Drive-In Movie Theatres Face Day of Reckoning (#GotBitcoin?)
“How many think we should return ‘Bohemian Rhapsody’ next week? Flash your headlights,” Mr. Vogel said over the sound system during an intermission. Several cars did.
The Bengies, owned by the Vogel family since it opened in suburban Baltimore in 1956, retains the décor and atmosphere of that era, complete with vintage trailers and a nightly rendition of the national anthem. Mr. Vogel, 60 years old, does his own negotiations with movie studios for what he will show each week. “There is less wiggle room than ever,” he said, with studios pushing for evermore favorable terms. “We are on pins and needles to book movies.”
These days his worries extend to Washington, D.C., where the Justice Department is considering whether to wind down the legal decrees that have governed movie distribution and limited strong-arm studio leverage for 70 years, since the Supreme Court dismantled Hollywood’s monopoly over the cinema business. The decrees largely prevent studios from owning movie theaters or imposing onerous terms on theaters, such as setting minimum ticket prices or demanding screen time for a studio’s entire slate of films.
“All of it has me kind of flipped out,” Mr. Vogel said.
The Justice Department’s review of the so-called Paramount decrees, named after the lead defendant in the case, is the highest-profile part of a broader initiative to terminate older antitrust legal settlements that time has passed by.
Unlike modern settlements, which sunset after a limited period, many earlier decrees had no end date and remain on the books.
The department has proposed ending dozens of settlements, including those addressing markets for typewriters, horseshoes and ice-cream cones.
The department hasn’t yet decided whether to ask a court to cancel or modify the movie decrees, but it has noted the film industry has changed greatly since the court battles of the 1930s and 40s, when most theaters were single-screen palaces and consumers didn’t watch motion pictures on television, much less on streaming services like Netflix.
The Supreme Court’s blockbuster 1948 ruling in U.S. v. Paramount Pictures covered the nation’s eight major motion-picture distributors and broke up a Hollywood machine that allowed studios to control the movie business from start to finish.
Besides largely prohibiting the studios from owning the theaters where their movies played, it said they couldn’t require theaters to play either several of their movies or none at all, an all-or-nothing deal known as “block booking.” And it stopped certain industry practices that limited when and how films could be shown in particular areas.
After the ruling, each studio entered into a decree with the Justice Department setting out the new rules. The movie-theater industry flourished, with more than 40,000 screens now operating in the U.S. and Canada.
Most of those theaters, of course, are not mom-and-pop operations. About half are controlled by the three largest exhibitors— AMC Entertainment Holdings Inc., Regal Entertainment Group and Cinemark Holdings Inc. Many of the smaller operators are struggling to hang on, and they say ending the Paramount decrees could be a final blow.
Five of the six big studios today—Warner Bros., Paramount Pictures, Sony Pictures Entertainment, Universal Pictures and 20th Century Fox—are bound by the decrees; only Walt Disney Co. , which wasn’t a juggernaut in 1948, is not.
The force of the Paramount rules has eroded somewhat over time. Studios have been able to purchase a small number of theaters, and some defendants covered by the decision, such as RKO Pictures, no longer exist. Newer studios such as STX Entertainment have signed distribution deals with theaters typically not allowed by the decrees.
Then there is the emergence of Netflix Inc. and Amazon.com Inc., which produce original movies and can bypass big screens altogether.
Theater owners, including Mr. Vogel, submitted a barrage of comments to the Justice Department this fall arguing that eliminating the decrees could badly hurt the film industry. The National Association of Theatre Owners, which represents both chains and independents, said removing the block-booking prohibition could give studios even more power to leverage their big-budget movies, which are essential for theaters’ bottom line.
This year, three movies alone—“Black Panther,” “Avengers: Infinity War” and “The Incredibles 2”—accounted for more than $2 billion in ticket sales domestically. Theaters say that if studios can force them to take their less desirable titles along with such blockbusters, that could crowd out movies from independent companies like A24, the upstart studio behind films such as “Moonlight” and “Hereditary.”
The Writers Guild of America West says giving dominant studios more power would squeeze out competition, leaving writers “with fewer jobs and consumers with fewer choices for what to see at the theater.”
No studio has publicly weighed in on the Justice Department review, but the major studios in recent years have considered advocating for lifting the decrees, according to two distribution executives.
Studio executives say privately that they long for the day when they no longer must grant an exclusivity “window” to theaters, which keeps movies off home services like iTunes or video-on-demand for about 90 days. Under current conditions, if major exhibitors don’t get such an agreement, they can refuse to screen the movie.
It is a challenging time for independent theaters. While ticket sales are expected to hit a record this year thanks to higher prices, attendance is stagnating, and studios are seeking a higher percentage of the box-office gate on major releases.
A shrinking supply of movies has tipped the balance of power to studios. In 2017, the six major studios released an average of 14 movies each, down from 23 in 2002.
