MGM Studios plaza entrance on February 28, 2015 in Niagara Falls, Ontario, Canada.
Raymond Boyd | Michael Ochs Archive | Getty Images
It finally happened. After years of waiting, a large technology company eventually acquired a major legacy media company. Amazon bought the legendary MGM Studios for $ 8.45 billion.
Why do I feel so empty inside?
Maybe it’s because this is essentially an acquisition for Amazon. There is nothing about the MGM deal that is particularly revolutionary or relies on cutting edge technology.
Rather, Amazon needs more content to keep Prime Video relevant against Netflix, Disney +, Hulu, HBO Max, and the many other streaming services that compete for eyeballs. By purchasing MGM, it not only gets library favorites like James Bond, Rocky, Real Housewives, and Survivor, but also improves the chances of producing better originals with a full-fledged studio that has recently hit hits like James Bond “has scored” The Handmaid’s Tale “and” Fargo “.
Maybe it’s because this business isn’t about media or technology at all. Amazon plays a different game than any other entertainment company. The main reason to buy MGM is to get more consumers to pay for Prime. More than 175 million Prime subscribers streamed TV shows and movies last year, Amazon announced last month. While paying a monthly subscription fee to a digital service was new in 2005 when Amazon first launched, the rest of the world caught on 16 years later. Amazon has an incredible hold in people’s wallets by offering free shipping to Prime members, but even the shipping discount has become increasingly common at large retailers. Buying MGM is a mechanism to reduce churn. Don’t you get excited about reducing churn?
Perhaps Amazon is spending $ 8.45 billion on MGM because regulators allow it, and there are few other things Amazon can strategically acquire that would not cause the government to literally own the company’s Seattle headquarters storm. Just this week, Washington, DC, Attorney General Karl Racine announced that he was suing Amazon on antitrust grounds, alleging that Amazon illegally maintained monopoly power by unfairly increasing prices and stifling competition. Congress briefed Amazon founder Jeff Bezos last year on Amazon’s history of using data on third-party products to promote its own private label brands. But they didn’t spend time talking about Amazon’s dominant position in the media and entertainment space.
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, there will be a lot of competition. There’s no certainty that regulators will approve this deal, but it’s probably more likely that they’ll approve it than letting Amazon buy into another industry for $ 8.45 billion.
And maybe it’s because Amazon has already taken steps to buy traditional media, even if this is the first example of a full media company takeover. Earlier this year, Amazon signed an unprecedented deal to exclusively broadcast Thursday Night football games starting next season. This was the first time a full package of National Football League games had been broadcast on a streaming service. Last year, Amazon also announced major streaming deals for the New York Yankees’ soccer and baseball games. To a certain extent, Amazon has already moved the Rubicon into an area that was previously reserved for the old media.
Maybe Amazon is doing something unexpected with MGM’s content.
There’s no doubt that Amazon noticed Disney’s flywheel for sculpting intellectual property in crossover episodes between characters and new sequels. Amazon doesn’t own any theme parks, but maybe it can do something with MGM’s intellectual property and the rest of its huge company that is new and unexpected.
Until then, Amazon’s second-largest acquisition – and the first big tech purchase of old media – looks a bit disappointing.
WATCH: Jim Cramer on Amazon buys MGM for $ 8.45 billion