MGM’s Amazon era begins with big, unanswered questions – The Hollywood Reporter

In the summer of 1981, MGM coveted Rocky and James Bond. The studio, formed in 1924 through the merger of Metro Pictures Corp., Goldwyn Pictures and Louis B. Mayer Productions, had an eye for expansion. And it liked what it saw in United Artist’s intellectual property. UA, a Hollywood icon himself, was behind the film as Some like it hot, Furious Bull, One flew over the Cuckoo’s Nestand yes, the Rocky movies and the Bond franchise.

So MGM bought UA and its films for about $ 380 million ($ 1.2 billion adjusted for inflation), with Frank Rosenfelt, MGM’s chairman, telling Washington Post at a time when UA’s library would be critical as Hollywood moved “from the movie industry to the entertainment software industry.”

“Just as everyone in the entertainment industry is eager to buy into the profits of the new technology, so technology is hungry to swallow almost anything, old or new, that will entertain,” Post’s Katherine MacDonald wrote about the deal, though the cutting edge at the time was cable TV and VHS tapes.

Forty years later, the same titles are still coveted to entertain through new technology. Except this time, the buyer is the technology company itself. For Amazon, its vision for MGM revolves around streaming Rocky Balboa and James Bond to smartphones in our pockets or the TVs hanging on the wall, perhaps through an Amazon Fire streaming device.

In a blog post announcing that it had completed the acquisition, Amazon quoted UA classics as Rocky and furious bull, but also MGM projects like Thelma & Louise and The eyes of evilall of which are now part of the Amazon family.

Amazon founder Jeff Bezos spoke with the company’s shareholders on the day the deal was announced in May 2021, saying it bought MGM because of its “large, deep catalog of much-loved intellectual property” and that it plans to “reconsider and develop the IP for the 21st century. “

Amazon is, of course, a giant with $ 470 billion in revenue in 2021. MGM, on the other hand, had a total annual revenue of $ 1.5 billion in the pre-pandemic days of 2019. And Amazon spent $ 13 billion on video and music content in 2021. MGM does not distribute its content consumption, but at best it would barely reach 1 billion.

Amazon’s $ 8.45 billion acquisition of MGM, like MGM’s acquisition of UA before it, was about looking for whatever it could find to entertain through the latest technology. But how much of that content actually ends up on Amazon’s streaming services? And when? With many movies and shows tied up in deals with other companies, a Prime Video source says The Hollywood Reporter it may take “years” before all MGM content is exclusive to Amazon platforms, but that company will try to put some titles on Prime as soon as possible.

And while Amazon highlighted some of the IP that it hopes to “re-perceive,” it’s not clear what form it will take, or when such projects may begin development at all. could one Creed the series goes forward without the blessing of Michael B. Jordans, Ryan Cooglers or Sylvester Stallone?

And what among MGM’s library could end up on Amazon’s free streaming service IMDb TV, which is ad-supported and seen as less “premium” than the ad-free Prime Video?

Analysts believe that Amazon, which already had a large content library, will only become a more formidable streaming competitor with the purchase, and that the deal will only increase M&A interest. “Amazon Prime Video will add a wealth of library content,” Wells Fargo analyst Steven Cahall noted in a research note on March 18, adding that the deal, which closes, “allows these outside forces to [tech firms] to keep their name running on potential M&A scenarios across the media landscape. “

Before these questions can be answered at all, companies need to come together. On March 18, the day after Amazon closed the deal, MGM employees lined up at a town hall that streamed from Amazon’s Culver City area. Mike Hopkins, senior VP of Amazon Studios and Prime Video, and the man who orchestrated the acquisition, told employees they were just in the process of figuring out how to integrate the company. However, he noted that MGM COO Christopher Brearton, film group chairman Michael De Luca and worldwide TV group chairman Mark Burnett would join his team. Jennifer Salke, who heads Amazon Studios, will also still report to Hopkins, which puts her on an equal footing with the best MGM executives.

Amazon and MGM’s management have been the source of speculation linked to the deal, along with strategic issues surrounding Amazon’s commitment to cinema distribution and what it will do with MGM assets such as pay-TV and streaming service Epix.

But the emphasis on the temporary nature of management at City Hall did not do much to secure staff. An insider believes that De Luca and his top deputy, Pamela Abdy, will be offered the chance to stay and lead MGM’s film offering. But this person does not believe that De Luca would do it – they were not sure about Abdy. “Mike will no longer be able to make one-sided decisions. At MGM, he had complete control and could light anything he wanted, green, the insider said. If they disappeared, speculation in Hollywood circles is that Kevin Ulrich, CEO of Anchorage Capital, which owned MGM until the sale to Amazon, would be interested in supporting an independent label led by the duo.

De Luca and Abdy are credited for reviving the fluttering studio, going toe-to-toe with money-rich players like Apple and Netflix for big projects, among others. Licorice pizza and Ryan Gosling in the lead role Project Hi Mary.

