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 the intellectual property of United Artists. UA, a Hollywood icon itself, was behind films like Some Like It Hot, Raging Bull, One Flew Over the Cuckoo’s Nest, and, yes, the Rocky movies and the Bond franchise.
So MGM acquired UA, and its films, for some $380 million ($1.2 billion adjusted for inflation), with Frank Rosenfelt, MGM’s chairman, telling The Washington Post at the time that UA’s library would be critical as Hollywood transitioned “from the movie business to the entertainment software business.”
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“Just as everyone in the entertainment industry is anxious to buy into the profits of the new technology, so is the technology hungry to gobble up just about anything, old or new, that will entertain,” the Post’s Katherine MacDonald wrote of the deal, though the cutting edge at the time was cable TV and VHS cassettes.
Forty years later, those same titles are still being coveted to entertain through new technology. Except this time, the buyer is the tech company itself. For Amazon, its vision for MGM revolves around streaming Rocky Balboa and James Bond to the 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 cited UA classics like Rocky and Raging Bull, but also MGM projects like Thelma & Louise and The Silence of the Lambs, all of which are now part of the Amazon family.
Amazon founder Jeff Bezos, speaking to company shareholders the day the deal was announced in May 2021, said that it bought MGM because of its “vast, deep catalog of much beloved intellectual property,” and that it plans to “reimagine and develop that IP for the 21st century.”
Amazon, of course, is a behemoth, with revenue of $470 billion in 2021. MGM, by contrast, had 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 doesn’t break out its content spend, but in a best-case scenario it would barely crack $1 billion.
Amazon’s $8.45 billion acquisition of MGM, like MGM’s purchase of UA before it, was about looking for whatever it could find to entertain through the latest technology. But how much of that content will actually end up on Amazon’s streaming services? And when? With many films and shows tied up in deals with other companies, a Prime Video source tells The Hollywood Reporter it could be “years” before all of the MGM content is exclusive to Amazon platforms, but that the company will try to put some titles on Prime as quickly as possible.
And while Amazon highlighted some of the IP that it hopes to “reimagine,” it isn’t clear what form it will take, or when such projects could feasibly begin development. Could a Creed series move forward without the blessing of Michael B. Jordan, Ryan Coogler 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 is seen as less “premium” than the ad-free Prime Video?
Analysts think that Amazon, which already had a large library of content, will only become a more formidable streaming competitor with the purchase, and that the deal closing will only ramp up M&A interest. “Amazon Prime Video will add a ton of library content,” Wells Fargo analyst Steven Cahall noted in a March 18 research note, adding that the deal closing “allows these outside forces [tech firms] to keep their name in the running on potential M&A scenarios across the Media landscape.”
Before those questions can even be answered, the companies need to come together. On March 18, the day after Amazon closed the deal, MGM employees tuned in to a town hall that streamed from Amazon’s Culver City lot. Mike Hopkins, the senior vp of Amazon Studios and Prime Video, and the man who orchestrated the buyout, told employees that they were just beginning the process of figuring out how to integrate the company. However, he noted that MGM COO Christopher Brearton, motion picture group chairman Michael De Luca and worldwide television group chairman Mark Burnett would be joining his team. Jennifer Salke, who leads Amazon Studios, will also still report to Hopkins, putting her on equal footing with the top MGM leaders.
Amazon and MGM’s leadership have been the source of speculation tied to the deal, alongside the strategic questions around Amazon’s commitment to theatrical distribution, and what it will do with MGM assets like the pay TV and streaming service Epix.
But the emphasis on the interim nature of the leadership in the town hall did little to assure staff. One insider believes that De Luca and his top deputy, Pamela Abdy, will be offered the chance to stay and lead MGM’s film offerings. However, this person doesn’t believe that De Luca would do so — they weren’t sure about Abdy. “Mike won’t be able to make unilateral decisions anymore. At MGM, he had complete control and could greenlight anything he wanted,” the insider said. If they did depart, speculation in Hollywood circles is that Kevin Ulrich, the CEO of Anchorage Capital, which owned MGM until its sale to Amazon, would be interested in backing an independent label led by the duo.
De Luca and Abdy are credited with revitalizing the flagging studio, going toe-to-toe with moneyed players like Apple and Netflix for big projects including Licorice Pizza and the Ryan Gosling starrer Project Hail Mary.
