Amazon’s recent purchase of Metro-Goldwyn-Mayer Studios is rich with opportunities for new content based on beloved film franchises such as James Bond and “Rocky.” But the online marketplace doesn’t have to compete with Netflix, Disney+, or Hulu for viewers of its movies and shows, say Northeastern scholars—it just has to offer content good enough that families on the fence about subscribing to Amazon Prime decide it’s worth the plunge.
“Amazon doesn’t need to be the best at streaming,” says Venkat Kuppuswamy, assistant professor of entrepreneurship and innovation at Northeastern. “They just need to be good enough for people already on the website to purchase one more bag of pet food, to decide that a Prime membership is worth it after all.”
Samina Karim, professor of entrepreneurship and innovation, says, “The bar can be lower for Amazon’s streaming service, because they’re bundling a lot of other services in with it. It’s not just entertainment, it’s also free shipping, discounts at Whole Foods, and more.” (Amazon purchased the organic grocery chain in 2017.)So, why purchase MGM at all, then?
“It’s a classic case of musical chairs,” Kuppuswamy says.
Media companies are competing for scale, and consolidating in order to offer the most content: Discovery and WarnerMedia merged last year, Disney bought much of 21st Century Fox, and Comcast owns Universal Studios as well as its own streaming platform, Peacock.
“Everyone is kind of paired off, they’ve all found their dance partners, and there aren’t that many valuable content libraries left,” Kuppuswamy says. “One of the notable ones had been MGM, which had been on the market for some time now.”
The e-commerce giant purchased MGM Studios for a whopping $8.45 billion. It was a surprising price, roughly 40 percent more than other potential buyers—including Apple and Comcast—thought MGM was worth, according to The New York Times. But it wasn’t an altogether surprising business move, Karim says.
“In general, what you’re seeing here is a vying for content,” says Karim, “and what we see sometimes in acquisitions is companies that are willing to overpay because they don’t want their competitor to have the assets.”
Amazon has had a handful of successful original shows and movies, including “The Marvelous Mrs. Maisel” and “Transparent,” but it hasn’t been nearly as successful in earning critical acclaim and awards as Netflix, for example, which had 17 Emmy nominations in 2021 and 7 wins.
“Developing good original content is hard to do,” Kuppuswamy says. “It’s a lot safer to play into existing intellectual property.”
It’s another reason Amazon is betting big on MGM.
“People aren’t going to subscribe to eight different streaming services,” Karim says. “All of these companies are fighting to be the three or four that remain. Ultimately, we don’t know how this will shake out, but I think it will boil down to who has the deepest pockets—and Amazon has some very deep pockets.”