On April 8th, 2021, U.S. Senator Elizabeth Warren (D-MA) sent a letter to the Department of Justice’s Antitrust Division and Federal Trade Commission for a “meticulous” review of Amazon’s proposed $8.45 billion acquisition of MGM Studios. In the letter, Senator Warren expressed concerns that Amazon could purchase what she characterized as a “valuable trove” of intellectual property to gain an advantage over its competitors in the streaming market and stifle innovation.
The proposed acquisition was announced on May 28th with Amazon offering to buy out MGM’s debt and become the largest shareholder in its parent company, Global Eagle Entertainment Inc. This news comes shortly after Amazon subsidiary IMDb TV acquired exclusive rights to stream classic films from Metro Goldwyn Mayer (MGM) in January 2021 in a $250 million deal.
This is not Senator Warren’s first time criticizing tech giants such as Amazon, having previously called for stricter antitrust laws to “bring more competition and fairness” into tech markets earlier this year and introducing US legislation aimed at curbing monopolies held by these companies earlier this month. She has now turned her attention towards this purchase which she believes should be examined with greater scrutiny given its potential impacts on competition within the streaming industry.
Overview of Amazon’s MGM Acquisition
Amazon recently announced plans to acquire MGM Studios for $8.45 billion. This move has been met with heavy scrutiny from regulators and lawmakers, with many questioning the potential anti-competitive nature of the acquisition. Senator Elizabeth Warren has called for a “meticulous” review of the acquisition and its implications for competition.
In this overview, we’ll dive into the details of the acquisition and its possible implications.
Background on Amazon’s Acquisition
On May 26, 2021, Amazon announced its $8.45 billion purchase of Metro-Goldwyn-Mayer (MGM) Studios, the iconic Hollywood film and television studio behind productions such as The Hobbit, Silence of the Lambs and James Bond. If federal regulators approve, the acquisition would give Amazon rights to thousands of MGM’s films, television programs and other works.
The deal has raised concerns from antitrust advocates who worry that such a large acquisition could give Amazon an even greater advantage in media content than it already holds. US Senator Elizabeth Warren immediately called for a “meticulous” review by federal regulators to ensure no laws were broken.
The purchase of MGM is accompanied by two other major acquisitions which continue to expand Amazon’s media dominance: the recently completed purchase of podcasting company Wondery for $300 million and the pending acquisition of self-publishing platform Scribd for $750 million. This combined with Amazon’s existing services, like Prime Video and Audible, creates potential conflict with competitive streaming services like Disney+, Netflix and HBO Max regarding original content production. Regulators are paying close attention as these purchases look to widen an already expansive control on digital content worldwide.
Details of the Acquisition
In 2021, Amazon announced the acquisition of Metro-Goldwyn-Mayer Holdings Inc. (MGM) for USD 8.45 billion in an all-cash transaction. MGM is a premier entertainment company with a celebrated library of more than 4,000 films and 17,000 hours of television programming including some of the most iconic franchises in Hollywood’s history such as James Bond and The Hobbit.
The acquisition by Amazon will give it access to MGM’s film and television library and its streaming platform Epix. This will help Amazon further expand its Prime Video streaming service, which already enjoys a subscriber base of over 200 million worldwide.
The move is seen as an effort by Amazon to strengthen its position in the streaming wars against rivals such as Netflix, Disney+, and Apple TV+. In addition to strengthening its offering, this acquisition might help Amazon increase revenue from its advertising segment due to increased content viewership and engagement around MGM’s properties on Prime Video.
The amount involved in the deal was staggering enough that it caught the attention of US Senator Elizabeth Warren who called upon federal regulators for ‘meticulous review’ into the proposed merger between two industry giants. In addition, concerns have been voiced about potential harm that could emerge due to lack of competition in the market which could thus lead to anticompetitive practices or stifling creativity by limiting innovation or freedom for new entrants into this sector.
Sen. Warren calls for ‘meticulous’ review of Amazon’s MGM acquisition
Senator Elizabeth Warren has recently expressed concerns about the potential impact of Amazon’s acquisition of MGM. Responding to the deal news, Sen. Warren said that Congress and antitrust regulators should take a “careful and meticulous review” of the acquisition.
She also noted that this deal could have far-reaching implications for media markets, consumers, and workers.
Senator Elizabeth Warren has raised concerns about the possible antitrust implications of Amazon’s acquisition of film and TV studio Metro-Goldwyn-Mayer (MGM). In a letter sent to the Department of Justice on June 4, 2021, Sen. Warren outlined her worries over an “aggressive expansion” that could lead to Amazon’s dominance in the movie and TV business.
In her letter, Sen. Warren highlights several potential risks to competition that may arise from Amazon’s acquisition of MGM including creating an uncompetitive online market for films, a monopoly position over new content and intellectual property rights, a lack of consumer choice in both production and distribution forms, as well as setting prices for distribution as well as preventing competitors from creating viable streaming services.
She argues that it is time for the Committee on Antitrust Policy to take a closer look at the potential long-term effects of this merger on consumers and competition in the industry. Finally, she called upon Attorney General Merrick Garland to ensure that “meticulous review” is given to this acquisition before it proceeds any further.
Warren’s Request for a Meticulous Review
On May 26, 2020, Senator Elizabeth Warren called on the Federal Trade Commission (FTC) to conduct a “meticulous” review of Amazon’s proposed acquisition of Metro-Goldwyn-Mayer (MGM). In her statement, sen. Warren argued that Amazon’s takeover of MGM would create a vertically integrated “entertainment monopoly” and risk stifling market competition.
Sen. Warren noted that the acquisition could significantly strengthen Amazon’s position in the streaming services market and potentially eliminate competition between entities. She suggested that these two factors would influence content production, reduce consumer choice, and increase consumer prices.
The senator encouraged an investigation into how the transaction will impact competition in streaming video and other media markets, aiming for a detailed review that includes concerned parties’ input to protect consumers from potential anti-competitive harms. Sen. Warren requested that any such resolution include strong, enforceable conditions on pricing and non-discrimination to ensure competition is preserved.
In conclusion, Sen. Warren’s call for a ‘meticulous’ review of Amazon’s acquisition of MGM is consistent with her history of pro-competition and consumer protection policies. Should the merger be approved, it could have significant consequences for the entertainment and streaming industries, affecting what viewers watch and how much they pay. Therefore, it is essential to scrutinize any potential anti-competitive effects arising from this acquisition and monitor Amazon’s intent to further suppress its competition in this and other commerce sectors.