Amazon-MGM deal could put pressure on regulatory review of content consolidation

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Amazon is hoping to buy MGM Holdings for $ 8.45 billion. But antitrust groups are already asking the Biden administration to block the deal.
Source: Raymond Boyd / Contributor via Getty Images

Consolidation continues to stir in the media industry, leaving behind a soup of content companies that are very different from the individual studios, media and tech companies that were once on the shelves.

More recently, Amazon.com Inc. announced that it would acquire MGM Holdings Inc., operator of the Metro-Goldwyn-Mayer Inc. film and television studio, in an $ 8.45 billion deal. While the costly acquisition results in more content studios under the umbrella of horizontally integrated tech and media companies, industry experts are divided over whether the deal does enough to stymie competition to hit. a regulatory roadblock.

“I don’t think the MGM deal has much bearing on the other monopoly concerns people may have about Amazon. They already make TV shows and movies. It just gives them more content to add to their library, ”said Wade Holden, analyst at Kagan, a media research group within S&P Global Market Intelligence.

However, the current regulatory climate is not particularly favorable for consolidators of major technologies or Amazon in particular. As Holden concluded, “That said, some people really don’t like Amazon.”

Already, the deal is rallying antitrust groups worried about the potential impact on film and television business. Barry Lynn, executive director of the Open Markets Institute, released a statement saying US President Joe Biden “must block Amazon’s monopoly ploy to take control of MGM.”

The Open Markets Institute is a non-profit organization that aims to educate people about the dangers of monopolization, especially in the tech industry.

“The takeover of MGM is a dangerous horizontal consolidation of two studios in an already strongly consolidated company. And it’s a vertical consolidation of power between one of the major film sales and distribution platforms and one of the studios that make films, ”Lynn said in a statement.

Lynn also said the deal would be bad for creative workers in the television and film industry, limiting a competitive employer market. Diana Moss, president of the American Antitrust Institute, has similar reservations. The transaction would create a content industry monopsony, or a market imbalanced by the power of a single buyer, Moss said in an interview.

“Writers have been struck by consolidation in media / content for years. This has potential effects on maintaining diversity, quality and innovation in content and deserves careful consideration in an antitrust review,” Moss said.

However, according to other accounts, the explosion of content and content platforms has increased the demand and salaries of many writers and other talent. Large companies with big budgets support platforms such as Netflix Inc., Disney + and Hulu by Walt Disney Co., HBO Max by AT&T Inc., as well as ad-supported video services like Pluto TV and Fox. of ViacomCBS Inc. Tubi TV of Corp.

According to this view, Amazon’s deal for MGM is just one more step in a highly competitive race that has broadened, unrestricted, the reach and diversity of content and the demand for content creators.

“There are many outlets for creatives to show off their talents,” independent film producer and content investor Justin Begnaud said in an interview.

Begnaud pointed out that rapidly growing content budgets were swelling across the board. Amazon, Netflix, Hulu and Disney + combined spent around $ 23.5 billion on content in 2020, according to Kagan’s estimates, including a rapidly increasing percentage of budgets for new original programming. Other deep-pocketed companies investing in originals and vying for a share in the streaming space include Apple Inc., Roku Inc., ViacomCBS, AT&T, Discovery Inc., and others.

Kagan has well over 100 over-the-top aggregators in the United States alone, ranging from UK channel Acorn TV to Indian film broadcaster YuppFlix.

Begnaud said he only saw the opportunities grow, despite offers such as Amazon’s purchase of MGM. Specifically, he believes Verizon Communications Inc. and T-Mobile US Inc. will join them to stay competitive with AT&T and capitalize on the growth in mobile video content.

“Amazon-MGM makes a lot of sense and should pass government regulations,” the producer said. MGM is not the Big Five studio it once was, relying heavily on the James Bond franchise and a handful of television properties, Begnaud said.

But as analyst Kagan Holden pointed out, many regulators are not very happy with the consolidation among tech conglomerates, and lawmakers are proposing bills that would hamper closing their deals. For example, U.S. Senators Elizabeth Warren, D-Mass., And Josh Hawley, R-Mo., Each sponsored separate bills that would significantly limit M&A activity among large tech companies.

And with Discovery set to combine with WarnerMedia, regulators will have plenty of opportunities to consider the company’s future in the coming days, with Moss at said the American Antitrust Institute.

“Antitrust authorities could … assess two major agreements at the same time. This means that they will have to consider multiple changes in the structure of the relevant content markets, however they are defined,” said Moss.



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Shanta Harris

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