It’s official: Amazon buys James Bond
27/5/2021
Translation: Veronica Bielawski
Last week, industry insiders reported Amazon was close to acquiring MGM, the movie studio behind James Bond. Now, it’s official. What does this mean for the film and movie-theatre industry?
It’s the largest acquisition in Hollywood made by an Internet company to date: Amazon has bought Metro Goldwyn Mayer, the movie studio behind the «James Bond» franchise. Amazon and MGM announced this in a joint press release. As reported last week, the purchase price is 8.45 USD.
This marks Amazon’s largest corporate acquisition since its controversial acquisition of the supermarket chain Whole Foods for 13.7 billion USD in 2017. Apple and Comcast – the parent company of Universal Studios – had also expressed interest in MGM. But in the end, Amazon seems to have made the best offer.
Let’s talk about what this means.
MGM sale is no surprise
The fact that MGM Studios was for sale in the first place is not news. In fact, the Wall Street Journal had already reported last December that MGM had joined up with investment banks Morgan Stanley and LionTree LLC. The message was clear: «We’re for sale.» MGM was estimated to be worth about 5.5 billion USD at the time.
Then came Amazon with its offer of 8.45 billion USD.
An offer that MGM couldn’t refuse. But the trade magazine The Information had, in fact, already estimated in mid-May that MGM was aiming for a sales price of 7 to 10 billion USD. After all, the company has a vast portfolio to offer potential buyers – about 4,000 movies and 17,000 hours of TV, according to The Guardian.
Financially, it probably wasn’t too difficult for Amazon to secure the required money. After all, the American Internet giant is sitting on around 71 billion USD in cash reserves, according to the NZZ. And while the Whole Foods acquisition was a risky venture into completely uncharted territory, purchasing MGM will plainly strengthen Amazon’s already existing movie business.
Amazon is not only the world’s largest Internet retailer, but also the largest cloud service provider – see Amazon Web Services, AWS. And Amazon is one of America’s most important logistics providers, delivering more packages than the national postal service. But Prime Video, Amazon’s streaming service, remains the company’s real marketing powerhouse.
Is the purchase of MGM a way of sending a signal to competitors?
Amazon’s crowd puller: Prime Video
What’s certain with the acquisition of MGM is that Amazon also wants to be at the forefront of the streaming business in the long term. It already is. The U.S. giant currently has 200 million Prime customers and subscribers worldwide. That’s more than the 100 million subscribers that Disney+ amassed in one single year. But it’s still less than the 208 million subscribers that the market leader Netflix has.
The U.S. domestic market looks somewhat different: Netflix is, in fact, also the market leader there with 66 million subscribers, which puts it ahead of Prime (48 million subscribers) and Disney+ (37 million subscribers). But if we add the 35 million Hulu subscribers to the Disney+ subscribers (Hulu is a subsidiary of Disney), we get a different picture: Amazon ends up only in third place, behind both Disney and Netflix.
Amazon wants to change this.
And it’s no wonder – for Amazon, Prime Video isn’t just a streaming service; it’s a crowd puller. If you sign up for a membership in the U.S. for 119 USD – or 69 EUR in Germany and Switzerland – your Amazon orders get delivered faster. In the U.S., you also get discounts at Whole Foods supermarkets. And, of course, you get access to the world of Amazon streaming.
This is how Amazon makes a mint of money. Last quarter, the company took in 7.6 billion USD in membership fees alone. In addition, Prime customers are extremely lucrative and loyal. On average, they spend 3,000 USD per year – more than twice as much as non-Prime customers.
And so, it goes without saying that Amazon is making an effort to keep in line its more than 200 million Prime customers worldwide. This is also one of the reasons why the U.S. giant secured the broadcasting rights for the National Football League’s Thursday night games for 1.2 billion USD per season until 2033.
But the competition isn’t lying dormant.
The world of movie theatres and streaming is changing
This is at least in part due to the coronavirus pandemic. Arguably, it has changed the film and movie-theatre landscape forever. Film studios were increasingly forced to release movies on streaming services instead of in movie theatres. This has resulted in explosive growth for streaming services.
Let’s take a look at the numbers: Just recently, still-CEO-of-Amazon Jeff Bezos reported that the number of hours streamed had increased by 70 per cent compared to last year.
This, too, is part of the new reality that has given rise to new business models. Disney, for example, has made its «Mulan» experiment – releasing a new movie only via streaming – the new standard. At least in 2021. Movies like «Cruella», «Raya» and «Black Widow» are getting or already have got a simultaneous release. This means they’ll be released simultaneously in movie theatres and on the streaming service – with an additional VIP fee on the latter.
