Why Amazon is paying $9 billion for MGM and James Bond

Amazon isn’t competing with Netflix, however it’s spending billions attempting to determine Hollywood. Possibly 007 may also help.

Huge tech firms have been eyeing huge media firms for years — however they’ve by no means gotten collectively earlier than. Now it’s lastly, in all probability occurring: 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 point out for it, and thinks proudly owning a studio — and, crucially, the rights to the mental property the studio owns — may assist it create Actually Huge Films and TV Exhibits 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 attempting to promote itself for years.

And the way in which regulators reply to this will likely 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 principle that’s for operating a market and promoting its personal objects in the identical market, however actually only for being so … huge. 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 completed with the CliffsNotes, slightly 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 12 months Netflix acquired into streaming its personal stuff with Home of Playing cards. However you in all probability don’t keep in mind Amazon’s first exhibits — Alpha Home? Betas? — and also you in all probability can’t consider many Amazon exhibits in any respect, aside from Clear and some others. Which supplies you a way of how in all places Amazon’s efforts to interrupt into Hollywood have been, even though Jeff Bezos has spent rather a lot to make it occur.

Bezos continues to be attempting, although: Amazon is sinking at the least half a billion {dollars} right into a Lord of the Rings TV present, and $10 billion over 10 years to point out an NFL sport as soon as per week. And now, in all probability, 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. However it’s taking part in a special 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 look at 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 supply, which provides you free transport and different goodies. It’s Amazon’s strongest weapon. For years, Bezos has stated that providing you with stuff like Clear made you that rather more more likely to stick round and order a pair of footwear — or at the least hold 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 individuals’s video providers — providers like Discovery+, for example. Amazon sells these subscriptions by way of its “channels” providing, and it retains an enormous slice of the cash you pay for these each month. With the intention to do this, it’s useful to have stuff like Jack Ryan, the sequence starring John Krasinski as Tom Clancy’s analyst/motion hero, to get individuals 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 exhausting to get, and Bezos has been adamant for some time that the way in which to get it isn’t by way of area of interest exhibits like Clear anymore — it’s by shopping for or making huge blockbusters that plenty of individuals will watch.

That explains The Lord of the Rings and the NFL, and that explains MGM: It provides Amazon one big film model everybody has heard of and nonetheless desires to look at — James Bond — after which a bunch of different stuff that would flip into one thing, perhaps, sooner or later. MGM owns the rights to Rocky, for example, which has already was a number of motion pictures, however perhaps there’s a method to do a Rocky Prolonged Universe.

What the hell is a Rocky Prolonged Universe? Nobody is aware of! However that’s been the standard knowledge in Hollywood for the previous few years. Nobody knew you’ll wish to watch motion pictures concerning 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 big, common spectacles. That’s the playbook.

And that playbook, by the way in which, requires proudly owning the stuff as an alternative of renting it. It was that Disney and Comcast and all the opposite huge media firms have been high quality 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 may make huge motion pictures and TV exhibits for you is getting tougher, too. Sony, for 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, it is going to 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 turn out to be considerably extra aggressive, in a facet enterprise, towards individuals who compete very severely in solely that enterprise. If regulators permit it.

Amazon’s argument to the Klobuchars of the world, by the way in which, will likely be easy: They’re a small participant in leisure, and the acquisition received’t scale back shopper selection.

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