Amazon’s move for MGM likely to open floodgates for streaming-studio alliances

Professor at the Business School (formerly Cass) explains how the multi-billion dollar purchase of MGM by Amazon could lead to a seismic shift in how we consume media in and out of the cinema

The future of cinema has long been a subject of discussion as theaters battle against the very real threat of closure amid the pandemic. While early viewing numbers at big chains are a sign for positivity, how we will consume film in the years ahead remains very much unknown.

Amazon has recently heightened the battle for global streaming supremacy by announcing the $8.5 billion acquisition of the Hollywood Studio MGM. If confirmed, Amazon will consolidate its place at the higher end of the subscription video-on demand (SVOD) food chain, if not break into the lead.

Professor Simone Ferriani, Professor of Entrepreneurship at the Business School and at the University of Bologna, has conducted extensive research on the film industry and believes the burden is now on Amazon’s competitiors to raise their game.

How streaming giants benefitted from film studio woes

“With profits up by 200 per cent since the start of the pandemic, Amazon has already vastly extended its grip on the film business and gobbled up big-budget, star-driven films that studios have been forced to shelve in response to the protracted closure of movie theatres.

“Netflix, Apple TV+, Disney+, and Hulu have all benefited from film studios’ distresses. Amazon has been one of the most active in acquiring new movies, while Disney+ is expected to spend $14bn-16bn on streaming content by 2024. It is only natural that the original SVOD disruptors Amazon and Netflix are now turning to movies to widen their bandwidth and attract new subscribers.

“Netflix raised the bar in January when it announced its 2021 strategy of delivering one new movie per week, which followed Warner Media’s announcement that it plans to stream every movie from its 2021 Warner Bros. Pictures slate on HBO Max the same day as theatrical release. Amazon, in turn, paid $200 million to acquire the tentpole movie ‘The Tomorrow War’, which Paramount was originally set to release.

“However, stirring MGM’s 4,000 library of titles into the mix is the quickest way for Amazon to stock its catalogue with premium film content - including the highly coveted James Bond franchise - and drive usage of Prime, which in turn creates stickier customers for Amazon.”

Only a matter of time before more deals are struck?

The end of MGM as a stand-alone company would add to a flurry of mergers at the intersection of Hollywood and Silicon Valley, as the big seek to compete by getting bigger. In recent times:

  • AT&T has announced a deal to spin off its WarnerMedia group and combine it with Discovery Inc
  • Disney paid $71.3 billion for 21st Century Fox and Hulu while launching its own streaming service Disney+
  • AT&T has acquired TimeWarner to create WarnerMedia and roll out SVOD HBO Max
  • Comcast has snapped up Sky and similarly launched streamer Peacock.

Professor Ferriani says trends will be driven in line with consumers need for fresh content, with continued cross-platform intersection, and compression of traditional release windows inevitable due to SVOD providers’ thirst for deep libraries to satisfy consumers’ demand. That combined with this year’s dismantling the Paramount Consent Decrees – which have governed major film studios for the last 70 years and prohibit movie studios from owning downstream movie theaters and banned the practice of bundling multiple films into one theater license – could pave the way for new strategic opportunities.

“It is only a matter of time before other streamers will strike their own deals with other studios to secure all their content.

“Will we see Amazon move into owning cinemas through MGM as part of a multichannel strategy to attract younger demographics by leveraging its e-gaming content via theatrical releases? Will we see Disney, which owns ESPN, combine live sporting events with the big screen?”

Modernising business models are crucial for the future of movie theatres

“Right now, movie theaters are the weakest link of the industry food chain,” added Professor Ferriani.

“To compete and alleviate streamers-studios mounting power, they will have to modernise their business models to deliver more of an immersive experience. Increased consolidation through sheer Darwinian survival could only intensify this kind of trend, so far masterfully led by Disney’s systematic bets on event-driven movies.

“Over the last 40 years, we have been warned many a time about the impending death of cinema following the entry of new players and technologies such as VHS, DVD, digitalisation and, now, streaming services. But, despite the terrible downturn of the pandemic, the industry is still pulsating with activity. This activity will inevitably net itself out through ever-increasing consolidation and shakeouts, but that is not necessarily a bad thing – without the clout of these massive players we would not have the Avatars, Avengers and Pirates of the Caribbean to keep pushing forward the frontier of cinematic possibilities and fuelling popular imagination.”

By Professor Simone Ferriani, Professor of Entrepreneurship at the Business School (formerly Cass) and at the University of Bologna. Professor Ferriani has conducted prior research and commented extensively about the film industry.

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