Mr. Vogel said he needs reasonable financial terms and flexibility to show films from a range of distributors, principles that are at the heart of the Paramount case.
“It’s extremely difficult for us to survive,” he said, “and the distributors know that.”
Amazon Is In the Running To Buy A Movie Theater Chain
Amazon.com Inc. is in the running to acquire Landmark Theatres, a move that would vault the e-commerce giant into the brick-and-mortar cinema industry, according to people familiar with the situation.
The company is vying with other suitors to acquire the business from Wagner/Cuban Cos., which is backed by billionaire Mark Cuban and Todd Wagner, according to the people, who asked not to be identified because the discussions are private. The chain’s owners have been working with investment banker Stephens Inc. on a possible sale, the people said. No final decisions have been made, and talks could still fall apart.
Pushing into movie theaters would follow Amazon’s expansion into myriad other forms of media, including a film and TV studio and music service. With Landmark, it gets a chain focused on independent and foreign films that was founded in 1974. The company has more than 50 theaters, including high-profile locations in New York, Philadelphia, Chicago, Los Angeles and San Francisco, with about 250 screens in 27 markets.
Amazon, based in Seattle, declined to comment. Officials at Landmark couldn’t be reached after normal business hours.
Though the acquisition price for Landmark would likely be small, it would mark a significant new incursion by Amazon into the physical world. The online retailer shocked the supermarket industry last year by acquiring Whole Foods for $13.7 billion, positioning the organic-food chain in the middle of its campaign to sell more groceries.
The e-commerce company already spends billions each year on movies and TV shows, saying it helps entice shoppers to join its Prime subscription plan and makes existing members more likely to renew.
Amazon, founded as a book seller, previously disrupted that industry by giving authors an alternative to the big publishers, eliminating a middleman between readers and artists. It opened its first brick-and-mortar bookstore in 2015 in Seattle and now has nearly 20 around the country.
The U.S. government has previously barred film studios from the theater industry. But the U.S. government said earlier this month that it was considering terminating a 70-year-old Hollywood settlement that halted the vertical integration of studios and theaters. The so-called Paramount decree may have prevented smaller films from getting wider distribution.
Cuban and Wagner also own Magnolia Pictures, the production company 2929 Productions, and the networks AXS TV and HDNet Movies. Cuban, a 60-year-old who also appears on the reality show “Shark Tank,” told the Hollywood Reporter in April that he hired a bank to evaluate offers, but said at the time he was in “no rush to sell.”
Justice Department to Terminate Longstanding Legal Rules for Movie Distribution
Antitrust officials conclude legal settlements from 1940s are outdated for governing movie industry.
The Justice Department is moving to terminate legal rules that have governed the movie industry since the late 1940s, a step that could shake up how movies are distributed and the terms on which they hit the big screen.
The department’s antitrust division has determined that rules limiting film studios’ influence over theaters have outlived their usefulness in a movie business that has changed considerably since the curbs were first imposed. The rules set to be lifted were laid out in decades-old legal settlements known as the Paramount consent decrees.
“As the movie industry goes through more changes with technological innovation, with new streaming businesses and new business models, it is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation,” Makan Delrahim, the department’s top antitrust official, said at an American Bar Association conference in Washington, D.C. on Monday.
The decrees clipped the wings of a core group of dominant studios in the post-World War II era, the result of a government lawsuit alleging the studios conspired to control the movie business from start to finish.
The decrees followed the Supreme Court’s blockbuster 1948 ruling in U.S. v. Paramount Pictures that covered the nation’s eight major motion-picture distributors.
The ruling largely prohibited the studios from owning the theaters where their movies played, as well as from requiring theaters to play either several of their movies or none at all, an all-or-nothing deal known as “block booking.” And it stopped certain industry practices that limited when and how films could be shown in particular areas.
After the ruling, each studio entered into a decree with the Justice Department memorializing the new rules. The movie-theater industry flourished and expanded in the decades that followed.
The Justice Department won’t seek to drop all the rules right away; it is seeking a two-year sunset period for parts of the decrees that address block booking and certain movie licensing practices for theaters in a specific geographic circuit.
Mr. Delrahim said the decrees were no longer needed because the conspiracy among movie-industry giants from the 1940s no longer exists. If modern practices arise in the movie industry that harm consumers, “antitrust enforcers remain ready to act,” he said.
The department will have to make a motion in federal court in Manhattan to terminate the decrees. That filing is expected in the coming days.
The Justice Department’s decision is a blow to the nation’s dwindling number of independent theaters and smaller studios trying to squeeze movies into a release calendar increasingly dominated by big-budget franchise titles.
Smaller operators have complained in recent years about not being able to afford the onerous distribution terms required by studios to show their biggest blockbusters—terms that major chains can stomach but mom-and-pop operations cannot. In extreme cases, up to 70% of ticket sales on a major release can flow back to the studio.
