- May 26, 2021
- Posted by: Stratford Team
- Category: Tech
It finally happened. After years of waiting, a large technology company finally acquired a significant legacy media company. Amazon has purchased legendary MGM Studios for $8.45 billion.
So why do I feel so empty inside?
Perhaps it’s because this is, in essence, a bolt-on acquisition for Amazon. There’s nothing about the MGM deal that’s particularly revolutionary or leans into cutting-edge technology.
Rather, Amazon needs more content for Prime Video to stay relevant against Netflix, Disney+, Hulu, HBO Max and the many other streaming services competing for eyeballs. Buying MGM not only gives it library favorites like “James Bond,” “Rocky,” “Real Housewives” and “Survivor,” but it also improves its odds of making better originals with a fully-fledged studio that has made recent hits such as “The Handmaid’s Tale” and “Fargo.”
Perhaps it’s because the essence of this deal isn’t about media or technology at all. Amazon is playing a different game from every other entertainment company. The primary rationale behind buying MGM is getting more consumers to pay for Prime. More than 175 million Prime subscribers have streamed TV shows and movies in the past year, Amazon revealed last month. While paying a monthly subscription fee for a digital service was novel in 2005, when Amazon launched Prime, the rest of the world has caught on 16 years later. Amazon has an incredible foothold into people’s wallets by offering free shipping for Prime members, but even the shipping discount has become more common among major retailers. Buying MGM is a churn-reduction mechanism. Doesn’t reducing churn get you excited?
Perhaps it’s that Amazon is spending $8.45 billion on MGM because regulators will allow it, and there are few other things Amazon can strategically acquire that wouldn’t lead the government to proverbially storm the company’s Seattle headquarters. Just this week, Washington, D.C. Attorney General Karl Racine announced he’s suing Amazon on antitrust grounds, alleging Amazon illegally maintained monopoly power by unfairly raising prices and suppressing competition. Congress grilled Amazon founder Jeff Bezos last year about Amazon’s history of using data on third-party products to promote its own private-label brands. But they didn’t spend any time talking about Amazon’s dominant position in media and entertainment.
That’s because Amazon doesn’t have a dominant position in media and entertainment. While Amazon is likely to be one of the global giants in the next five years, it will have plenty of competition. There’s no certainty regulators will allow this deal, but it’s probably more likely they’ll approve this than letting Amazon buy into any other industry for $8.45 billion.
And perhaps it’s because Amazon has already taken strides to buy traditional media even if this is the first example of acquiring a media company outright. Earlier this year, Amazon struck an unprecedented deal to exclusively air Thursday Night Football games beginning next season. That marked the first time an entire package of National Football League games will be broadcast by a streaming service. Amazon has also announced landmark deals in the past year to stream soccer matches and New York Yankees baseball games. To some degree, Amazon has already crossed the Rubicon into what used to be territory reserved for legacy media.
Maybe Amazon will do something unexpected with MGM’s content.
There’s no doubt that Amazon has noticed Disney’s flywheel to mold intellectual property into crossover episodes between characters and new sequels. Amazon doesn’t own theme parks, but perhaps there’s something it can do with MGM’s intellectual property and the rest of its behemoth company that’s new and unexpected.
But until then, Amazon’s second-largest acquisition ever — and the first big tech purchase of old media — feels a bit anticlimactic.
WATCH: Jim Cramer on Amazon buying MGM for $8.45 billion