Will MGM be Amazon’s ticket to Hollywood’s big leagues?

Jeff Bezos has for years been desperately chasing his very own Game of Thrones — a runaway hit that will allow Amazon’s video streaming business to break into the big leagues of Hollywood.

“It can’t be that hard,” the billionaire entrepreneur told his team, according to Brad Stone’s recent book Amazon Unbound. Bezos is said to have then broken down the ingredients of Hollywood success into key must-have criteria: a hero protagonist, “civilisational high stakes”, betrayal, violence, among others.

In MGM, the film studio behind storied franchises such as James Bond and Rocky, Bezos might have found what he is looking for. But many remain sceptical that the acquisition is his silver bullet.

The only MGM asset considered a bona fide jewel for the years to come is the James Bond franchise, which the company co-owns with the Wilson/Broccoli family through a separate vehicle. That means that for any future Bond projects, Amazon will be reliant on the approval of producers Barbara Broccoli and her half-brother Michael G. Wilson. 

“Barbara and Michael are the ones who decide when they want to make movies. For a long time, the hedge fund guys at MGM have tried to turn James Bond into a TV series that could rival Games of Thrones and the two have been vehemently against that,” said a person who knows Broccoli and Wilson.

“They are very, very sensitive about the franchise. So all MGM has is that when Barbara and Michael decide to make a Bond movie, they [MGM] get the right to finance and distribute the movie. But the real decision-making about Bond, the creative stuff, is with Barbara and Michael,” the person added. 

MGM has a rich library of award-winning movies, including classics such as The Usual Suspects, The Good the Bad and the Ugly and Silence of the Lambs, but its creative prowess as a film studio is widely considered to have peaked. Meanwhile the early, era-defining MGM titles such as Gone With the Wind and The Wizard of Oz are gone, having been sold off in previous deals.

“It’s not the biggest studio in town,” said Thomas Hughes from film and TV rights platform Vuulr, and a former MGM executive. “Does it change the face of Hollywood because MGM is being bought? Not really. Does it change the face of Hollywood because it’s Amazon doing it? Maybe.”

Amazon is pouring investment into content creation, seeing it as the glue between attracting Prime members and retaining them. Last year, Amazon spent $11bn on creating, acquiring or licensing music and video content for Prime subscribers, up from $7.8bn in 2019.

Through its own Amazon Studios, the company has seen critical acclaim for series such as Transparent and The Marvelous Mrs Maisel, which won two Golden Globes and five Emmys. Amazon’s 2017 film Manchester By The Sea became the first produced for a streaming platform to be nominated for a Best Picture Academy Award. 

“I think it tells you they’re serious about content,” says Brian Yarbrough, senior analyst with Edward Jones. But he added: “It’s a hit-based business, and there’s always the risk you spend billions and billions on content — and it’s content people don’t want to view.”

MGM has been in the hands of financial wizards ever since it went bankrupt in 2010. The shots are being called by its largest shareholder, hedge fund Anchorage Capital, which began buying MGM’s debt in 2010 as part of a bankruptcy plan in the wake of the financial crisis. 

“Anchorage and the other hedge fund guys who control MGM are not going to bring much to the table once it’s sold,” said a person who has worked with MGM in the past. “The only decent stuff over the past few years has been Bond and The Handmaid’s Tale series.” 

The person who worked with MGM added that it might have made more sense for Amazon to follow the Netflix model, which includes paying a premium for the best creative talent rather than buying an old studio, which many believe has its best days behind it.

What Amazon will obtain is a bigger library to give its users more choice. “The Amazon guys aren’t fools. Sure, the deal might seem a little unusual and expensive but I think they just found out that they needed more content for their streaming services and this is what they were willing to pay for it,” said a person close to Amazon. “Sure, this may be an old and tired library but it’s better than what Apple has on offer at the moment.”

In all, Morgan Stanley analysts estimate, Amazon will get its hands on some 4,000 films and 17,000 TV episodes. It will also gain cable TV channels Epix and MGM HD — all outlets with which Amazon can build its booming advertising business, now worth around $20bn a year.

Apple was also in the race to acquire MGM, but it was only prepared to pay as much as $6bn, according to two people briefed about the matter. Comcast, the cable company had also considered a bid but ultimately walked away, those people added. 

“Amazon was really trying to get a licensing deal with Sony Pictures, which ended up going to Netflix and Disney. And they realised that they really need content for the streaming service, which is why they’re buying MGM at the price that is absolutely nuts,” said a banker not directly involved in the deal.

For Amazon, the transaction will not break the bank and is worth making given that there are few studios left to be acquired, according to insiders.

The deal is expected to be the target of political attacks as Republican and Democrat lawmakers have repeatedly accused Amazon of using its commercial power to buy companies and potential future rivals. 

“This proposed merger is yet another example of Big Tech’s commitment to total dominance in every sector of our economy,” said in a tweet Republican Congressman Ken Buck, a member of a House Judiciary subcommittee on antitrust issues.

But observers are sceptical that regulators will do much to stand in Amazon’s way. Although it is a dominant player in ecommerce, the same cannot be said for streaming and content creation, where Amazon will continue to compete fiercely with Netflix, Disney and others.

“It would be relatively hard for the government to challenge this deal,” said Professor Chris Sagers, an antitrust expert from the Cleveland-Marshall College of Law. “But that’s not because I don’t think the deal is potentially dangerous. Amazon is in a lot of businesses, and they’re using the synergy of the combination of them to have power.”