Amazon Buys MGM for $8.45B, But What Will the DOJ Say About It?

Could this move hasten the company's ultimate breakup amid antitrust objections?

Amazon Buying MGM Info Details
Amazon’s blockbuster purchase of MGM looks great on paper. In reality, it brings a host of new questions. James Baylis - AMA/Getty Images

After more than a week of whispers and speculation, Amazon (AMZN) has said that it will indeed acquire MGM Studios for a whopping $8.45 billion. It is the company’s second largest acquisition ever after snatching up Whole Foods in 2017 for $13.7 billion and makes a clear statement as to Amazon’s ambitions in the entertainment space.

We’ve previously explored the domino effect all of these mergers, acquisitions, and overall consolidation are having on the media landscape. We’ve also highlighted the major properties and value Amazon can wring from MGM moving forward. Now, it’s time to zoom out even further.

According to CNBC‘s report, “The MGM deal could heighten antitrust concerns for Amazon. The company faces ongoing probes by multiple federal agencies, state attorneys general and Europe’s antitrust watchdog. The House Judiciary antitrust subcommittee issued a sweeping report last October that found Amazon has monopoly power over third-party sellers on its marketplace.”

The potential for DOJ intervention in Amazon has been high even prior to the MGM deal. David Offenberg, Associate Professor of Entertainment Finance in LMU’s College of Business Administration, told Observer back in February that there’s a “50/50” chance the company is broken up in the next decade by regulators. If that were to happen, it’s unknown if Amazon Prime Video would continue to exist.

Yet Thomas Hughes, the Americas CEO of Vuulr, a global online content marketplace for premium film and TV rights, sees potential value in the streamer should that ever come to pass.

“Prime Video as a standalone company would be very interesting,” he told Observer. “It’s SVOD [subscription video on demand], AVOD [advertising video on demand], FAST [free ad-supported streaming TV], TVOD [transactional video on demand] and EST [electronic sell through].”

Premier streamers such as Netflix (NFLX) and Disney+ are classified as SVOD platforms. Hulu’s successful ad-supported tier is an AVOD service. Free ad-supported services include platforms such as IMDb TV and Pluto TV. TVOD allows you to further monetize VOD, one example being Amazon Prime Videos ability to sell and rent digital films. And electronic sell through is one of the many pay windows a film enters after leaving movie theaters.

“Amazon is truly the only platform with every consumption method there is,” Hughes said. “Given the assumption TVOD and EST remain viable business models, Prime Video would be well positioned to offer the consumer the opportunity to consume content in every manner possible. Others would have to re-engineer technology to catch up plus go back and acquire rights, which isn’t an easy task.”

Of course, it’s always possible that if the DOJ did force Amazon to break up its divisions Prime Video could be sold for spare parts and its entangled web of streaming rights carefully unfolded by interested parties. But either way, the growing entertainment powerhouse seems to have options should that fateful day ever arrive.

Amazon Buys MGM for $8.45B, But What Will the DOJ Say About It?