They renamed and revived studio labels and acted on MGM’s legacy. Launched in 2014 as the company’s genre-focused arm, Orion Pictures is now run by agent who became producer Alana Mayo, and houses projects from under-represented talents. It has even built an impressive board, which has given Billy Porter’s directorial debut, What if?and the film adaptation of the bestseller Crying in H Mart. Then there are American International Pictures, which have had less success securing notable projects, but which are intended to focus on titles set for limited cinema and digital release.

Although MGM operates independently within Amazon, the issue of distribution remains unclear. United Artists Releasing, the distribution and marketing effort launched jointly by Annapurna and MGM, handles the studio’s domestic releases.

In a note to staff on March 17, Hopkins said the streamer would continue to work with UAR on titles. What the distribution looks like could be a point of contention because it’s unclear whether MGM titles will get an exclusive theatrical release or go day-and-date on Prime Video.

A major reason why Ridley Scott decided to go with MGM to his latest film, House of Gucci, was due to a promised cinema release (given, Scott’s next film, Kitbag, is with Apple), with the domestic release handled by UAR. Internationally, all of MGM’s projects are published by Universal.

Then there are MGM’s and Amazon’s television companies, which are run by Burnett and Salke, the former entertainment president of NBC, respectively. Many of MGM’s biggest TV shows, including The waitress’ story, Fargo, Survivor and The voice, is tied to existing agreements with networks and streaming services. Prime Video originals, as The wonderful Mrs. Maisel and Wheel of Timeis of course exclusive to Amazon’s platforms.

Although there is some overlap between MGM’s film business and Prime Video’s film business (Amazon has noted that Prime Video has mostly been focused on series and film acquisitions), the same cannot be said about television. Would MGM merge its TV business into Prime Video, or will they really remain separate, as the companies say is the plan? And would Burnett (who was on a remote mountain in Iceland when the deal was announced last year) or Salke agree to share such a responsibility?

Amazon has provided Prime Video with enormous resources to develop series (see the first season of Lord of the Rings, which cost $ 500 million to produce before marketing costs), and would probably be willing to invest similarly in series based on MGM IP, but will these series be produced by MGM? Or will Prime Video be able to mine its sister company’s library for projects?

And what about the two companies’ associated streaming companies? Epix, the MGM-owned pay-TV channel and streaming service that has tens of millions of subscribers, does not seem to fit naturally into Amazon. The tech giant would certainly prefer to move the content over to Prime Video, but cable car deals are likely to make such a move challenging, if not impossible.

IMDb TV is said to be a top priority for the company, which seeks to receive Paramount-owned Pluto and Fox-owned Tubi in space. Amazon has already renamed it once (it was launched as “Freedive”) and is said to be looking at another remark. Could an “Epix Free” or even “MGM TV” brand be that far away? Amazon revealed in February that their advertising business brought in $ 31 billion in 2021 and with exclusive NFL Thursday night football rights as of this year, the company appears to be serious about becoming a major player in ad-supported video.

And while the merger is complete, the regulatory risks are not over yet. While the FTC did not challenge the agreement within the statutory time frame, a Commission spokesman said after the conclusion of the agreement that although it “does not comment on any particular circumstances, … we reiterate that the Commission does not approve transactions and may challenge an agreement at any time. , if it establishes that it is in breach of the law. “

In other words, the FTC reserves the right to a post-close challenge, and when the commission gets a democratic majority (it is currently split 2-2 pending the nomination of Alvaro Bedoya), we can see more aggressive action.

MGM can ultimately hope to avoid the fate that befell United Artists after the acquisition 40 years ago. At the time, the companies promised regulators that the two would “remain autonomous, competitive studies” despite sharing joint ownership. “Would we buy UA … to liquidate it?” Rosenfelt quarreled Post in 1981.

Now, of course, the UA name only lives on in MGM’s distribution arm.

Amazon has always shaped itself as a forward-thinking company. In its very first shareholder letter in the company’s annual report for 1997, Bezos stated that it was “Day 1 for the Internet” and that the company would relentlessly focus on investing in what comes next. This “Day 1” philosophy now underlies Amazon’s culture (“Treat every day as if it were day one,” is a company slogan, and Hopkins ended his staff meeting with the phrase).

In entertainment M&A, the real value is increasingly not about studio label (Disney recently de- “Foxed” the former 21st Century Fox studios), but the content the studio owns and how it can use it in the future. Does Amazon see MGM the same way? The comments from Bezos suggest that it does. And what does “Day 1” for a 100-year-old company look like at all? For the large studio, it is an existential question.

Mia Galuppo, Borys Kit and Kim Masters contributed to this report.

A version of this story first appeared in the Hollywood Reporter magazine on March 23rd. Click here to subscribe.

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