The termination of the decrees could speed up a consolidation happening across the industry as independent chains throw in the towel. About half of the nation’s roughly 40,000 movie screens are controlled by the top three exhibitors: AMC Entertainment Holdings Inc., Regal Entertainment Group and Cinemark Holdings Inc.
When the Justice Department invited theaters and studios to comment on the pending decision in 2018, no major studio weighed in. Instead, the comments were mostly left to small exhibitors and drive-in theaters, which cited a top-heavy box office as a concern.
So far this year, more than 27% of the box-office grosses in the U.S. and Canada have been generated by the five-highest grossing movies, according to Box Office Mojo. Four of those movies were released by Walt Disney Co. , which currently holds a commanding market share over the industry but wasn’t a party to the Paramount decree because it wasn’t a juggernaut back then.
Since blockbusters like “Avengers: Endgame” or “The Lion King” are too lucrative for most theaters to pass up, those same titles could be used as leverage by studios if the decree disappears and block booking is allowed, the National Association of Theatre Owners argued in comments submitted to the Justice Department.
“If exhibitors were forced to book out the vast majority of their screens on major studio films for most of the year, this would leave little to no room for important films from smaller studios,” NATO argued. The organization said Monday it would wait to review any motion filed by the Justice Department in court before commenting further.
The Justice Department’s review of movie-industry rules has been part of a broader initiative in which department antitrust officials have revisited long-ago legal settlements across a range of industries that have remained on the books with no expiration date.
The other big review that remains pending is in the music industry, where the department is considering whether to revise or terminate decrees that have set rules for music licensing since the 1940s. The outcome could shake up how businesses, broadcasters and digital streaming services secure rights from songwriters and publishers.
Heading Back To The Drive-In
After decades of theater closures, the pandemic is introducing a new generation to the fun of 1950s-style outdoor moviegoing.
Now that most entertainment can be streamed or downloaded at home, it’s easy to forget that for a century, moviegoing involved a physical journey to a movie theater—by car, by bus or on foot. “So many of the movies that we remember best from our youthful moviegoing years were because we went out and saw them,” said Joe Dante, the director of “Gremlins” (1984) and “The ’Burbs” (1989). “It wasn’t just because we happened to find them on the ‘Late Show.’”
Only one venue, however, actually required patrons to arrive in an automobile: the drive-in movie theater, whose enormous screens and overflowing parking lots used to be as ubiquitous as the golden arches of McDonald’s.
Most of the drive-ins in the U.S. closed in recent decades, thanks to the vagaries of film distribution, rising property values and the proliferation of home viewing options. According to the United Drive-In Theatre Owners Association, the high-water mark for drive-ins came in 1958, when there were 4,063 in the U.S. Last year, there were just 305.
During the pandemic, however, Americans are giving drive-ins a fresh look. The doors of multiplexes and art houses are shut, but drive-ins in all but a handful of states have been given the all-clear to start running movies again.
“You go there, you sit in your own car, you don’t have any contact with anybody, so it’s the safest way to see a motion picture,” said Roger Corman, the 94-year-old producer and director whose low-budget exploitation films—such as “The Pit and the Pendulum” (1961) and “The Wild Angels” (1966)—routinely cycled through the drive-in circuit.
Though early versions of the concept appeared in the 1910s, the first real drive-in theater was built in Camden, N.J., in 1933 by Richard M. Hollingshead Jr., who had obtained a patent for the format. Drive-ins blossomed in the following decades and reached their peak in the 1950s, when the automobile connoted a restless quest for freedom.
The Beat novelist Jack Kerouac wrote “On the Road” in 1957, and CBS debuted the drama “Route 66” three years later. “Everything was drive-through—the idea of getting in your car and going places,” said Mr. Dante, who was a faithful patron of drive-ins in his hometown of Livingston, N.J. “If you turned on the TV, there was nothing but commercials for cars—Jetaway HydraMatic and Rocket T350.”
Viewing movies from behind a steering wheel enables the sort of social distancing now being prescribed by public health officials, but the drive-in experience has never been altogether solitary. “People still managed to pack as many people as they could into a car,” said Bob Murawski, an Oscar-winning film editor who grew up going to drive-ins in Michigan.
Drive-ins found loyal patrons in large families who could pile into a car for an evening of double- and triple-bills, as well as side attractions: “There’s the candy and the refreshments and the intermission—and the swings, because there were always swings,” Mr. Dante said.
Mr. Corman said that while drive-in owners booked major studio releases, they were especially receptive to independent distributors—like New World Pictures, which Mr. Corman founded—because they took a smaller percentage of the box-office receipts. Consequently, drive-ins eventually became synonymous not only with a certain type of viewing experience but a certain type of low-budget production: campy, over-the-top, not meant to be taken entirely seriously.
