Why Amazon Spent $8.5 Billion to Land MGM, and What’s Next for the Studio Behind James Bond

B25_39456_RC2James Bond (Daniel Craig) and Paloma (Ana de Armas) inNO TIME TO DIE an EON Productions and Metro Goldwyn Mayer Studios filmCredit: Nicola Dove© 2020 DANJAQ, LLC AND MGM. ALL RIGHTS RESERVED.
Courtesy of Nicola Dove/Danjaq/MGM

Amazon bought MGM for its history — but not necessarily its standalone future.

The e-commerce giant surprised Hollywood on Thursday by announcing the completion of its $8.5 billion acquisition of MGM, an iconic Hollywood brand whose presence in the modern entertainment industry has diminished over time and numerous changes in ownership since the mid-1980s.

The Federal Trade Commission had suggested it might object to Amazon’s purchase of MGM, raising the prospect of a long fight. On the heels of Thursday’s closing announcement, the FTC still raised the threat of a future challenge to the combination.

Analysts expect the tech company to try and exploit MGM’s best-known pieces of intellectual property for future gain — but don’t believe the studio has a long path ahead as a separate, influential entity.

“The reason for the acquisition seemed like they were after the big titles, the intellectual property, which of course, first and foremost, meant the James Bond franchise,” said Peter Newman, head of Tisch School of the Arts’ MBA/MFA program at New York University.

For now, the expectation is that the bulk of MGM’s roughly 800 staffers will move to Amazon, where the company will operate, at least initially, as an independent label. That includes the studio’s motion picture group chairman Michael De Luca and motion picture group president Pamela Abdy, who have been credited with landing a group of buzzy projects. Amazon has not revealed a reporting structure, but the senior team of MGM will part of the organization that’s led by Mike Hopkins, head of Prime Video and Amazon Studios.

If he remains, De Luca has deep relationships across the creative community that could be helpful to Amazon as it looks to bolster its content. At MGM, he landed Paul Thomas Anderson’s “Licorice Pizza,” Joe Wright’s “Cyrano” and Ridley Scott’s “House of Gucci,” and is producing such upcoming projects as a remake of “Fiddler on the Roof,” which will be directed by “Hamilton” wunderkind Thomas Kail, and “Project Hail Mary,” an adaptation of “Martian” author Andy Weir’s novel of the same name that stars Ryan Gosling. Of the films that have been released, “Licorice Pizza” scored an Oscar nomination for best picture, but lost money, as did “Cyrano” and “House of Gucci.” “Dog,” a $15 million drama that was co-directed by and stars Channing Tatum and a film that De Luca greenlit, was a hit, earning $50 million.

Barbara Broccoli and Michael G. Wilson, the producing team behind the James Bond series, have creative control over the movies and have made it clear that future 007 films will debut in cinemas. Analysts believe that it is Bond that drove Amazon’s acquisition. The spy series continues to be popular and there’s the potential that it could be built out to include shows and other spinoffs, although those would require the sign-off of Broccoli and Wilson.

“Hollywood is crazy over IP right now and Bond is one of the biggest ones there is,” says Jeff Bock, an analyst with Exhibitor Relations. “In order to unlock its true potential though, there need to be TV shows and other ancillary properties. Purists may not like that, but you know what, those purists are on their way out.”

Of course, Bond also is in a period of transition. The series wrapped up Daniel Craig’s acclaimed run last year with “No Time to Die” and the keepers of 007 must now find a new actor to handle the role and to help continue to find ways to make the womanizing spy relevant in a changed world.

Beyond Bond, there are other ways that Amazon can get its money’s worth. Over time, suggested Newman, the MGM library will be used to drive Amazon’s broader relationship with consumers, who already use the company to buy books, music, household goods and more. “While the MGM name is legendary, I don’t know what the brand means to people under a certain age,” he said.

Amazon is likely not to be as interested in traditional means of distribution that don’t lend some boost to its broader commerce business, and is likely to focus heavily on marquee projects that will get consumers to keep a connection to the company through a Prime subscription.

Amazon is betting on MGM to help it move forward in Hollywood’s streaming wars, in which victory hinges on attracting new subscribers, then keeping them as big entertainment projects ebb and flow. Wall Street has paid heavy attention to the number of consumers taking out new subscriptions to venues like Disney Plus, Peacock, Netflix and Paramount Plus. But Amazon’s fortunes don’t rise and fall based on its entertainment business. Amazon and Apple are perhaps the only two streaming combatants who have the luxury of knowing that “the content and entertainment are not the principal sources of revenue — not by a long shot,” said Newman.

When Amazon started making its own in-house films, it initially embraced traditional theatrical distribution. But that has changed. Under Jennifer Salke, Amazon has more aggressively emphasized streaming, with films such as “Being the Ricardos” and “Coming 2 America” debuting on Prime. In the case of MGM, many of the movies that are in the works will have some form of exclusive theatrical release because that was part of their contractual agreements. It has yet to be decided, however, how long theaters will have an exclusive window on the MGM movies that have yet to debut and if they will align with the 45 days that most studios have embraced during the pandemic.

The hope is that Amazon can find franchises and pieces of intellectual property in MGM’s library of 4,000 films that it can revive as feature films or spinoff shows. MGM controls the rights to the “Rocky,” “Legally Blonde,” “Stargate,” “The Pink Panther” films, among others. Many of these titles have been relatively recently updated — “Rocky” has begat three “Creed” movies since 2015. “The Pink Panther” has been remade with Steve Martin filling in for Peter Sellers as the bumbling Inspector Clouseau.

On the television side, MGM has slowed down in recent years after coming back into the episodic series in a big way with hits like Hulu’s “The Handmaid’s Tale” and FX’s “Fargo” anthology series. MGM also has several long-standing home entertainment distribution deals that must be honored, which could impact when the movies it makes land on Prime. The companies also have yet to decide how to capitalize on Epix, the cable network that MGM owns.

More details will emerge at a virtual town hall that will be held on Friday. But for now, many MGM employees seem relieved that the deal has finally closed even if they still have many questions about what it will mean for their jobs.

“At least now, maybe we’ll get some clarity,” said one MGM staffer.