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Does $8.45 billion buy Amazon a monopoly in Hollywood?

Amazon bought a library of 4,000 movies and 17,000 TV episodes to sell you more tube socks. That sums up the state of Hollywood in 2021, when movies and TV shows are being given away at low prices — often free — to get you to buy something else.

Verizon gives away Disney+ to sell you a phone plan. Apple gave away its video service to anyone who bought a new device.

Some companies believe so strongly in the power of Hollywood as a marketing tool that they are spending billions of dollars on acquisitions. AT&T paid $85 billion for Time Warner to sell more phone subscriptions. Amazon just spent more than $8 billion on MGM to draw more customers to its Prime subscription.

Now it's not really clear to any of us if this works. AT&T lost market share while owning Time Warner, and is now selling the company. Apple and Amazon say their entertainment operations have helped them, but they offer no hard evidence.

It could also be that the people running those companies just like going to fancy parties, and hanging out with J.J. Abrams and Michael B. Jordan.

Recent outsiders that have succeeded in Hollywood realized there were few natural synergies between making movies and their core business. Comcast likes to talk about symphony between NBC and its cable box, but NBCUniversal has done well because Comcast hired smart people to run it and got out of their way.

I have some thoughts on what this devaluation of Hollywood product means long-term, but I received a lot of questions about the Amazon-MGM deal from readers this week. After a busy couple weeks, I decided to use this long weekend to answer those reader questions.

(If for whatever reason you want to hear more from me on this topic, check out CBS This Morning and KCRW's The Business).

"It's going to suck to have to subscribe to every different service to access every studio and network library. Seems like a big anti-consumer movement that shouldn't be ok with the public or government." -- Jay Skotcher

I'm starting to see #antitrust concerns over Amazon's $AMZN purchase of MGM. I see the potential; however, IMO, this move is for content (predominantly "vintage" TV programming), not cornering significantly more market share. Thoughts? -- Lance A Schart, CDW

Governments are already examining antitrust cases against Amazon, which is accused of punishing third-party merchants in a way that inflates prices and undercutting competition in a way that keeps them artificially low. The case against Amazon is best outlined in Lina Khan's now-famous 2017 essay in the Yale Law Journal.

But if the Department of Justice tries to block Amazon's acquisition of MGM for anti-trust reasons, it will have little to do with the MGM and everything to do with Amazon's might everywhere else.

MGM could improve's Amazon hit rate when making TV shows and movies. But Amazon is already making TV shows and movies, and it isn't  the dominant player. It's at best second to Netflix and at worst closer to fifth in cultural relevance. In terms of revenue, it's even smaller.

MGM doesn't alter the balance of power all that much. It is a small studio that is dwarfed by those owned by other entertainment companies.

I suspect there are two broader points that consumer advocates will make.

Does giving away TV shows and movies make Amazon a more attractive destination for shoppers? Yes. Is forcing customers to pay for 6 or 8 or 10 services raising prices? Also yes. 

But, as to that second point, the solution to that problem is ironically more consolidation. Speaking of…

Merger/acquisition predictions for smaller players like ViacomCBS, Lionsgate, AMC, etc? -- Dave Martinson, host of Nowstalgia Pod

Every company that looked small before the recent deals look even smaller now. That includes ViacomCBS, Lions Gate and AMC Networks. It might also include NBCUniversal, even though its leadership swears it is happy with its current size.

People don't want to pay for 8 different services and spend 20 minutes figuring out which one carries the show they want. And companies like ViacomCBS can't justify spending more than $10 billion a year on programming if its streaming service isn't one of the biggest players.

Over time, the industry will consolidate behind a few main players, the broadcast networks of the streaming era. That doesn't preclude niche services, which are the cable networks of the streaming age. But those niche services are much, much smaller businesses than the cable networks of old, and so they can't sustain large public companies. At least not right now.

Which of the remaining players will endure? Ask yourself which service is a must-have. Is it Paramount+? HBO Max? Peacock? Shudder?

With Amazon's acquisition of MGM ,what happens to shows produced by MGM TV for other streamers/networks. Handmaid's tale for Hulu, Fargo for FX and Vikings: Valhalla for Netflix to name a few. — NetflixStan

Nothing at first. Hulu retain the rights "The Handmaid's Tale" for as long as it keeps ordering new seasons, and then for at least a few years after that. The same goes for "Fargo" on FX and "Vikings: Valhalla" on Netflix.

Amazon is playing the long game here – the very long game. Most of MGM's movie library has already been licensed to Paramount+ for the next couple years. Its movies will be released in theaters for the next year or two. Its most popular TV shows are stuck on rival services.