“For us, horror films and science-fiction films played better in drive-ins than in hardtops,” said Mr. Corman, using an industry term for indoor theaters. He added that drive-ins were often called “passion pits” because they catered to lustful teenagers looking for some privacy.
The films shown in drive-ins in the 1960s and ’70s, from “Billy the Kid vs. Dracula” to “Satan’s Sadists,” would hardly be considered first-class in either production value or taste. But it’s easy to imagine how they might be unapologetically enjoyed in a rowdy, crowded outdoor environment, especially after dark.
The viewing experience in drive-ins was never ideal. The sound emanating from speakers fixed to car windows was inadequate, and dark cinematography could be hard to see outdoors. “Whenever [drive-in operators] would write the box office and complain about some movie, they would say, ‘Too many night scenes,’” Mr. Dante said. Studios sometimes produced drive-in prints that were artificially brightened.
In the 1980s, as low-budget distributors shifted to video and multiplexes began hoarding the available prints of mainstream productions, drive-ins faced irrelevance. John Vincent, the president of the United Drive-In Theatre Owners Association, points to 1987 as the lowest ebb.
“We could only get one new movie that year, and it was ‘Superman IV,’” said Mr. Vincent, who is the owner of a drive-in on Cape Cod. The property values of the large lots on which drive-ins sat made matters worse. “Drive-ins did not fade because of the lack of interest,” Mr. Corman said. “They faded because, economically, it was better to tear down the drive-in and build an office building.”
Drive-ins came part of the way back in the 1990s, and today they play the same big releases, on the same schedules, as multiplexes. Even the lowliest drive-in fare has acquired a certain respectability, thanks to championing from directors like Quentin Tarantino, whose 2007 homage to low-rent cinema, “Grindhouse,” could just as easily have been titled “Drive-In.”
There is something oddly appropriate about the drive-in’s surprising resiliency. Quick: Do you remember the winner of the Best Picture Oscar in 1965? Probably not. But if you went to a drive-in that summer to groove with Frankie Avalon and Annette Funicello in the camped-up musical “Beach Blanket Bingo,” you are unlikely to have forgotten the occasion. Drive-ins sold not just cinema but a total experience.
Still, no one could have anticipated the drive-in’s newfound prominence during the pandemic. Some operators call it a mixed blessing. “It’s nice to have some interest in it, but none of us want to be in this environment,” Mr. Vincent said. “Most of us are going to have to operate at 50% capacity.”
For now, the movie business finds itself in thrall to drive-ins. Whether it’s releases from this spring or cult classics from long ago, whatever movie product is available will play in drive-ins and drive-ins only. Could a Hollywood screenwriter have dreamed up such a scenario? “It’s kind of ironic that we all ended up making drive-in movies now,” said Mr. Dante. “That’s how we started, and that’s apparently how we’re going to end.”
Zack Snyder’s ‘Army Of The Dead’ And Other Netflix Movies Turn Up In Theaters
Facing a shortage of programming, more cinema operators are agreeing to show the streaming company’s movies ahead of their online debut.
The nation’s movie theaters are running out of movies. Some are turning to an unlikely source for more: Netflix Inc.
With major Hollywood studios paring back their release calendars—or shipping movies to their own streaming services—theater chains are expecting to be short of programming for at least three years. That’s one reason several chains premiered the Netflix zombie-heist movie “Army of the Dead” Friday, one week before it becomes available on the service.
The unlikely alliance between movie houses and the streaming giant is another sign of the ways Covid-19 has upended the decades-old dynamic between Hollywood entertainers and the theaters that show their movies.
Pandemic-related production shutdowns and a strategic shift away from the big screen have resulted in a programming crunch likely to last years, leaving theaters with no choice but to make deals with Netflix and other streaming services that allow them to play movies at home soon after their big-screen premieres.
Theaters are now compromising on terms they once considered sacrosanct, especially the length of time studios must wait before making movies available to watch at home.
“Pre-Covid there were these rules,” said one theater executive. “Post-Covid there’s a whole new ballgame. We can negotiate anything now.”
Most in the theatrical industry have viewed Netflix as a mortal threat, not a business partner. Before the pandemic, major cinema chains refused to budge on an exclusive theatrical “window” of about 90 days, designed to avoid giving viewers a reason to stay home and wait to watch a movie online.
When Netflix insisted on a drastically reduced window for its original productions, something it says caters to consumer demand to watch movies anywhere, the big chains balked. As a result, the movies Netflix wanted to release in theaters—often so they would be eligible for awards such as the Oscars—played in only a handful of circuits willing to accommodate its terms.
But theater executives and Hollywood agents now say they expect more deals with the streaming giant as U.S. cinemas emerge from pandemic shutdowns that decimated business and shifted the focus of studios and audiences alike to at-home services. One theater executive projected his chain would have 25% fewer titles in 2022, 2023 and 2024 than in pre-pandemic years—a forecast that drove his decision to book “Army of the Dead.”