Disney CEO Bob Chapek recently didn’t rule out the possibility of the VIP business model remaining in the future, even after the pandemic is over, under the guise of «flexibility».
Well, we haven’t really – beyond this current fiscal year, we’ve not really said what we’re going to do because again, we’re celebrating that flexibility that we’ve given ourselves, so that we’re not going to make a decision and sort of regret it depending on the rate being too conservative or too aggressive.
According to Bob Chapek, Mark Zoradi, CEO of the U.S. cinema chain Cinemark, has also estimated that it could be years before viewers flock back to movie theatres in pre-pandemic crowds. Accordingly, many film studios are switching to the streaming model – at the expense of cinema operators.
Spearheading the switch is Warner Bros.
The film studio with Hollywood’s most famous water tower already announced as much last December: this year, it will release all theatrical motion pictures both in theatres and on HBO Max (its in-house streaming service) simultaneously, for free, though only for a few weeks.
In addition to this, there’s the set-in-stone merger of the media company WarnerMedia and Discovery. The newly formed company that would include the Warner Bros. film studio and the renowned Discovery Channel Group would generate more than 40 billion USD in annual revenues. While that’s not quite as much as Disney with 65 billion USD last year, it’s more than Netflix with 25 billion USD in the same period.
The people in charge at WarnerMedia and Discovery are obviously interested in catching up to the big players on the field. Especially in the streaming sector. The fact that this can’t be done with just HBO Max and Discovery+ alone hasn’t gone unnoticed. Neither has the fact that the planned merger will create a new serious rival in the market.
Exactly this might be the thorn in the side of Amazon and its Prime Video streaming service. Buying MGM helps Amazon face the looming streaming competition.
What does MGM have to offer?
Just how much subscriber growth the addition of MGM’s franchises to Prime’s catalogue might cause is anyone’s guess. But what’s certain is that MGM is once of the most renowned and long-standing film studios of all time. Some of MGM’s most interesting movie franchises include «Hobbit», «Rocky», «Creed» and «RoboCop». Then there are the film classics such as «The Silence of the Lambs», «The Magnificent Seven» and «Four Weddings and a Funeral».
Who knows if there won’t be suitable overlapping with the planned «Lord of the Rings» series.
MGM also owns quite a few series, including «Stargate SG-1», «Stargate Atlantis», «Vikings», «Fargo», «The Handmaid’s Tale», «Condor» and «Fame».
But MGM’s biggest gem is «James Bond».
Funnily enough, there was speculation last October about whether Netflix or Amazon Prime Video might be interested in exclusive distribution rights to the forthcoming James Bond movie, «No Time to Die».
Could we see a simultaneous release of James Bond, à la Disney or Warner Bros., once the acquisition is complete?
It seems unlikely. The franchise lives off its product placement deals – like with Land Rover, Omega, Nokia and Heineken, to name a few. These companies have set up these deals with the big screen in mind, not living rooms. The latter simply doesn’t match the luxury and glamour the Bond franchise emanates.
So if Amazon insists on an exclusive or partial streaming release, these deals will have to be renegotiated. Above all, they’re then likely to be significantly less lucrative. And importantly, Disney CEO Bob Chapek himself agreed that not all franchises are suited for simultaneous release.
Theatrical exhibition for us is a very good thing because it helps us build our franchises, which then turned to Disney flywheel and create so many opportunities across parks and consumer products.
In addition, MGM (and thus Amazon) owns only half of the James Bond film rights. The other half still belongs to traditionalist Barbara Broccoli. She’s the daughter of legendary Bond producer Albert «Cubby» Broccoli, who created the film series in the 1960s and shaped it until his death. She’s considered a true champion of cinema.
Still, the investment of nearly 8 billion USD will certainly be observed – and proved worthwhile – when the subscriber count increases, at the latest when Amazon launches any James Bond spin-off series for Prime Video. The MGM takeover is therefore likely to be the first but not only example of how the film industry is trying to survive in a post-pandemic world by allying with the tech industry. There’s certainly no shortage of potential buyers.
Apple, for example.
Luca Fontana
Senior Editor
Luca.Fontana@digitecgalaxus.chI'm an outdoorsy guy and enjoy sports that push me to the limit – now that’s what I call comfort zone! But I'm also about curling up in an armchair with books about ugly intrigue and sinister kingkillers. Being an avid cinema-goer, I’ve been known to rave about film scores for hours on end. I’ve always wanted to say: «I am Groot.»
