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Amazon agrees to buy MGM, uniting Hollywood old and new

The combination of a tech giant with an embattled studio aims to recharge both companies’ fortunes

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Amazon will buy MGM parent MGM Holdings from its investment-group owners, paying $8.45 billion to put the historic studio of “Rocky,” “The Pink Panther” and James Bond in the hands of the retailing giant.

The price is several billion dollars higher than many analysts thought the company was worth, but finally appeared to be enough to sway MGM’s board, which for years couldn’t agree on a sale.

The move aims to bring much-needed assets to both sides. Like many recent Hollywood entrants, Amazon has struggled to locate the deep well of content enjoyed by Disney, Paramount and other traditional studios.

And like many traditional Hollywood players, MGM has struggled to keep up with modern Hollywood, in which deep pockets and digital distribution rule the day.

Now the two entities are coming together, hoping they can achieve together what they have been unable to do apart.

“The real financial value behind this deal is the treasure trove of [intellectual property] in the deep catalogue that we plan to reimagine and develop together with MGM’s talented team,” Mike Hopkins, Amazon’s senior vice president of Prime Video and Amazon Studios, said in a statement announcing the deal. “It’s very exciting and provides so many opportunities for high-quality storytelling.”

MGM Chairman Kevin Ulrich said in the same statement: “The opportunity to align MGM’s storied history with Amazon is an inspiring combination.”

MGM — which began life as Metro-Goldwyn-Mayer in the 1920s, making movies such as the original “Ben-Hur” — is owned primarily by some half-dozen investment groups. They include the New York hedge fund Anchorage Capital, which controls 35 percent of the company and is led by Ulrich. The board has resisted overtures from traditional media companies in the past, with some thinking that more could be done to monetize the properties internally.

MGM also features an unusual chief executive structure — namely, it doesn’t have one. The role, which for years had been occupied by the longtime Hollywood producer Gary Barber, is now filled by a handful of the company’s division heads that make up MGM’s “office of the CEO.”

How Big Tech got so big: Hundreds of acquisitions

The $8.45 billion deal is the second-largest dollar amount Amazon has paid for a company, behind its purchase of Whole Foods for $13.7 billion in 2017 but well ahead of acquisitions such as Zoox, an autonomous-vehicle company, which Amazon bought for $1.2 billion last year. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)

Left unclear in the announcement is what management roles Jennifer Salke, who runs Amazon Studios, and Michael De Luca, a longtime producer who became the head of MGM’s film group last year, would have in the combined entity. Either would probably report to Hopkins, a former Sony Television executive Amazon hired last year.

Also ambiguous is the theatrical future for new titles. MGM has a long-standing history in movie theaters, but Amazon has recently shied away from putting many of its releases in them.

The deal brings together old and new, cash-strapped and moneyed, for what each side hopes could be a sum greater than its individual parts. It is an uncharacteristically older acquisition for Amazon, whose targets have generally been new firms and start-ups.

In MGM, Amazon will gain a key weapon to attract people to Prime Video, its entertainment subscription platform, just days after Warner Media sought to supercharge HBO Max by combining with unscripted powerhouse Discovery. Netflix and Disney Plus are the category leaders.

Amazon has been aggressive on the television side, spending notably in recent years to create its own content. But it has sometimes struggled to find its place in the television firmament, with scattered hits such as “Transparent” and “Fleabag,” but not a consistent roster of successes. One of the company’s better-known properties became famous for reasons other than creative results — a “Lord of the Rings” TV series that has made headlines for costing a reported $465 million for one season.

MGM offers a steady stream of TV hits such as “The Voice,” “Fargo” and “The Handmaid’s Tale.”

Amazon’s film business has been a different story. It largely comprises small- or medium-budget productions and a number of festival acquisitions; the latter has had the occasional hit, such as “Manchester by the Sea,” offset by a number of pricey flops.

Without a large standing studio machine, the company has recently gone on a spending spree to buy one-off titles from other studios that might help the effort — paying $125 million for “Coming 2 America” from Paramount, for instance. That is easier than making movies directly, but comes with far less creative control.

The MGM acquisition, then, offers new movie projects from the directors Ridley Scott and Paul Thomas Anderson, as well as a slew of intellectual property that could be exploited in fresh film reboots.

Still, it remains unclear how much investment Amazon would pour into MGM as a robust studio entity. Resurrecting the older movies into new hits may be tricky. Many of MGM’s film franchises are shopworn, having gone through a ringer of remakes and spinoffs at other studios.

Then there is James Bond, MGM’s crown jewel. “No Time To Die,” the upcoming 007 movie with Daniel Craig, will be released by distribution partners MGM and Universal in October after numerous pandemic-related delays. But while Amazon will acquire the rights to distribute and finance future Bond titles, the franchise is owned and creatively controlled by an outside company, Eon Productions; run by the Broccoli producing family. (MGM simply has the rights to finance and distribute these movies in a profit-sharing deal.)

MGM’s deep library, however, makes the company appealing on those terms. “Rocky,” “RoboCop,” “Legally Blonde” and other popular movies fill its ranks of 4,000 film titles (many of its titles from the earlier part of the 20th century are owned by Warner and are not part of this deal) along with a raft of TV shows such as “Survivor” and “Shark Tank.” Those titles could be promoted and offered on-demand as a lure for Amazon Prime subscribers.

“For what is really a relatively low cost per hour of programming, you can hold on to a lot of subscribers,” said Brian Wieser, global president of business intelligence for GroupM, the ad-centric media firm. “Libraries are a big reason people stay with streaming services. It’s the thing Apple is missing, honestly,” he said, noting that the move will keep the MGM movie catalogue away from competitors.

Wieser suggested that Amazon will be able to use MGM content to program its free IMDb platform and increase revenue in its growing ad business.

For MGM, meanwhile, the move could provide the stability that has eluded it for decades. The deal ends a dozen years of ownership uncertainty for the company, which as far back as 2009 was eyed for acquisition by a number of studio players, including Warner Bros. and Rupert Murdoch’s Fox, before entering into and emerging from bankruptcy — then becoming the frequent subject of acquisition rumors again. In recent years, Apple has been among those that held preliminary talks about acquiring the company.

The purchase also will provide MGM with something it significantly lacks: a robust distribution arm that reaches hundreds of millions of people, which could help it attract top stars and script packages.

MGM was founded 97 years ago and came to be known for its iconic lion, Leo, roaring before the start of each picture. The studio is a cornerstone on which modern Hollywood was built, involved in such films as “Gone With the Wind,” “The Wizard of Oz” and the Spencer Tracy-Elizabeth Taylor version of “Father of the Bride.” For the first 23 Academy Awards ceremonies, when the best-picture prize went to the studio instead of the producer, MGM was nominated 40 times, more than any other company.

MGM would go on to back landmark films through the second half of the past century, too, including “North by Northwest,” “2001: A Space Odyssey” and “Thelma & Louise.” But it was often overshadowed by its ownership drama. The studio passed through numerous leaders, most infamously late dealmaking kingpin Kirk Kerkorian, who bought and sold it three times beginning in 1969 and is often considered a reason for its slow demise.

The deal also comes with an unusual wrinkle. Mark Burnett, the veteran producer of “The Apprentice,” sold a majority stake in his company to MGM seven years ago as he took a position with the company. It is not clear if Burnett retained rights to the show’s library. If he didn’t, this would now potentially put hundreds of hours of raw footage of Donald Trump in Amazon’s hands.