A pileup of delayed 2020 releases like “Black Widow” and “Top Gun: Maverick” fill the calendar for the next year, but after that, studios are expected to opt for more of their films to skip the theater and go to streaming. Now every major studio but Sony Pictures is attached to a streamer.
The nation’s No. 3 exhibitor, Cinemark Holdings Inc., along with a handful of small and midsize operators, will show “Army of the Dead” on a total of 600 screens before it premieres on Netflix. The chain’s chief rivals, AMC Entertainment Holdings Inc. and Regal Entertainment Group, are not showing the film. Netflix and Cinemark said it would be the first of many similar deals.
For Netflix, the theatrical runs use some of its biggest movies as a marketing tool that burnishes the service’s claim that its films are on par with traditional studio offerings. And if the service keeps the strategy going, it could help it secure deals with directors who have avoided working with the streamer because they want a guaranteed theatrical release.
The changing relations between Netflix and theater chains come as other Hollywood studios incorporate streaming into their release strategies.
For the rest of this year, AT&T Inc.’s Warner Bros. will release its movies on sister streaming service HBO Max on the same day they hit theaters. Disney+ carries certain movies also released in theaters for $30, on top of a monthly subscription fee.
Paramount+ is putting some of the namesake studio’s movies on the service 30 to 45 days after they open in theaters. Comcast Corp.’s Universal Pictures and AMC cut a deal that shortens the theater chain’s exclusivity to 17 days.
When theaters closed due to the pandemic, studios’ streaming services became ready homes for some releases, from Warner Bros.’ “Wonder Woman 1984” to Walt Disney Co. ’s “Soul.” During the pandemic, ViacomCBS Inc.’s Paramount Pictures sold more than half a dozen movies on its 2020 and 2021 release calendar to Hulu, Netflix and Amazon.com Inc.
The plethora of at-home options could mean some moviegoers never return.
“Less supply from the studios will make it more challenging for box office to return to prior peak levels,” said an analyst report from MoffettNathanson earlier this month. The Netflix-Cinemark deal “should be able to at least partially offset the decline of product.”
Netflix theatrical releases have come in fits and starts, and usually with plenty of charged emotions. When it released its Oscar-nominated drama “The Irishman” in some theaters in the fall of 2019, no major chain would show the film, despite protracted negotiations.
The head of the theaters’ lobbying group called Netflix’s decision to distribute the movie on a fraction of the nation’s screens with a 26-day theatrical window a “disgrace.”
As recently as September of 2019, Cinemark Chief Executive Mark Zoradi said his chain wouldn’t give Netflix any special treatment.
“We can’t have a different deal for Netflix than we have for all the other major studios,” he said at an investor conference.
Flash forward to a conference call Cinemark held with Wall Street analysts earlier this month, on which Mr. Zoradi touted the one-week theatrical window he had secured for Netflix’s “Army of the Dead.” The company, the CEO boasted, was “thrilled to provide our moviegoers the chance to see this movie in our theaters before it’s available to stream.”
To get “Army of the Dead” into theaters on such an unusual timeline, Netflix agreed to take a smaller cut of ticket sales than major studios typically receive, according to an exhibition executive whose company is showing the film. Before the pandemic, a studio like Disney could secure up to 65% of ticket sales on its biggest releases.
The movie is one of Netflix’s marquee releases this year—a gory zombie thriller directed by Zack Snyder, best known for his DC Comics adaptations “Justice League” and “Batman v Superman.” “Army of the Dead” follows a ragtag crew of mercenaries who brave a zombie-filled Las Vegas to pull off a casino heist.
Netflix, however, hasn’t been spending as much to market “Army of the Dead” as a major studio might on a big-budget film, and exhibition insiders don’t expect it to gross more than a few million dollars in the week before it appears on the service. As it has with past releases, Netflix has asked exhibitors not to release box-office figures.
Yet the film comes as die-hard moviegoers face a dearth of options. That’s what led Anthony Papetti to buy a $13 ticket to see “Army of the Dead” on Thursday at his local Cinemark multiplex in Hazlet, N.J.
“I need that two hours of escapism,” said the 27-year-old, who works for an auto-transportation company. “Just being able to sit down with my overpriced popcorn and feel that normalcy.”
Before the pandemic, he said, he saw about two movies a week, a habit he has maintained at home thanks to three streaming-service subscriptions, including Netflix. But he’s grown tired of watching a movie while his dog barks and the dishwasher runs—and finds he enjoys even a mediocre film more when he has the darkened theater and big screen to sweep him away.
“I’m getting a little exhausted of my attitude toward a movie being dictated by the environment,” he said.
Amazon Considers Buying Movie Studio MGM For $9 Billion
Amazon.com Inc. is in talks to buy James Bond movie company Metro-Goldwyn-Mayer, according to a person familiar with the matter, potentially taking one of the last major independent film studios off the market.