They rebranded and resurrected studio labels, trading on MGM’s legacy. Orion Pictures, which relaunched in 2014 as the company’s genre-focused arm, is now run by agent-turned-producer Alana Mayo and houses projects from underrepresented talent. It has built out an impressive slate itself, landing Billy Porter’s directorial debut, What If?, and the feature adaptation of best-seller Crying in H Mart. Then there’s American International Pictures, which has found less success in securing notable projects but is meant to focus on titles that are set for limited theatrical and digital release.
Even if MGM functions autonomously within Amazon, the question of distribution remains unclear. United Artists Releasing, the distribution and marketing effort that was launched jointly by Annapurna and MGM, handles the studio’s domestic releases.
In a memo to staff on March 17, Hopkins said that the streamer would continue to partner with UAR on titles. What that distribution looks like may become a point of contention being that it is unclear if MGM titles will be getting an exclusive theatrical release or going day-and-date on Prime Video.
A major reason that Ridley Scott decided to go with MGM for his latest movie, House of Gucci, was due to a promised theatrical release (granted, Scott’s next movie, Kitbag, is at Apple), with the domestic release handled by UAR. Internationally, all of MGM’s projects are released by Universal.
Then there are MGM’s and Amazon’s TV businesses, which are run, respectively, by Burnett and Salke, the former president of entertainment for NBC. Many of MGM’s biggest TV shows, including The Handmaid’s Tale, Fargo, Survivor and The Voice, are tied up in existing deals with networks and streaming services. Prime Video originals, like The Marvelous Mrs. Maisel and The Wheel of Time, are of course exclusive to Amazon platforms.
While there is little overlap between MGM’s film business and Prime Video’s film business (Amazon has noted that Prime Video has been mostly focused on series and film acquisitions) the same can’t be said for TV. 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 accept sharing such responsibility?
Amazon has handed Prime Video enormous resources to develop series (see the first season of The Lord of the Rings, which cost $500 million to produce before marketing costs), and would presumably be willing to invest similarly on series based on MGM IP, but will those series be produced by MGM? Or will Prime Video be able to mine its sister company’s library for projects?
And what of the ancillary streaming businesses of the two companies? Epix, the MGM-owned pay TV channel and streaming service that has tens of millions of subscribers, would not seem to be a natural fit within Amazon. Surely the tech giant would prefer to move that content over to Prime Video, but cable carriage deals likely make such a move challenging, if not impossible.
IMDb TV is said to be a top priority for the company, which is looking to take on Paramount-owned Pluto and Fox-owned Tubi in the space. Amazon already renamed it once (it launched as “Freedive”) and is said to be looking at another rebranding. Could an “Epix Free” or even “MGM TV” brand be that far off? Amazon disclosed in February that its advertising business brought in $31 billion in 2021, and with exclusive NFL Thursday Night Football rights beginning this year, the company seems to be serious about becoming a major player in ad-supported video.
And while the merger has closed, the regulatory risks aren’t over just yet. While the FTC did not challenge the deal within the statutory timeframe, a commission spokesperson said after the deal closed that while it “does not comment on any particular matters, … we reiterate that the Commission does not approve transactions and may challenge a deal at any time if it determines that it violates the law.”
In other words, the FTC is reserving 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 may see more aggressive moves.
MGM may, ultimately, hope to avoid the fate that befell United Artists after its acquisition 40 years ago. At the time the companies promised regulators that the two would “remain autonomous, competitive studios” despite sharing common ownership. “Would we buy UA … to liquidate it?” Rosenfelt quipped to the Post in 1981.
Now, of course, the UA name lives on only in MGM’s distribution arm.
Amazon has always fashioned itself as a forward-looking company. In his very first shareholder letter in the company’s 1997 annual report, Bezos declared that it was “Day 1 for the Internet” and that the company would relentlessly focus on investing in what comes next. That “Day 1” philosophy now undergirds Amazon’s culture (“Treat every day like it’s day one,” is a company slogan, and Hopkins closed his staff meeting with the phrase).
In entertainment M&A, the real value is increasingly not about the studio label (Disney recently de-”Foxed” the former 21st Century Fox studios) but the content the studio owns, and how it can use it going forward. Does Amazon view MGM the same way? The comments from Bezos suggest that it does. And what does “Day 1” for a 100-year-old company even look like? For the storied studio, it’s an existential question.
Mia Galuppo, Borys Kit and Kim Masters contributed to this report.
A version of this story first appeared in the March 23 issue of The Hollywood Reporter magazine. Click here to subscribe.
