Amazon and MGM combine to sound the clarion call for streaming in the second half

3, 2, 1 deal!

Congratulations to Amazon for its successful purchase of MGM Studios (Metro-Goldwyn-Mayer Studios Inc, MGM) for US$8.45 billion.

This Hollywood’s former gold-letter brand and a leading film and television production and distribution company with many IPs has now been acquired by Bezos with a big hand, and will become a part of Amazon Studios in the future.

Amazon said that MGM can help Amazon Prime Video to further its content production capabilities, while Mike Hopkins, senior vice president of Amazon Prime Video, said at the press conference that the true value of this transaction lies in the many hands of MGM. IP and its franchise rights.

In the field of streaming media, various platforms are in full swing. After Amazon won MGM, there were a few more trump cards in their hands, and they had the capital to compete with Disney+, which had just won over 100 million subscribers.

Tears of the times, MGM

Founded in 1924, MGM Studios is the oldest and most prestigious film production company in Hollywood. It has produced many well-known classic movies. In addition to the several classic IPs mentioned above, it also accompanied the 80s and 90s. The "Cat and Mouse" who grew up later, I believe that many people first saw MGM's iconic Lion Roar title from the cartoon.

In addition to cultivating its own creative ability, MGM has also played an indelible role in advancing the development of the world film industry. Louis B. Mayer, one of the founders of MGM, initiated the establishment of the American Academy of Motion Picture Arts and Sciences, and promoted Established the Oscars, and MGM, with its solid creative foundation, deservedly won the most Oscars so far.

However, in the 1950s, Hollywood studio giants collectively encountered Waterloo, and MGM was no exception.

In the 1930s and 1940s, in order to extract more profits, some large studios integrated the distribution and theater operations into the system. When resources are over-concentrated, a monopoly will inevitably be formed.

At its peak, the eight major Hollywood studios (Paramount, MGM, Twentieth Century Fox, Warner Bros., Raiden, Universal, Columbia, and United Arts) monopolized the distribution of more than 90% of American films and global films For 40% of the number, independent film producers have been suing the eight major studios for manipulation of distribution and price discrimination, which has made their living space become smaller and smaller.

In 1948, the "Paramount Act" came fiercely. This set of bills required that large production plants such as Paramount and MGM be required to only control films, not to balance distribution and theater business, and avoid monopoly. The chain was dismantled, and the eight major studios were accustomed to the moisturizing days under one-handed control. Now they are compressed and can only act as a bank, and instead provide funding and equipment support for other filmmakers.

▲ Paramount Studios

MGM, which was pushed by the torrent of the times, was no exception. It was forced to abandon part of its business. In addition to the popularity of TV and related businesses at that time, compared with people who originally needed to go out to the theater for entertainment projects, they now choose to sit at home Watching TV, and compared with movies, the acquisition cost of TV programs is lower and the frequency of consumption is higher.

So the films of that period turned to provide spectacles for the audience, which is what we often call blockbuster films nowadays. Blockbuster movies mean high budgets and high investment, but they also mean high risks. If the audience does not sell the accounts, the hard work this year may become useless.

According to statistics from the Motion Picture Association of America, only 1% of the films released between 1960 and 1968 had gross profit exceeding $1 million.

They all say, "It's not necessarily your colleague who killed you." This sentence has been verified in the film industry. Faced with years of losses, the eight major studios began to seek mergers and acquisitions. Paramount was acquired by Gulf and Western, Universal was acquired by Music Group of America (MCA), and MGM continued until 1966, and was subsequently acquired by Kirk Kerkorian, a wealthy American casino , Merged into its entertainment industry.

These Hollywood film giants ushered in a wave of revival in the 1980s, but it was not because of the recovery of the film market, but because they looked at the timely opportunity to merge with the media groups.

Time Warner, Murdoch Group, Vivendi Universal, and Sony were the new generation of entertainment giants that emerged during that period.

And MGM? At that time, it was sold and recovered by Kirklian. It was already a marginal asset of the group. Until 2005, Sony bought MGM for US$4.8 billion. At that time, MGM was already heavily indebted and had 20 debts. The billions of it was temporarily pulled back from the brink of bankruptcy by Sony.

But in the end, due to many complex factors such as old IP and backward production technology, MGM finally could not escape the fate of bankruptcy, and formally filed for bankruptcy in 2010. Since then, MGM has been looking for suitable buyers. Ten years later, it has finally waited for Amazon.

The ups and downs of MGM happen to be a microcosm of Hollywood in the last century. Times are changing. If you are not careful, you may fall from the peak to the bottom of the valley.

MGM was acquired only to allow users to spend more money on Prime membership?

This acquisition is the second largest acquisition in the history of Amazon's development. In 2017, Amazon acquired Whole Foods Market for $13.7 billion.

It now appears that the value of Amazon's acquisition of Whole Foods is not only for deeper offline retail, but also to consolidate the Prime membership system.

