas Anderson’s “Licorice Pizza,” Joe Wright’s “Cyrano,” and Ridley Scott’s “House of Gucci,” and produced upcoming projects like a remake of “Fiddler on the Roof,” which will be directed by “Hamilton,” prodigy Thomas Kail, and “Project Hail Mary,” an adaptation of the novel of the same name by “Martian” author Andy Weir that stars Ryan Gosling. Of the films that were released, ‘Licorice Pizza’ was nominated for Best Picture Oscars but lost money, as did ‘Cyrano’ and ‘House of Gucci’. Barbara Broccoli and Michael G. Wilson, the production team behind the James Bond series, have creative control over the films and have made it clear that future 007 films will debut in theaters.

Analysts believe Bond led the Amazon acquisition. The spy series continues to be popular and there is a possibility that it will be expanded to include shows and other spinoffs, although these will require Broccoli and Wilson’s approval.

“Hollywood is crazy about IP right now and Bond is one of the biggest,” says Exhibitor Relations analyst Jeff Bock. “To unlock its true potential, there must be TV shows and other ancillary properties. Purists might not like it, but you know what, those purists are about to go extinct.

Of course, Bond is also in a period of transition. The series wrapped up Daniel Craig’s acclaimed run last year with ‘No Time to Die’ and now 007 Guardians must find a new actor to handle the role and help continue to find ways to make the running spy petticoats relevant in a changed world.

Beyond Bond, there are other ways Amazon can get its money’s worth. Over time, Newman suggested, the MGM library will be used to boost Amazon’s broader relationship with consumers, who already use the company to purchase books, music, household items and more. “Although the MGM name is legendary, I don’t know what the brand means to people under a certain age,” he said.

Amazon is unlikely to be as interested in traditional means of distribution that don’t give a boost to its broader business, and is likely to focus heavily on flagship projects that will keep consumers connected to the business. through a Prime membership. .

Amazon is betting on MGM to help it advance in Hollywood’s streaming wars, in which victory hinges on attracting new subscribers and then sustaining them as the ebb and flow of major entertainment projects. Wall Street has been paying close attention to the number of consumers taking up new subscriptions to sites like Disney Plus, Peacock, Netflix and Paramount Plus. But Amazon’s fortunes don’t rise and fall based on its entertainment business. Amazon and Apple are perhaps the only two streaming fighters who have the luxury of knowing that “content and entertainment aren’t the primary sources of revenue — not by a long shot,” Newman said.

When Amazon started making its own in-house movies, it first embraced traditional theatrical distribution. But that has changed. Under Jennifer Salke, Amazon has shifted its focus more aggressively to streaming, with films such as “Being the Ricardos” and “Coming 2 America” ​​debuting on Prime. In MGM’s case, many films in the works will have some form of exclusive theatrical release, as it was part of their contractual agreements. However, it remains to be decided how long theaters will have an exclusive window on MGM films that have yet to debut and whether they will align with the 45 days that most studios have adopted during the pandemic.

The hope is that Amazon can find franchises and pieces of intellectual property in MGM’s library of 4,000 films that it can revive as feature films or spin-off shows. MGM controls the rights to the films “Rocky”, “Legally Blonde”, “Stargate”, “The Pink Panther”, among others. Many of these titles have been updated relatively recently – ‘Rocky’ has spawned three ‘Creed’ films since 2015. ‘The Pink Panther’ has been remade with Steve Martin replacing Peter Sellers as the clumsy Inspector Clouseau.

On the television side, MGM has slowed in recent years after returning to episodic series in a big way with hits like Hulu’s “The Handmaid’s Tale” and FX’s “Fargo” anthology series. MGM also has several long-standing home entertainment distribution deals that need to be honored, which could impact when the movies it makes land on Prime. The companies also haven’t yet decided how to capitalize on Epix, the cable network owned by MGM.

More details will be revealed at a virtual town hall on Friday. But for now, many MGM employees seem relieved the deal is finally done, though they still have many questions about what it will mean for their jobs.

“At least now we may have some clarification,” said an MGM staffer.

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