Name: Vaibhav Maurya

Roll no. 21819

Subject: Merger and acquisition

Semester IX

BBA-LLB
 Amazon’s acquisition of MGM studios
Amazon Inc. in May, 2021 made a deal worth $8.45 billion, acquiring world-renowned
Hollywood studio Metro Goldwyn Mayer (MGM). The studio is the name behind some of
Hollywood’s classics and fan favorites, from James Bond to Tom & Jerry.

About Amazon:

Amazon Inc. is an American multinational conglomerate which focuses on e-commerce,

cloud computing, digital streaming, and artificial intelligence. It is one of the Big Five
companies in the U.S. information technology industry.

Jeff Bezos founded Amazon from his garage on July 5, 1994. It started as an online
marketplace for books but expanded to sell electronics, software, video games, apparel,
furniture, food, toys, and jewelry. Amazon is known for its disruption of well-established
industries through technological innovation and mass scale. It is the world's largest online
marketplace, AI assistant provider, live-streaming platform and cloud computing platform as
measured by revenue and market capitalization. Amazon is the largest Internet company by
revenue in the world. It is the second largest private employer in the United States and one of
the world's most valuable companies. As of 2020, Amazon has the highest global brand
valuation.

Amazon distributes a variety of downloadable and streaming content through its Amazon
Prime Video, Amazon Music, Twitch, and Audible subsidiaries. Amazon also has a
publishing arm, Amazon Publishing, film and television studio Amazon Studios, and a cloud
computing subsidiary, Amazon Web Services. It produces consumer electronics including
Kindle e-readers, Fire tablets, Fire TV, and Echo devices. Its acquisitions over the years
include Ring, Twitch, Whole Foods Market, and IMDb.

About MGM:

Metro-Goldwyn-Mayer Studios Inc. known as MGM is an American media company,

founded in 1924, that produces and distributes feature films and television programs. It is
based in Beverly Hills, California. MGM was formed by Marcus Loew by combining Metro
Pictures, Goldwyn Pictures, and Louis B. Mayer Pictures into a single company. “It hired a
number of well-known actors as contract players its slogan was "more stars than there are in
heaven" and soon became one of Hollywood’s "big five" film studios, producing popular
movie musicals and winning many Oscars. It owns a library of 4,000 film titles including
popular franchises like “James bond”, “Rocky” and “Lord of the rings”; and 17,000 hours of
TV hits such as “The Handmaid’s Tale” and “Vikings”. It made $1.5 billion in revenues last
year.

The studio was forced into bankruptcy a decade ago after running up a $4 billion in debt.
MGM was searching for sale options for a long time. In 2018, MGM fired its then-chief
executive, Hollywood veteran Gary Barber, for having early, unsanctioned conversations
with Apple Inc. to sell the studio for more than $6 billion. The preliminary talks fell apart
when he was ousted. MGM board chairman Kevin Ulrich, co-founder of Anchorage, told
studio investors at the time he could sell MGM for more than $8 billion in two to three years.

Acquisition:

In December 2020, with the COVID-19 pandemic and the domination of streaming platforms
due to the closure of movie theaters as contributing factors. MGM hired Morgan Stanley and
LionTree Advisors to handle the sale process on behalf of the studio. On May 17, 2021,
online retail and technology company Amazon entered negotiations to acquire the studio. The
negotiations were made directly with MGM board chairman Kevin Ulrich whose Anchorage
Capital Group is a major shareholder in the studio. On 26 May, 2021 Amazon and MGM
announced that they have entered into a definitive merger agreement under which Amazon
will acquire MGM for a purchase price of $8.45 billion. Cravath, Swaine and Moore LLP are
representing Amazon in connection with the transaction. This acquisition is Amazon's
second-biggest after Whole Foods Market, which it bought for $13.7 billion in 2017. A
statement from Amazon after the announcement of acquisition said, “MGM has nearly a
century of filmmaking history and complements the work of Amazon Studios, which has
primarily focused on producing TV show programming. Amazon will help preserve MGM’s
heritage and catalog of films, and provide customers with greater access to these existing
works. Through this acquisition, Amazon would empower MGM to continue to do what they
do best, that is great storytelling”.

Amazon’s prospective:

Amazon always had plans to step into Hollywood and now owing a studio with years of
experience and a well-known brand name will give a lead to amazon in the industry and over
its direct rivals Netflix and Disney+. Mike Hopkins, senior vice president of Prime Video and
Amazon Studios. said “The real financial value behind this deal is the treasure trove of IP in
the deep catalogue that we plan to reimagine and develop together with MGM's talented
team. It's very exciting and provides so many opportunities for high-quality storytelling,”
Amazon's Prime Video faces a long list of competitors including Netflix Inc, Walt Disney
Co's Disney+, HBO Max and Apple Inc's Apple TV+. Companies are increasing spending
and expanding in international markets, aiming to capture the pandemic-led shift to binge-
watching shows online. In April, 2021 Amazon posted its fourth consecutive record quarterly
profit and boasted more than 200 million Prime loyalty subscribers.

