Why the hell did Amazon spend $ 8 billion on a zombie studio?


Amazon just dumped an $ 8 billion piece of change on MGM, a studio best known for James Bond and a roaring lion logo. The acquisition offers Amazon the opportunity to turn the spy movies into a major advantage for its streaming services. But it’s hard to believe that dropping billions for the studio’s content library will actually support Amazon’s streaming services – at least on its own.

Amazon already has a fully functioning one studio arm that produces content for its Prime Video service. Although it has a few hits here and there – Jack Ryan immediately comes to mind – Amazon is struggling for the most part with the Strange things– the viewer’s enthusiasm that his rivals often enjoy. The company also owns IMDb TV, a free and ad-supported streaming service that’s actually pretty decent. Some of the service’s content is a bit dated, but most of the composition feels pretty solid in terms of the selection of titles that pay nothing. Still, Amazon could use a major overhaul of the content.

MGM brings a significant amount of quality cinema to the table, even if much of it is older. The studio’s library contains the Bond, Legally blonde, and Rocky franchises, which is not nothing. It also owns a huge catalog of series and movies, including Tomb Raider, The Addams family animation film, Candyman, Creed, Real housewives, The Handmaid’s Tale, and Fargo. Amazon said it plans to reinvent these titles, which sounds like spin-offs and remakes. “The real financial value behind this deal is IP’s treasury,” Mike Hopkins, senior vice president of Prime Video and Amazon Studios, said in a statement.

But while, yes, there is IP, it’s unclear how valuable it all really is. Many of MGM’s largest franchise properties are dated, and it is does not even completely own the rights to Bond, his crown jewel. Additionally, many of MGM’s legacy titles are like The Wizard of Ozfor example, are no longer owned by the studio. (Warner Bros. actually now owns the rights to the iconic film.) MGM, while certainly iconic, is far from a top-notch studio producing genre-bending contemporary films.

“It feels like they are following a playbook from five years ago,” said Katharine Trendacosta, deputy director of policy and activism at Electronic Frontier Foundation. The edge by phone. From the $ 8 billion price tag, Trendacosta said, “It’s going to seem like a crazy move in about five years – because that’s not really what the value of this stuff is.”

That IP playbook – which HBO led by AT&T has plunged into its current brand identity crisis – has left behind as far as studios are concerned. The playbook that Amazon and other services draw on simply seems to point to gathering as much content as possible for their respective services. But Amazon, and other service-oriented companies for that matter, are now picking the bones. The company can certainly afford to drop billions in IP acquisitions for its services. But right now, no one can compete with what Disney has been building for the better part of two decades. And as Trendacosta pointed out, “We’re out of studios soon.”

Nearly ten years ago, Disney bought Lucasfilm – the studio behind the Star Wars movies – for just over $ 4 billion. A a few years earlier on the Lucasfilm deal, the company paid about the same to get hold of Marvel. In 2006 the company paid one just over $ 7 billion to acquire Pixar. Certainly, none of these deals were struck in the midst of what is arguably the peak of streaming’s popularity. But even considering the streaming bubble we’re currently in and the value of franchise IP for luring potential subscribers, the MGM deal still feels a bit like a rip off.

“Hollywood has picked up Silicon Valley disease, even though we should know at this point that it doesn’t work,” said Trendacosta. “Any entertainment [property] is now a streaming service, which means they consider themselves to be tech companies – which isn’t right. “

Trendacosta added that these services all operate on a four-step business model: Acquire IP, create as many things as possible, insert a question mark here, and become profitable. But that only works in the event that the grand plan is to be acquired. For smaller services like Discovery Plus or even Peacock, that makes sense. There are just too many streaming services. Those small services won’t be able to compete with the bigger players forever, and we’ll likely see more mergers like the ones we just saw with WarnerMedia and Discovery. But what comes next is unclear, especially for mega services. Right now, it feels very much like mega-services are just collecting spare parts, and that’s not to say anything about brand identity confusion.

Who’s going to buy one of these places? No one. They’re big already, ”said Trendacosta.

That’s not to say the deal has no value at all. Amazon can certainly count on opportunities to spin out one of the legacy franchises it has acquired – in the same way that competing services do to drive subscriber growth. Disney has participated in this The Mandalorian and WandaVision on Disney Plus, and CBS has done the same with Star Trek: Picard on Paramount Plus (formerly CBS All Access). But How much Do these spin-offs add value for Amazon?

“You’re talking about overpaying and overpaying, which Amazon can do,” Jeff Bock, senior media analyst at entertainment research firm Exhibitor Relations Co. told me. The edge in a telephone interview. “It doesn’t really hurt their bottom line.”

According to Bock’s assessment, such a step is to take the Bond For instance, IP could be a vertical integration game if Amazon eventually decides to invest in theaters – something that probably sounds ridiculous before you remember Amazon owns Whole Foods.

“Is it possible – and everyone here in LA thinks it anyway – that they are one of the bidders at the ArcLight Cinemas or Cinerama Dome?” Bock added. “If they see bookstores the same way and they see supermarkets the same way, what is stopping them from eventually going to the physical store and buying theaters.”

This is especially true for the future of the Bond franchise. While MGM one Bond film every few years, Amazon could produce them every one or two years, Bock speculated.

Ultimately, it’s too early to say for sure what Amazon plans to do with its shiny new box of old classics. It is entirely possible that Amazon will release future titles exclusively on Amazon, opt for theatrical releases, or do a combination of both. But whether the $ 8 billion investment will prove worthwhile remains to be seen. And on its own, it’s hard to believe that MGM’s acquisition of Prime Video will make it a serious Netflix competitor.