Another day, another media acquisition

Amazon's purchase of MGM is the latest big studio deal, but it's unlikely to be the last

Minor programming note before I get started…I’ll be traveling over Memorial Day weekend on a mini-vacation so will likely miss this Friday and Monday but your regular Scrawler programming will return Wednesday, June 2.

✍️ The big story

On Wednesday, Amazon announced it was acquiring Metro-Goldwyn-Mayer (MGM) for $8.45 billion in a deal that would bolster its streaming library and continue a trend of consolidation in the media industry.

MGM has been around for nearly a century and was once one of the most highly esteemed studios in Hollywood, but it has struggled over the past several decades to regularly produce many breakout hits. In an industry heavily tilted toward superhero franchises these days, the MGM intellectual property (IP) catalog is decidedly old school, consisting of figures like James Bond, Rocky, the Pink Panther, and RoboCop.

Boosting Prime Video

What MGM lacks in recent blockbusters it makes up for with a content library of 4,000 films Amazon could use to boost its on-demand Prime Video offering, particularly at a time when other studios are pulling back on licensing deals and rolling out their own streaming services.

Disney, for instance, has leveraged its acquisition of Marvel and Lucasfilm to anchor its launch of Disney+ streaming service; WarnerMedia has done the same with its HBO and Warner Bros. catalog to get people to sign up for HBO Max. Both of those companies have realized that their IP—which they might have previously licensed out to Netflix or Amazon—is much more valuable on their owned streaming properties.

With fewer potential video licensing partners, Amazon was placed in a position where it would either need to build or buy its own content to satisfy Prime Video customers. And as others have noted, Amazon Studio’s track record of movie and TV show production has been spotty, at best. Here’s Recode’s Peter Kafka:

Amazon has been making and buying its own TV shows and movies since 2013 — the same year Netflix got into streaming its own stuff with House of Cards. But you probably don’t remember Amazon’s first shows — Alpha House? Betas? — and you probably can’t think of many Amazon shows at all, except for Transparent and a few others. Which gives you a sense of how all over the place Amazon’s efforts to break into Hollywood have been, despite the fact that Jeff Bezos has spent a lot to make it happen.

In truth, Prime Video didn’t need to have the latest and greatest content, as the Amazon Prime offering makes up just a tiny portion of the company’s topline revenues. But it needed to do something to keep its library stocked with so many other studio titles off the table.

Go big or go home

There’s a reason there’s been so much consolidation in the media industry lately. Amazon’s MGM purchase is just one more in a series of mid-sized studios finding a home within a larger media company—or at the very least, in a highly profitable tech player.

From Disney’s acquisitions of Pixar, Marvel, and Lucasfilm to WarnerMedia’s tie-up with Discovery, it’s becoming ever clearer that there’s no operating leverage in being a smallish or even medium-sized media player.

You either operate as part of a behemoth that can package your titles with thousands of other pieces of content from other parts of the business, or you find yourself licensing your IP to other streaming players, or you find yourself launching a streaming service of your own that is unlikely to succeed.

It’s why, before this latest wave of consolidation is over, we’ll probably see AMC or Lionsgate swallowed up by one of the larger players. Comcast could find a new home for some—or all—of its NBCUniversal arm. ViacomCBS could be a buyer or a seller. And Sony Pictures might finally be spun out of the eponymous consumer electronics manufacturer.

MGM was never going to be successful as just a licensor of Bond films or by trying to launch its own streaming service, and it’s unlikely AMC, Lionsgate, Viacom or Sony would fare much better.

📖 What I’m reading

How a 17-year-old’s birthday party became the biggest thing on the Internet [NYTimes]
A fascinating case study in the intersection of online and offline when something seemingly innocuous goes viral.

Heat List [The Verge]
What happens when predictive policing goes wrong.

Brian Chesky describes a faster, nimbler post-pandemic Airbnb [TechCrunch]
”Travel as we know it is over. There is a new kind of travel emerging and it’s a blur between living and travel.”

Meet your next angel investor. They're 19 [Wired]
They are also probably a TikTok or YouTube influencer.

The influencers are burned out, too [Vox]
Speaking of TikTok influencers…

🧘‍♂️Your moment of zen