Has Amazon Paid Too Much? What is the fate of MGM film director Michael De Luca? How much will MGM TV boss Mark Burnett put into sales? (The answer: enough to bring his total revenue from multiple sales of his production banner to nearly $ 1 billion.)
The forward-looking question, however, is how Amazon can change once MGM is launched Jeff Bezos‘huge tent of e-commerce, web hosting services and media.
As the details of the MGM deal emerged, speculation also surfaced about Amazon’s long-term plans. Sources close to the situation say there have even been discussions about Amazon eventually spinning off the Prime Video and Amazon Studios units into a standalone entity. However, Amazon sources deny this.
Jeff BlackburnThe return from Amazon to Amazon earlier this month has been interpreted as a sign of impending movement for the device. Blackburn, the Amazon veteran credited with building the company, was on sabbatical for most of 2020, then quit in February. But on May 13, two weeks before the MGM acquisition was announced, Amazon surprised the business world by announcing that Blackburn would once again serve as senior VP of the newly created Global Media and Entertainment unit.
Amazon is already in the middle of a management change, as Bezos is handing over the CEO position to Andy Jassy, the long-standing head of the highly profitable Amazon Web Services division, on July 5th.
Industry sources say Amazon’s top bosses are increasingly paying attention to the regulatory environment in the US and Europe. There is concern among all big tech firms that Amazon, Apple, Google, and Facebook are being viewed as prime targets for breakup efforts, much like how Microsoft fought in the 1990s and early 2000s. The Global Media and Entertainment unit also hosts Audible, Twitch, Amazon Music, and Amazon Games.
Negotiations on the deal, which includes approximately $ 2 billion in MGM debt, have come together quietly for the past nine months or so. Insiders say the majority of the conversation was over phone and video conferencing between Mike Hopkins, Amazon’s senior VP of Prime Video and Studios, and Kevin Ulrich, CEO of Anchorage Capital Group, the mutual fund that was the majority owner of MGM.
Conversations focused solely on the price tag for sale. Decisions about the fate of MGM’s executives and how the studio itself will operate within Amazon Studios’ infrastructure were not addressed. That sparked a tussle between key players like De Luca, Burnett and Amazon Studios director Jennifer Salke, who is now overseeing an original content budget of nearly $ 8 billion, immediately after the announcement. Amazon insiders say they are not considering a scenario that would lead to major changes for Salke.
The only certainty at this stage is that Burnett is poised to come out of the sale with an estimated profit of approximately $ 200 million. He and his wife and business partner Roma Downey were the third largest shareholders in MGM behind Ulrichs Anchorage and Highland Capital Management. The two sold their One Three Media production banner (a joint venture with Hearst) to MGM in two transactions in 2014 and 2015, valued the company at $ 650 million. In 2015, the couple received more than half of their second payout in MGM shares instead of cash. That turned out to be a good bet on sales of $ 8.5 billion.
Ulrich fired former MGM chairman Gary Barber in 2018 after attempting to orchestrate the sale of the studio to Apple for $ 6 billion. At the time, Ulrich was the subject of industrial giggles that he didn’t want to forego red carpets in his entrée, with A-lists and other trappings of Hollywood mogulship.
Sources who worked with the hedge fund manager say he always focused on leaving MGM – at the right time and at the right price. Ulrich’s confidence in MGM’s appeal to buyers as the streaming wars began to rage has been proven by all of the things MGM has not done in the past two years.
MGM has chosen not to open its vault for content licenses or reboots. It did not search its library to develop traits attached to characters in such well-known titles as “Rocky”, “The Pink Panther”, “Legally Blonde”, “Four Weddings and a Funeral”, “RoboCop” and “The Graduate.” “are bound.”
MGM’s revenue could easily have been replenished through content deals for marquee titles. But that would also have locked those assets in the short term with films and television series that would be committed to competing platforms. Part of MGM’s appeal to Amazon was that much of its library has yet to be dismantled for new content offerings. In fact, a source close to the situation says that the greatest asset Amazon is gaining from the deal is not the library per se, but the key to an intellectual property vault that has potential far beyond the existing one Goes beyond MGM’s list of 4,000 films and 17,000 TV episodes.
The James Bond franchise is, of course, the huge exception as it is jointly owned with Eon Prods. ‘ Barbara Broccoli and Michael G. Wilson, who retain their veto rights against the use of Agent 007.
Even without the renowned spy, the abundance of material Amazon gets for its $ 8.5 billion will set the company apart from Netflix and Apple in the race to build global streaming media platforms.
“You only think Amazon paid too much for this deal if you have absolutely no imagination,” says a senior executive who is involved in the deal.
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