But you can afford to play the long game when you are already spending billions of dollars a year on a streaming service that is more or less a marketing tool. 

Why do people still say record companies are ending? Aren't they more powerful than ever? — Frances McCahon, Splice

People are interested in topics other than Amazon!

Two developments have changed the record business that seem contradictory, but are in fact not. Social media and streaming have given artists more power over their careers than ever. They can record music and release it on streaming services, and then use social media to promote it at prices far below what it used to cost.

If they release a song that becomes a hit on their own, they can then demand ownership from any record label that tries to sign them.

But, this does not mean they don't want to sign with a record label. Labels still provide all sorts of services and help that artists can use, from upfront capital to relationships overseas. Record labels are making more money than they have in years thanks to streaming services, which gives them even more money to waste on signing TikTok stars.

Do I really have to watch all the Marvel movies in order? --Matt Boyle, Bloomberg News

No. You might not want to jump into "Avengers: Infinity War" with no knowledge of what came before it. But I've always had a pick and choose approach to Marvel movies. I've still never seen a half dozen of the movies in the Marvel Cinematic Universe, including "Captain America: The First Avenger," "Doctor Strange" and "Ant-Man and the Wasp." I can't hold my own at Comic-Con, but I can understand good vs. evil. — Lucas Shaw

The best of Screentime (and other stuff)

Jon Chu on 'In the Heights' and 'Crazy Rich Asians'
Chu's last movie turned into a global phenomenon and schooled Hollywood on the value of a diverse cast. Now he is ready to do it again.
Here are the Ways the Pandemic Changed Hollywood
A viewer's guide to the future of entertainment, where blockbusters no longer require cinemas, studios make sitcoms again, and more.
South Korea's Elderly Conservatives Turn to YouTube
Older South Koreans have flocked to YouTube, turning it into a hotbed of conservatism and Christianity.
How the Pentagon Started Taking UFOs Seriously
It took me a few weeks to catch up with this long but excellent piece on the study of UFOs.

The movie business is roaring back

"A Quiet Place Part II" grossed almost $60 million in North America this weekend, the biggest opening since the pandemic started.

You are about to read a lot of stories about how the box office is back, and movie theaters aren't dying. These are both true, but this is also a straw man argument made by reporters whose sources are movie theater owners and traditional theatrical distribution executives.

Cinephiles are excited that theaters are back open, and rushing back now that they are vaccinated (I hope). Yet lots of people would still rather watch movies at home. Before the pandemic, most studios were only satisfying the first group. Now they are trying to satisfy them both.

Universal wants more parents to sign up for Peacock

Speaking of streaming movies… Universal will release a sequel to the hit movie "Boss Baby" on its streaming service Peacock the same day it appears in theaters. This is the first time Universal has released a new movie this way.

Universal was the first major studio to release movies online during the pandemic, but it offered "Trolls World Tour" as a $19.99 rental. That gambit forced theaters to finally give up on a 90-day between a movie's release in theaters and at home. So credit Universal with changing the way movies are released at home.

But no other studios adopted the model. Instead, they started releasing movies on streaming for no extra cost (or, in the case of Disney, $30 on top). That is now the norm. And so Universal is embracing the same model as Netflix, Amazon, Warner Bros./HBO Max and Disney/Disney+.

Also in the charts…

John Cena apologizes for calling Taiwan a country

Cena apologized to Chinese viewers after referring to Taiwan as a country.

China doesn't consider Taiwan a country but a renegade province, and is seeking to bring it back under its control. China is one of the most important territories for the "Fast and Furious" franchise, so Universal scrambled to conduct damage control.

U.S. companies continue to tailor their practices to the tastes of the Chinese government. Consider that Apple, the supposed defender of privacy, stores data for Chinese customers in China. Or that an NBA general manager expressing support for pro-democracy protestors in Hong Kong sparked an international incident.

Also in international intrigue…

The average streaming bill is soaring

The average person is spending at least $4 more on streaming services than they did a year ago, according to a new study Bloomberg commissioned with help from Corus.

Gen Z is spending the most of any demographic on streaming services, paying an average of $43 a month for about four services. Millennials are spending almost $40 while bayb boomers are bringing up the rear at just $2.

Deals, deals, deals

  • Apple tried to buy Verzuz, the live streaming music event. Apple, worth about $2 trillion, was outbid by Triller, worth a lot less than that.
  • Jason Kilar will remain at WarnerMedia into next year. Next week, he will interview Discovery chief David Zaslav at a company event. Awkward…

Weekly Playlist

There is a new DMX record. That is all.

 

 

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