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Source: MGM

It took a while, but after years of speculation over the fate of MGM and whether a streamer would ever buy a Hollywood studio, Amazon has obliged and snapped up the 97-year-old company for an eye-popping $8.45bn.

This could be a game-changer for Amazon. Many have baulked at the price tag, but it’s pocket change for an e-commerce titan with a $1.6tn market capitalisation run by the world’s richest person. Founder and outgoing CEO Jeff Bezos (Andy Jassy assumes the role on July 5; Bezos becomes executive chairman) and his lieutenants know MGM’s storied library could become the gift that keeps on giving.

In the right hands, there’s no reason why a treasure trove of 4,000 films and 17,000 hours of TV cannot drive growth in Prime membership. Bezos said in an earnings call in April that more than 175m Prime members have streamed video in the last year, up 70% year-on-year. Once Amazon clears US regulatory hurdles, which it is expected to do without too much fuss, it can start building a vast entertainment hoard on Prime Video.

Better yet, when output commitments on various pieces of content come to an end in the years ahead, Amazon Studios can explore myriad opportunities through remakes, reimaginings, and spin-offs.

It remains to be seen whether MGM runs essentially as a separate entity (as Whole Foods has done since Amazon paid $13.7bn for it) or an integrated content division. Also on the to-do list is figuring out how Amazon Studios head Jennifer Salke and MGM’s film and TV heads Michael De Luca and Mark Burnett and their teams will align within the global media unit that returning Amazon executive Jeff Blackburn will run.

Sources have suggested the pressing matter of how to release MGM’s 2021 slate appears to have been settled in favour of honouring theatrical release commitments. This is wise stewardship, particularly in the case of James Bond, the jewel in the MGM crown whose two dozen movies have grossed around $7bn worldwide over the decades.

As owner of MGM, Amazon now controls half of the 007 property. Eon Productions controls the other half, and Barbara Broccoli and Michael G. Wilson have been clear they want the superspy in cinemas, starting with No Time To Die  in autumn. Salke and her team have been in the content and talent relations game long enough to know close collaboration with Eon will matter – and yield financial rewards. Think of all the ways the partners can monetise the brand.

Who will be next?

While this could be a game-changer for Amazon, it will certainly be a game-changer for streaming, and by extension studios. Now that streamer-buys-legacy studio has become a reality, it raises the stakes, ramps up the competition, and begs the question, ‘Who will be next?’

Does Netflix, a pure content company that needs to put shiny new things in the shop window to keep subscribers from jumping ship to a rival platform, buy a target content owner? It has first mover advantage and Ted Sarandos and Reed Hastings know it will take years for Amazon Studios and others to catch up to its massive production operation, but don’t rule that out.

Maybe Apple goes shopping. The obvious acquisition target is Lionsgate. There is also STX, which is owned by India’s Eros, although Amazon-MGM and Discovery-WarnerMedia remind us that ownership can change should the opportunity arise.

Sony Pictures Entertainment is off the block for the time being in light of its lucrative pay 1 and pay 2 deals with Netflix and Disney, but it’s not inconceivable that several years down the line, if it hasn’t built out Sony PlayStation or another in-house streaming service, parent Sony Corp might be minded to revisit the licensing strategy and accept an offer.

The pandemic has precipitated fundamental change in the theatrical window and alerted exhibition to the need for flexibility and dynamism in today’s entertainment landscape. The Amazon-MGM deal has revealed the exposure of studios and mini-majors that don’t exist within a larger corporate stable with streaming infrastructure and ambition.

Theatrical will continue to play an important role in revenue waterfalls for the right movies at MGM and other studios and distributors. However the old approach of throwing a movie into the market and seeing what sticks is on the way out, and theatrical heads know they are no longer the only option for consumers.

You could feel it in the air at last week’s ‘The Big Screen Is Back’ sizzle reel presentations in Los Angeles. If you’ve got the goods, theatrical will work. If not, there are other distribution avenues. Either way, Amazon-MGM deal reminds us that today, streaming is the endgame.