In the ultimate symbol of one Hollywood era ending and another beginning, Metro-Goldwyn-Mayer, home to James Bond and Rocky, finally found a buyer willing to pay retail: Amazon.
The e-commerce giant said Wednesday that it would acquire the 97-year-old film and television studio for $8.45 billion – or about 40% more than other prospective buyers, including Apple and Comcast, thought MGM was worth. The studio, which had been shopped around for months, was once home to “more stars than the heavens,” as Louis B. Mayer liked to brag. But its vast production lot and pre-1986 film library were sold off decades ago. (Sony Pictures now occupies the lot, and Warner Bros. owns classic MGM films like “Singin’ in the Rain,” “The Wizard of Oz,” and “Gone With the Wind.”)
MGM does come with one Hollywood crown jewel: James Bond.
But even 007 has an asterisk. Amazon will own only 50% of the spy franchise. The balance is held by Barbara Broccoli and her brother, Michael G. Wilson. The siblings also have ironclad creative control, deciding when to make a new Bond film, who should play the title role and whether television spinoffs get made. (They have blocked such efforts in the past.)
The 25th installment in the Bond series, “No Time to Die,” is scheduled for pandemic-delayed release in theaters on Oct. 8, with Universal Pictures handling overseas distribution.
So why did Amazon pay such a startling premium?
For starters, it can. The company has $71 billion in cash and a market capitalization of $1.64 trillion.
But Jeff Bezos, Amazon’s founder and chief executive, is known as a conservative buyer. The purchase of Whole Foods for $13.4 billion in 2017 was the biggest acquisition in Amazon’s history. Its next-largest deals – until MGM – were for Zappos ($1.2 billion, 2009) and the smart doorbell company Ring ($1.2 billion, 2018).
The Whole Foods deal was a major strategic change for the company, pushing it into new markets of groceries and physical stores, which it had largely avoided. MGM is more about augmenting a current strategy: Amazon most likely paid more than others thought MGM was worth because of its all-important Prime membership program.
In addition to paying Amazon $119 a year or $13 a month for free shipping and other perks – notably access to the Prime Video streaming service – households with Prime memberships typically spend $3,000 a year on Amazon. That is more than twice what households without the membership spend, according to Morgan Stanley. About 200 million people pay for Prime memberships.
“More and more Prime members are using video more often, spending more hours on there, so I think this is a way to add more content and more talent around movies,” said Brian Yarbrough, a senior analyst at Edward Jones.
“This isn’t one studio buying another,” he added. “If you’re Amazon, the perspective is what’s the potential for Prime membership, what is the potential for advertising.”
In buying MGM, Amazon is bolstering Prime Video at a time when the biggest old-line studios are becoming less willing to license their libraries to outside streaming services; Warner Bros., Walt Disney Studios and Paramount Pictures must now supply corporate siblings like HBO Max, Disney+ and Paramount+.
That shift has made independent film libraries more valuable. In recent weeks, Sony Pictures licensed its old films and TV shows to Netflix and Disney in deals valued at more than $3 billion, a sharp increase from the expiring licensing agreements. Sony does not have a streaming service, unless you count the game-oriented PlayStation Network.
Although its library is diminished, MGM still owns 4,000 older movies, including pre-1986 films that come from two MGM divisions, United Artists and Orion. Those movies include “Rocky,” “RoboCop,” “The Pink Panther,” “Silence of the Lambs” and the James Bond catalog. (Fun fact: In true Hollywood fashion, MGM’s roaring lion mascot is lip-syncing; a cranky tiger sounded more ferocious.)
In addition, MGM has several movies in its pipeline that could be Oscar contenders, including “Respect,” an Aretha Franklin biopic starring Jennifer Hudson; Ridley Scott’s “House of Gucci,” starring Lady Gaga and Adam Driver; and Paul Thomas Anderson’s latest project, which stars Bradley Cooper in his first film since “A Star is Born.”
Amazon’s appetite for movies became ravenous during the pandemic. It paid $125 million for the rights to “Coming 2 America,” $80 million for “Borat Subsequent Moviefilm,” and $200 million for “The Tomorrow War,” a Chris Pratt adventure that will arrive on Prime on July 2. Amazon also has Oscar ambitions, buying the rights to “Sound of Metal,” which was nominated for best picture and other top awards at the most recent ceremony.
When it comes to making its own hit films, Amazon has long struggled. MGM managers could help: Michael De Luca, MGM’s movie chairman, has a track record that includes, at various companies, the “Rush Hour,” “Austin Powers” and “Fifty Shades of Grey” franchises.
MGM also has a television studio that makes “Vikings,” “The Handmaid’s Tale” and various “Real Housewives” shows. In 2014, MGM acquired Mark Burnett’s production company, One Three Media, which holds rights to competition series like “The Voice,” “Survivor” and “Shark Tank.” Burnett, a contentious figure in Hollywood because he helped shape Donald Trump’s image with “The Apprentice” and remained close to him during his divisive presidential term, serves as MGM’s television chairman.
Anchorage Capital, a New York investment firm, has been the majority owner of MGM for more than a decade. Before that, MGM was tossed between owners and, bitten by falling DVD revenue, eventually ending up in bankruptcy. It was worth about $2 billion in 2010, according to analysts.