Amazon is considering a bid of about $9 billion, said the person, who asked not to be identified because the deliberations are private. Discussions could still fall apart and details such as price may change, the person said. The Information and Variety previously reported on the talks.
An agreement would cap a rush of streaming deals that are set to make 2021 a record year for media takeovers. Reports about the discussions came on the day that AT&T Inc. announced its plan to create a new entertainment company by merging assets with Discovery Inc. in an entity that will be valued at about $130 billion including debt.
The proliferation of streaming services, including newer arrivals such as Disney+, HBO Max and Paramount+, has put pressure on Amazon to acquire more programming. MGM’s vast backlog also provides plenty of material at a time when production of new shows and movies is still recovering from the pandemic.
MGM and Amazon declined to comment on deal talks.
More than $80 billion in media takeovers have been announced so far this year, according to data collected by Bloomberg. That puts 2021 on track to be the busiest period for the industry since at least 2000, when AOL and Time Warner Inc. announced plans to combine.
MGM has been seen as a takeover target for years, but was never able to close a sale. The company made a fresh push last year, when the Wall Street Journal reported it hired advisers to solicit offers.
MGM also discussed other scenarios with tech giants. MGM, whose library includes the “Rocky” films and “Silence of the Lambs,” held talks with Apple Inc. and Netflix Inc. about taking its new James Bond film directly to streaming. But the company said last year that it’s committed to a theatrical release for the film, which is currently slated for Oct. 8 in the U.S.
Amazon, meanwhile, is reshuffling its entertainment operations with the return of longtime executive Jeff Blackburn. He briefly left the e-commerce company to join Silicon Valley venture capital firm Bessemer Venture Partners. But now he’s taking command of Amazon’s entire entertainment division, including the Prime Video streaming service, Amazon Studios and the video-game-streaming site Twitch.
An Amazon acquisition of MGM would be its largest purchase since it bought Whole Foods Market for $13.7 billion in 2017.
Talking To Chairman
Amazon’s bid for MGM is being handled by video executive Mike Hopkins, according to Variety. He’s dealing directly with MGM Chairman Kevin Ulrich, the publication said.
Amazon Agrees To Buy MGM Film Studio For $8.45 Billion
Amazon.com Inc. agreed to buy the Metro-Goldwyn-Mayer movie company for $8.45 billion, a bet that a nearly century-old Hollywood icon can feed an insatiable demand for streaming content.
The proliferation of streaming services, including newer arrivals such as HBO Max and Disney+, has put pressure on Amazon to acquire more programming.
Chief Executive Officer Jeff Bezos has made no secret of his desire for movie moguldom, and MGM’s vast backlog provides an abundance of streaming material, not to mention an opportunity to mine the iconic James Bond and Rocky franchises for new films and television shows.
Moreover, with retail rivals like Walmart Inc. rolling out more sophisticated online stores, Amazon must work even harder to keep its 200 million Prime subscribers loyal.
“This jump-starts them by 50 years,” said Michael Pachter, an analyst with Wedbush Securities. “That’s really what it comes down to. They weren’t going to be able to produce enough content to ever get close to Netflix.”
Pachter said that Amazon’s studios produce a few hundred hours worth of television shows and movies a year. MGM adds a back catalog of 25,000 hours that Amazon could divvy up between its Prime Video offering, or its free-to-stream, ad-supported IMDb TV.
Amazon shares were up less than 1% Wednesday morning in New York.
The takeover is Amazon’s biggest acquisition since it agreed to buy Whole Foods in 2017 for $13.7 billion but follows investments of about $11 billion on content for its streaming video and music services last year alone. Mike Hopkins, senior vice president of Prime Video and Amazon Studios, in a statement pointed to MGM’s “deep catalog” as justification for the purchase.
MGM has been seen as a takeover target for years, but was never able to close a sale before. The company made a fresh push last year when it tapped advisers to seek offers.
Previously, Amazon has acquired smaller startups it perceived as a threat — footwear seller Zappos, say, or Diapers.com parent Quidsi. Amazon also has snatched up-and-comers in new business lines, such as the game platform Twitch or Kiva, which makes warehouse robots.
It’s unusual for Bezos to spend big bucks on a legacy business like MGM. The only other example is the purchase of Whole Foods Market in 2017, which came after Amazon spent a decade trying to become a player in grocery sales — with little to show for its efforts and investment. Today, some analysts deem the Whole Foods acquisition wrong-headed and point to the fact that Amazon has since started a rival grocery chain.
For MGM, the studio that brought James Bond and Scarlett O’Hara to the big screen, the deal provides a finale to a bumpy era of hedge-fund ownership that began with a bankruptcy over a decade ago. MGM’s lead shareholder is the Anchorage Capital Group LLC, which became an owner with other investors as part of a 2010 bankruptcy agreement that erased about $4 billion in debt.