This strategy can also be applied to the acquisition of MGM. After all, the more rights and interests of Prime members, the more users are willing to renew Prime membership. Amazon CEO Bezos once said that investing in content can help The company's flywheel effect is mainly manifested in increasing the number of Prime member subscriptions.

In the initial Prime membership system, there was only one major benefit of unlimited free parcel delivery services, followed by the addition of free Prime Video, Amazon Music, unlimited album storage space, Kindle library service, and later, it will be exclusive to Prime members of Whole Foods Supermarket. discount.

At present, the number of Amazon Prime subscribers worldwide has exceeded 200 million, and the annual membership fee of 119 US dollars can be exchanged for all the above services.

▲ In 2020, the number of Prime members in the United States has reached 150 million, photo source: Viral-Launch

But if you think about it, Amazon’s acquisition of MGM does not seem to have an immediate effect on the number of Prime member subscriptions. Perhaps this time Bezos really just wants to consolidate his entertainment industry.

Can the fateful MGM usher in the "Renaissance"?

The combination of MGM and Amazon can actually be abstracted into another case of traditional film and television giants embracing streaming media.

Such a combination is not new: In order to transfuse its HBO max platform, Warner Pictures will not hesitate to announce that all new films will be screened online and offline in 2021. It would rather sacrifice the theater alliance to transform successfully; Disney also launched in November 2019 Its own streaming service Disney+ has so far exceeded 100 million subscribers. Starting from the launch of the original series, it took Netflix six years to reach the goal of 100 million users, while Disney only took less than three years; even the action Paramount, the slowest one, also launched Paramount+ streaming service at the beginning of this year.

There are more and more players in the streaming media field, and the original incremental market has now become a stock market. MGM has no energy, time or money to build its own streaming media platform, so there is only one way out: find a streaming media thigh.

In December last year, MGM officially entered the sale process. Bond's latest series 007: No Time to Die (No Time to Die) almost died because of this.

At that time, the market value of MGM was about 5.5 billion U.S. dollars. This figure was much lower than Amazon’s purchase price of nearly 8.5 billion U.S. dollars. According to media estimates, Amazon’s purchase price of 8.45 billion U.S. dollars would be about MGM 2021. The estimated annual earnings before interest, tax, depreciation and amortization are 37 times.

Bezos is a businessman, and it is impossible for him to trade at a loss. He is willing to spend this money because he feels that this money will ensure that he wins MGM, and this money can be earned back in the future.

And compared to the $11 billion that Amazon spent last year on Prime Video and music business, the purchase price does not seem to be expensive.

On May 13th of this year, Amazon has just recalled veteran Jeff Blackburn to manage Amazon’s Media and Entertainment Group, which includes Amazon Studios, Prime Video, Music (Amazon Music), Podcasts (Wondery), After the completion of the acquisition of games and Twitch and other businesses, a general will be added to the group.

Today, MGM’s resource library still has more than 4,000 movies and more than 17,000 TV shows, and its subordinates "007", "The Hobbit", "Terminator", "Rocky", and "The Silent Lamb" "A series of IPs are waiting for Amazon to explore.

These resources are very attractive to Amazon Studios. Since their founding in 2010, they have begun to solicit original scripts or short films from screenwriters and producers, select suitable content from them, and then shoot them.

Remember the 2016 "Manchester by the Sea"? That film tells a heartbreaking story. It is like a thorn, which has been stuck in my heart. After watching it for a long time, I can't calm down. The excellent script produced a wonderful chemical reaction through the wonderful interpretation of the actors. In the end, the film won 6 nominations for the 89th Oscar and successfully won the best actor and best original screenplay awards.

▲ Stills of Manchester by the sea

Amazon's Prime Video has therefore become the first streaming media platform that has made some achievements in mainstream movie awards, and it can be regarded as a staged initiative of Hollywood's acceptance of the Internet.

Subsequently, Prime Video also produced many excellent original series, such as "The Great Mrs. Maisel", "Black Robe Picket", "The Great Journey" and so on.

However, even if I consider myself a fan of American dramas, when I was collecting information, I found that in the original series of Amazon Studios, I can be called on the number, just the ones above, and most of the other content is not popular, and it is very popular. Impressed, there are not many landmark episodes.

Next door Netflix has "House of Cards", "Stranger Things", "Love, Death and Robots", and "Irish"; Disney+ has Marvel's IP vault; HBO max has Warner as its backer, and it will guide the editing version of Justice League. Driven by, this year’s number of new subscribers has achieved a phased victory.

The big guys are striding forward, and only Amazon is left, which has become a small transparency that works silently but is still forgotten.

This time Amazon has included MGM in the bag, and it has so many usable IPs all at once, at least in terms of original ability, it can be regarded as catching up with the first echelon. After that, can MGM become a renaissance and one of Amazon's entertainment empires. Whether the dream can come true depends on how Jeff Blackburn and Bezos' successor Andy Jassy (current AWE CEO) turned corruption into magic.

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