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

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Replace, March 17, 10 am: Amazon’s $8.45 billion deal has closed, and the corporate introduced that MGM can be becoming a member of Prime Video and Amazon Studios.


Large tech firms have been eyeing massive media firms for years — however they’ve by no means gotten collectively earlier than. Now it’s lastly, most likely taking place: Amazon is on the point of pay $9 billion for MGM Holdings, the Hollywood studio that brings you James Bond and a smattering of different stuff, just like the Pink Panther motion pictures and The Handmaid’s Story TV present.

Which ends up in some questions. Why now? Why Amazon? Why MGM? And, simply as essential: Will regulators let it occur?

Quick solutions right here: The media world is consolidating and there aren’t many targets left for a would-be acquirer. Amazon has spent many billions on video with out a lot to indicate for it, and thinks proudly owning a studio — and, crucially, the rights to the mental property the studio owns — might assist it create Actually Large Films and TV Reveals You Actually Need to Watch. Not a lot as a result of it desires to personal streaming, however as a result of it desires you to maintain coming to Amazon. MGM, in the meantime, has been making an attempt to promote itself for years.

And the best way regulators reply to this can be fascinating: Amazon will declare that it’s too small in video for this to pose a aggressive risk. However, Amazon is already in regulators’ cross-hairs. In idea that’s for operating a market and promoting its personal gadgets in the identical market, however actually only for being so … massive. So that is akin to waving a purple flag in entrance of the likes of Sen. Amy Klobuchar and daring her to cost.

Now that we’re finished with the CliffsNotes, just a little context about Amazon and Hollywood, which stays one of many weirder media tales of the final decade:

Amazon has been making and shopping for its personal TV exhibits and flicks since 2013 — the identical yr Netflix received into streaming its personal stuff with Home of Playing cards. However you most likely don’t keep in mind Amazon’s first exhibits — Alpha Home? Betas? — and also you most likely can’t consider many Amazon exhibits in any respect, apart from Clear and some others. Which supplies you a way of how all over Amazon’s efforts to interrupt into Hollywood have been, even if Jeff Bezos has spent rather a lot to make it occur.

Bezos continues to be making an attempt, although: Amazon is sinking at the very least half a billion {dollars} right into a Lord of the Rings TV present, and $10 billion over 10 years to indicate an NFL sport as soon as every week. And now, most likely, one other $9 billion for MGM.

So does that imply Amazon is lastly on the point of tackle the streaming heavyweights — Netflix, Disney, and perhaps WarnerMedia/Discovery?

Amazingly, the reply is not any: The corporate is certainly extra critical than ever about video. But it surely’s enjoying a distinct sport than the “actual” streamers. Amazon doesn’t wish to compete with Netflix or the opposite biggies for watch time and subscriber {dollars}. It simply desires you to observe some video and spend some cash.

That’s as a result of all of Amazon’s “premium” video is bundled into its Amazon Prime subscription provide, which supplies you free transport and different goodies. It’s Amazon’s strongest weapon. For years, Bezos has mentioned that supplying you with stuff like Clear made you that rather more more likely to stick round and order a pair of footwear — or at the very least preserve paying for Prime.

What Amazon says much less regularly however can also be true is that it has constructed a very nice enterprise promoting subscriptions to different folks’s video companies — companies like Discovery+, as an example. Amazon sells these subscriptions by way of its “channels” providing, and it retains a giant slice of the cash you pay for these each month. With a purpose to do this, it’s useful to have stuff like Jack Ryan, the collection starring John Krasinski as Tom Clancy’s analyst/motion hero, to get folks watching video on Amazon. Come for the free exhibits, then perhaps purchase another ones.

So Amazon doesn’t wish to dominate Hollywood. It simply desires a toehold. However even that toehold has been laborious to get, and Bezos has been adamant for some time that the best way to get it isn’t by way of area of interest exhibits like Clear anymore — it’s by shopping for or making massive blockbusters that a lot of folks will watch.

That explains The Lord of the Rings and the NFL, and that explains MGM: It offers Amazon one large film model everybody has heard of and nonetheless desires to observe — James Bond — after which a bunch of different stuff that would flip into one thing, perhaps, at some point. MGM owns the rights to Rocky, as an example, which has already changed into a number of motion pictures, however perhaps there’s a strategy to do a Rocky Prolonged Universe.

What the hell is a Rocky Prolonged Universe? Nobody is aware of! However that’s been the traditional knowledge in Hollywood for the previous few years. Nobody knew you’d wish to watch motion pictures in regards to the Guardians of the Galaxy, or a TV present about Wanda Maximoff and Imaginative and prescient. However now that Disney owns Marvel, it has been mining the corporate’s retailer of obscure superheroes and turning them into large, fashionable spectacles. That’s the playbook.

And that playbook, by the best way, requires proudly owning the stuff as an alternative of renting it. It was that Disney and Comcast and all the opposite massive media firms have been wonderful letting streamers like Netflix and Amazon borrow their previous TV exhibits and flicks, however these days are over. In the meantime, discovering different studios that can make massive motion pictures and TV exhibits for you is getting tougher, too. Sony, as an example, which used to make stuff for everybody, is now off the desk as a result of it has long-term offers with Netflix and Disney. Amazon wanted to purchase … one thing.

So: Amazon is betting billions — if the deal goes by way of, it will likely be the corporate’s second-biggest buy, after it paid $13 billion for Entire Meals — on a Hollywood acquisition which may give it the flexibility to develop into considerably extra aggressive, in a facet enterprise, towards individuals who compete very critically in solely that enterprise. If regulators permit it.

Amazon’s argument to the Klobuchars of the world, by the best way, can be simple: They’re a small participant in leisure, and the acquisition received’t cut back client alternative.

However: For those who didn’t like the truth that Amazon runs a retailer that sells batteries and sells its personal batteries in that very same retailer, you would possibly see comparable parallels to operating a film retailer and promoting your individual motion pictures. Or, you would possibly merely have an issue with some of the highly effective firms on the earth utilizing its billions to purchase something in any respect. We’ll discover out.

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