Franchise:

Even after Amazon had acquired MGM it only got them half of the rights in James Bond
franchise, other half still remains with producers Barbara Broccoli and Michael G. Wilson,
who oversee the franchise's creative direction and own Eon Productions and its parent
company Danjaq LLC. MGM and Eon Productions co-own the copyright to the films. But
Broccoli and Wilson have the creative control of the franchise meaning they will have the
final say in nearly every aspect of the movie. In an interview with Total film when questions
were asked if future James bond movies will be released on streaming platforms or will there
be any series in this franchise, producers made it clear saying "We make films. We make
films for the cinema. That's what we do." Wilson also added his opinion on doing a Bond
series and explained "We've resisted that call for 60 years." Last year in November, MGM
studios announced that they and Eon productions have shared intellectual rights of James
Bond with IO interactive, the video game company behind the famous Hitman series. They
are working on “Project: 007”. On 2nd August, 2021 Amazon announced that it is working on
making a prequal series of “Lord of the rings” which is set to release in September 2022.

Appeal to Federal trade commission:

On 31st August, 2021 Thirty-four groups from the Writers Guild of America West to Public
Citizen to Demand Progress have appealed to the Federal Trade Commission to block
Amazon’s proposed acquisition of MGM, which they say reflects the e-commerce giant’s
growing dominance. Earlier in the month, a coalition of labor unions representing nearly 4
million workers also lobbied the commission to block the deal, citing harmful vertical
integration in the film business.

In the letter addressed to FTC chairperson Lina Khan, Thirty- Four group urged the FTC to
block Amazon’s purchase of MGM Studios in order to slow Amazon’s growing dominance.
Furthermore, they described that this acquisition is not simply a one-off deal for streaming
content; it is the latest move in Amazon’s overarching strategy to create numerous
interconnected points of dominance over businesses and consumers. They applauded the
Commission’s investigation of this merger because it is a clear example of Amazon’s larger
pattern of monopolistic practices. Amazon demonstrates the dangers of modern tech platform
monopolies. It has a long history of combining and utilizing its many businesses together as
an integrated whole to weaponize them against workers, businesses, and ultimately
consumers. For example, Amazon uses its control over its retail platform to surveil and copy
successful products to sell under one of its own product lines, such as “Amazon Basics,”
unfairly capitalizing on the work of other businesses in building out the market demand.
Similarly, Amazon excludes businesses from its “Buy Box”-the space on Amazon’s product
pages where users are prompted to purchase a product-unless the sellers pay exorbitant fees
for Fulfilled by Amazon and advertising placement. The same pattern is true across the entire
Amazon platform. Amazon has used its dominance to destroy rivals in the markets for baby
care products and smart speakers by pricing its own products below-cost. The trend is clear:
accept Amazon’s dominance or it will turn its entire ecosystem against you. The House
Antitrust Subcommittee detailed these and other abuses in its Digital Markets report last year,
but Amazon has continued to abuse its monopoly power.

Through the MGM acquisition, Amazon will gain control over additional levers of power in
the digital economy. This is certainly a problem in the streaming market where MGM and
Amazon overlap. But the issue is much larger. With the MGM acquisition Amazon will gain
control over must-have content, as well as control over additional advertising and IP rights
that allow it to stretch its dominance over consumers and other businesses. This increases
Amazon’s ability to lock consumers into its sprawling platform and punish businesses and
workers that do not accede to its demands.

If Amazon is permitted to own MGM, consumers will be more forcefully pushed into
subscribing to Amazon Prime because more content will be exclusive to it, rather than being
available across many platforms. Businesses too will face greater pressure from Amazon. For
example, Amazon could destroy rivals to its Fire TV products by denying other streaming
platforms access to its content. Further, Amazon’s control over the IP for MGM content
including sequels or gaming rights allow it to further exert leverage over its e-commerce
platform. Amazon could also force competitors to prioritize Amazon content and product
placement within non-Amazon products in exchange for access to content or IP rights. On top
of this, the additional business and consumer data Amazon will acquire through MGM will
further entrench Amazon’s one-sided information advantage over other businesses that
depend on its platform. Finally, with more control over the streaming, advertising, and media
distribution ecosystem Amazon can extract unfair concessions from independent content
producers and workers in the industry. All of this means Amazon can exert greater control
even outside of the portions of commerce it directly owns. And ultimately it means
consumers, businesses, and the workers that depend on them are subject entirely to Amazon’s
whims.

US Legislators have already voiced grave concerns about this acquisition and how it fits in
Amazon’s broader playbook of monopolization. Senator Elizabeth Warren urged a broad
review of the deal, which would cover its impacts on “streaming services and entertainment
products in addition to the broader impacts that this transaction may have on workers, small
businesses, and competition overall as Amazon.” Senator Amy Klobuchar warned that the
MGM merger “has the potential to impact millions of consumers.” In the House,
Representative David Cicilline explained that the deal “reinforces what we already know,
Amazon is laser-focused on expanding and entrenching their monopoly power.”

Amazon replied that it expected the MGM deal to close mid-next year. It also asked that
recently appointed FTC chairperson and antitrust reformer Lina Khan to recuse herself, but
the request was nixed. A paper Lina Khan wrote for the Yale Law Journal in 2017 called
“Amazon’s Antitrust Paradox” said the company has evaded antitrust scrutiny by “fervently
devoting its business strategy and rhetoric to reducing prices for consumers.” Reformist
thinkers on antitrust law increasingly believe it should also consider producers and the health
of a market as a whole.