MGM’s earnings before interest, taxes, depreciation and amortization rose 48% to about $307 million last year, lifted by profit from its 4,000-title film library. But with a lack of new releases, sales declined 3% to $1.5 billion.
Under Anchorage, the studio aspired to its old glory — a legacy that includes “Gone With the Wind,” the top film of all time in ticket sales, and the biblical classic “Ben-Hur,” which shares the record for most Academy Awards at 11.
The new owners hired a moviemaker CEO in Gary Barber, a Hollywood heavyweight known for films such as “The Hitchhiker’s Guide to the Galaxy” and “Ace Ventura: Pet Detective.” He oversaw a new James Bond movie, “Skyfall,” that generated more than $1 billion in ticket sales — the studio’s biggest-grossing film ever — and partnered with Warner Bros. on the blockbuster “Hobbit” films.
MGM also branched out into television. The studio took control of the premium cable network Epix, and acquired the TV production company owned by famed producer Mark Burnett, known for creating “Survivor” and “The Apprentice.” The studio also created the critically acclaimed series “The Handmaid’s Tale” and “Fargo,” adding to a lucrative library.
Hedge funds rarely hang on to such investments for more than a few years, and observers long thought that Barber was prepping the studio for sale. In 2017, reports suggested that MGM was in discussions with a Chinese company, though no deal materialized.
Behind the studio’s renewed financial stability under Anchorage and the M&A rumors, there was turmoil within MGM’s executive ranks. Five months after Barber’s contract was renewed in 2018, he was abruptly fired by Anchorage CEO Kevin Ulrich. Reports surfaced that the two had clashed, and that Barber’s relationship with Bond producer Barbara Broccoli was also tense.
Barber ultimately walked away with a $260 million exit package. Ulrich never named a replacement for Barber, and instead created an office of the CEO, which has been in place for three years. The unusual arrangement led the Hollywood Reporter to say Burnett was sowing chaos within the company. He was said to have, at least in part, led to the ouster of film studio head Jonathan Glickman in early 2020, among other executives.
When the coronavirus struck, MGM was particularly hamstrung. Its biggest anticipated film release, the new James Bond film “No Time to Die,” has been postponed repeatedly. The company approached both Apple Inc. and Netflix Inc. about buying the film for their online services, but never reached a deal.
While coping with the prospect of production delays and higher costs due to Covid-19, MGM suffered another blow. In a June 2020 lawsuit in New York, a woman accused Ulrich of sexual battery in a swanky Manhattan hotel in June 2019. The case was ultimately withdrawn.
Late last year, MGM reportedly hired advisers to explore a sale of the company. The studio was said to seek about $5 billion, compared with the more than $8 billion that Ulrich predicted the company could fetch given time.
LionTree LLC and Morgan Stanley advised MGM on the transaction. Amazon didn’t use bankers, and the corporate development team was involved.
2001 A Space Odyssey
Metro-Goldwyn-Mayer traces its roots back to the 1920s merger of Marcus Loew’s Metro films with a film company run by Hollywood legend Louis B. Mayer.
The studio, while making great pictures like “Dr. Zhivago” and “2001: A Space Odyssey,” drifted in and out of financial distress in the second half of the 20th century. Over the decades it was owned by Time Inc., CNN founder Ted Turner and more than once by the late billionaire Kirk Kerkorian.
Turner kept much of MGM’s library, which is now owned by AT&T Inc.’s WarnerMedia, soon to be part of Discovery Inc.
“I am very proud that MGM’s Lion, which has long evoked the Golden Age of Hollywood, will continue its storied history, and the idea born from the creation of United Artists lives on in a way the founders originally intended, driven by the talent and their vision,” said Anchorage’s Ulrich, who is chairman of the board of MGM. “The opportunity to align MGM’s storied history with Amazon is an inspiring combination.”
With MGM, Amazon’s Big Audience Finally Gets The Hits They Crave
When Amazon.com Inc. agreed to buy the MGM film studio on Wednesday, it threw a spotlight on what has largely been an overlooked contender in the streaming wars.
Because many of Amazon’s video customers get the service as a freebie — it’s bundled with the Prime fast-shipping offer — the company often isn’t named as a streaming giant alongside the likes of Netflix Inc. and Walt Disney Co.
In terms of subscribers, though, Amazon is the second-largest paid streaming service in the world. Prime Video ranks behind Netflix, but well ahead of Disney+ and AT&T Inc.’s HBO Max.
Amazon lets customers buy Prime Video without the shipping deal for $9 a month, putting it in the middle of the pack of streaming rivals in terms of price. (A full Prime membership costs $13 a month in the U.S., or $119 a year.)
