Amazon, MGM – and MAYA:
Why this is a good deal
Amazon’s $ 8.45 billion acquisition of MGM epitomises the perfect combination of the three assets required to compete for people’s attention: content, to fuel customer acquisition; data, to increase retention; and scale, to sustain lower prices.
The bet is on MGM’s library’s ability to boost the Prime population – currently at 200 million – with a subsequent increase in revenue from subscriptions and, to a far more substantial extent, purchases.
Much has been said about the James Bond franchise; this, however, comes with some serious strings attached, given that Amazon will not be in control of the if, when and what of future Bond material. MGM’s catalog also includes thousands of films and TV series, including classics like The Pink Panther, past blockbusters such as Robocop or Tomb Raider, as well as a number of recent hits such as The Handmaid’s Tale.
At a first glance, there is no straight answer. On the one hand, the price tag is dwarfed by Amazon’s $70 billion-plus liquidity; it is also in the same order of magnitude of the $11 billion Amazon invested in 2020 alone on content (including music) for its Prime services. Finally, this is barely 8 times what Amazon has spent so far on a single readaptation of the Lord of the Rings.
On the other hand, Amazon has paid a significant premium over competing offers for MGM. Disney paid less for Marvel and Lucasfilm combined. MGM’s library leans dangerously towards past glory; and ultimately, it’s hard to model out what the MGM assets might mean in terms of incremental subscribers.
But shift perspective, and this suddenly becomes a very good deal.
In Jeff Bezos’s words, this isn’t a bet on MGM’s existing library, but on the way “we can reimagine and redevelop that I.P. for the 21st century.” What MGM has sold is a library of content; what Amazon has acquired is a host of globally recognised narrative platforms – each capable of breeding sequels, spinoffs, reinventions, making a Prime subscription not just desirable, but sticky.
So in this sense thinking Amazon has acquired a catalog of content misses the point. What it’s done is bring home a roster of established brands. The difference isn’t abstract, it’s financial – and it’s huge, because you’re no longer looking at a film’s potential viewership, but at each property’s likelihood to generate multiple, accumulative streams of revenue globally within and beyond Amazon’s ecosystem.
Is this a credible opportunity? Yes, and the reason is MAYA.
In the 1950s industrial designer Raymond Loewy, the father of era-defining designs such as the Lucky Strike cigarette pack and the Studebaker Starliner, coined the acronym MAYA: ‘Most Advanced Yet Acceptable’ – a moniker summing up the widespread observation that the most massively successful products are a combination of newness and familiarity. Franchises work in precisely this way – as daring variations on a comfortable theme. Think Star Wars or, yes, 007. Human beings tend to respond enthusiastically to the mix. Of novelty and nostalgia.
The question is whether Amazon can pull off a steady stream of Iron Mans. So far, Amazon Studios have had a number of success stories with the likes of Mrs Maisel and Manchester By The Sea; but have struggled to produce a mega hit in the league of Game of Thrones. Some of MGM’s assets are seemingly past their best before date. Which means that the biggest risk for Amazon is turning Sleeping Beauty into Night of the Zombies.
So the true test for this acquisition will be Amazon’s investment on the attraction, retention and expansion of a pool of world class creative talent capable of consistently reinventing MGM’s content brands and churning out what journalist Derek Thompson, in his 2017 book Hitmakers, describes as “something new that opens the door to comfort”.
In the same book, Thompson himself studies another key to popularity beyond MAYA – an existing network of closely connected people. But that’s not something Amazon should be too worried about.