Why Amazon Bought MGM — and What Comes Next

Amazon just made another land grab. Amid widespread speculation, on May 26 Amazon confirmed the signing of an agreement to acquire MGM for $8.45 billion. The deal marks the second-largest acquisition in Amazon’s history (next to its $13.7 billion acquisition of Whole Foods in 2017). The deal will add 4,000 MGM movie titles to Amazon’s burgeoning film library available to subscribers of the Amazon Prime Video streaming service. Those titles include many James Bond films (of which MGM owns partial rights) and many other popular movies such as Silence of the Lambs. Amazon will also acquire 17,000 television shows. Make no mistake: this is a content grab for Amazon, a victory for New Hollywood streaming companies, and another nail in the coffin for the Old Hollywood studios. Here are four takeaways:

1 This Is All about Amazon Prime

Owning MGM would expand the Amazon Prime Video library with 4,000 film titles, on top of the estimated 13,000 films available on Amazon Prime already, thus giving people more of an incentive to join and renew their Prime memberships. (By contrast, Netflix’s film library numbers anywhere from 3,800–4,000 according to estimates.) More Prime members mean more revenue for Amazon from all the product purchases made by those Prime members. Indeed, Prime members spend reportedly 133 percent more annually than non-Prime members. As Jeff Bezos once said, “When we win a Golden Globe, it helps us sell more shoes.”

By contrast, the other big streaming players lack this card to play. Amazon’s acquisition strategy is all about playing to the company’s strengths.

2 James Bond Could Become a Thorn in Amazon’s Side

As they told Variety, “For better or worse, we are the custodians of this character. We take that responsibility seriously.” (You would, too, if you controlled the rights to one of the most lucrative film franchises of all time.)

As if to remind the world of that reality, Broccoli and Wilson issued a statement on the day Amazon announced the MGM deal: “We are committed to continuing to make James Bond films for the worldwide theatrical audience.” In other words, full steam ahead for a theatrical release October 8 the old fashioned way.

James Bond has no time to stream.

We could be in for a content fight of the 21st Century between Old Hollywood power players and New Hollywood.

3 The New Hollywood Arms Race Will Intensify

  • Buy more titles from Old Hollywood studios, as they did in 2020 — which is essentially what Amazon is doing at scale by making a run at MGM.
  • Buy more studios, with Apple being the strongest candidate to do so because of Apple’s cash reserves.
  • Buy each other. Apple could possibly buy Netflix. Apple+ lacks brand cachet, but Apple has loads of cash. The reverse is true for Netflix. And it’s getting more expensive for Netflix to keep creating titles.
  • Recruit more talent from Old Hollywood. For instance, Director David Fincher recently signed an exclusive four-year deal with Netflix. Fincher, responsible for prestigious titles such as Fight Club and Zodiac, released his Academy-Award nominated movie, Mank, on Netflix in December 2020 following a brief theatrical run.
  • Expand film distribution beyond streaming to start capturing audiences as they return slowly to theaters, as Netflix is doing with its new Zack Snyder film, Army of the Dead. I could also see Amazon buying some cash-strapped theaters, where Amazon could hustle its private-label brands in the lobbies and offer special rewards for Amazon Prime members.

4 Old Hollywood Is on the Ropes

But peddling movie distribution rights to streaming services is no slam dunk decision, as the saga of the MGM James Bond film No Time to Die shows. MGM had originally slated No Time to Die for a May 2020 release, and hopes were high for the final James Bond movie to star Daniel Craig. But as the pandemic worsened, MGM delayed the release of the movie to November 2020 — and then to April 2021. Meanwhile, as reported in Variety, MGM shopped No Time to Die to streaming platforms such as Apple TV+ and Netflix. But the film has a staggering $301 million budget, and to recoup that cost, MGM offered a price between $600 million and $850 million, which was unacceptably high to Apple and Netflix.

MGM ended up being like a homeowner who sinks a fortune into improving the house only to find no buyers on the market. With revenue streams drying up, MGM put itself on the sale months ago. It may not be the last studio to do so.

Movie theater re-openings and the loosening of safety-mask restrictions will certainly help bring people back to theaters, but we’re still in the early stages of sorting through the wreckage caused by the pandemic. All the studios (including New Hollywood) have been hurt by delays in film production and distribution during the pandemic. According to The Wall Street Journal, film production delays and the sales of titles to streaming services are going to trigger a shortage of new programming for theaters that will last at least three years — which will hurt the critical Old Hollywood distribution system.

Truth be told, that distribution system was already in decline. In 2019, ticket sales in North America totaled $11.4 billion, down 4 percent from 2018. As Brooks Barnes and Nicole Sperling of The New York Times reported in March 2020, even before the pandemic, major studios were starting to route smaller dramas and comedies toward streaming services instead of theaters. And now viewers, as they return to theaters, will have fewer options.

Buckle up. It’s going to be a bumpy ride.

Writer and pop culture lover.

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