But despite its size, Amazon has only had a fraction of the hits of Netflix, which has attracted subscribers with buzzy shows such as “Stranger Things” and “Bridgerton.”
The MGM deal could change that. The acquisition brings more than 4,000 movies and 17,000 TV shows, including “Rocky,” “RoboCop” and “The Handmaid’s Tale,” under Amazon’s control.
The idea is to mine that intellectual property to create new hits. Mike Hopkins, senior vice president of Prime Video and Amazon Studios, says he’ll work with MGM to “reimagine and develop” the material — in other words, look for spinoffs, reboots and sequels of franchises like “Tomb Raider” and “The Pink Panther.”
For now, Netflix dwarfs Amazon in the so-called demand share of its original programming — a measure of how much viewers actually want to see it — according to Parrot Analytics. If MGM had made “The Handmaid’s Tale” for Amazon, rather than Hulu, it would be one of Amazon’s biggest hits, the firm estimates.
In the U.S., eight of the 200 most in-demand series since the beginning of 2020 belong to MGM, according to Parrot Analytics.
MGM’s James Bond franchise could ultimately be the biggest prize. But it may take time to pay off for Prime Video.
The latest movie in the series, “No Time to Die,” is still slated for a theatrical release this year — and that isn’t expected to change with the Amazon deal.
MGM-Amazon Deal Puts Acquisition Target On Independent Studios
Amazon.com Inc.’s acquisition of Metro-Goldwyn-Mayer has turned fresh attention from investors to the fates of independent Hollywood studios that would be a catch for larger streaming players.
In particular, it has put a spotlight on Lions Gate Entertainment Corp. and Sony Pictures Entertainment Inc., which claim a trove of acclaimed movies and beloved characters, much like MGM. And crucially, they might find it similarly tough to go it alone as tech giants move aggressively to conquer the entertainment industry.
While there’s no indication deals are imminent, the logic of mergers may ultimately prevail, with customers increasingly drawn to the type of expensive and exclusive programming that only a few mega-corporations can afford. Such an acquisition would continue a wave of media tie-ups, including that of WarnerMedia and Discovery Inc., that will reshape the entertainment business for the coming decades.
“There are four or five mega-platforms in this space,” said Mark Mahaney, the head of Internet research at Evercore ISI, in an interview with Bloomberg Television on Wednesday. “It clearly indicates the scope of the spending required to be in the segment. You’ve got to be willing to cut checks for at least $10 billion a year in order to be a global streaming provider.”
The crown jewels of both Sony and Lions Gate are the studios’ libraries of content. Sony owns more than 3,500 films, including the Spider-Man and Ghostbusters franchises, and 12 best-picture Oscar winners. Lions Gate has 17,000 film and television titles, counting “The Hunger Games” and “Dirty Dancing” among them. Its movies have won 32 Oscars.
Both studios are among the foremost licensees in Hollywood, generating hundreds of millions of dollars a year by allowing other services to broadcast their hits. Those spoils could instead go to a deep-pocketed owner, such as Apple Inc., which has launched its own streaming service but has relatively little content.
A new owner could also expand or reimagine the fictional universes of the studios’ characters, as Amazon’s Jeff Bezos says he plans to do with MGM’s movie properties, which include James Bond and Rocky Balboa.
Done right, franchises can be cash machines for their media owners. Marvel and Star Wars films consistently top the box office, and offshoot storylines from those properties helped Walt Disney Co. quickly attract about 100 million subscribers to its Disney+ streaming service.
Investors seem hopeful that a splashy deal is around the corner. After news leaks about Amazon’s deal talks with MGM, Lions Gate’s shares soared. Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near estimate the Santa Monica, California-based company could fetch between $7.6 billion and $11.6 billion in a sale.
A Lions Gate spokesman declined to comment on a takeover, but executives addressed it during its fourth-quarter earnings call on Thursday.
The deals “are a resounding affirmation, I’d say, about the value of content, the value of IPs and the value of brand,” Lions Gate CEO Jon Feltheimer said. “And I think that the key thing that we’re going to do is keep our head down and just keep executing on our plan.
I think, the thing that we don’t want to get distracted by frankly is this concept of scale, because we think our job is actually just to create for our shareholders.”
Sony also declined to comment, though it has been more clear about where it stands on being acquired. Chief Executive Officer Kenichiro Yoshida told the Financial Times after the MGM-Amazon deal that Sony’s film business is not for sale.
Still, that won’t likely stop those looking to strengthen their foothold in the streaming battle from making overtures to the companies, said Thomas Hughes, a former Lions Gate executive who is CEO of the Americas division of Vuulr, a marketplace for film and TV rights.
“Consider the talent, time, money and effort it would take to duplicate either Sony’s or Lions Gate’s libraries if you started tomorrow morning,” Hughes said. “If you are a tech giant and able to spend X of its billion dollars to garner more audience attention, belly up to the bar… .I’ll take a double.”