Vue cinemas head says MGM takeover by streaming giant Amazon would not hurt theatres

Blockbuster mergers and acquisitions in Hollywood continued apace today as it emerged that Amazon is in talks to buy MGM, the home of James Bond, for around $9 billion.

News of the potential deal started leaking out just hours after AT&T, the giant US telecoms company, agreed to merge its WarnerMedia studios with Discovery. That deal would put Warner Bros’ Harry Potter and Batman franchises into the same group as the Discovery Channel’s science, cooking and nature shows.

Neither Amazon nor MGM have yet commented on their talks, but sources have indicated this to be a tale of non-fiction.

Analysts said a deal would bring Amazon MGM’s rich back catalogue of successful franchises and give it access to the famous studio’s new movies without having to enter into expensive auctions with rival streaming services.

The industry is in the midst of a flurry of mergers as it readjusts to life where streaming is a major force in the way new movies are distributed.

While cinemas in England reopened this week, theatres have been closed around the world for months during the pandemic.

Analysts said the resulting boom in streaming on the likes of Amazon, Apple + and Netflix has made studios realise the tide towards home viewing is here to stay.

While cinema releases are more lucrative for the studios, the concern is that people who would previously head to movie theatres will not now return.

With MGM and Warner Brothers now both in M&A talks, speculation is rife that fellow studios Sony Pictures and Lionsgate will be bid for, with deep-pocketed Apple being mentioned as a possible bidder.

Fox is already owned by Disney, Universal by Comcast and Paramount by ViacomCBS.

Cinema owners today said an Amazon deal for MGM would not harm them despite the added muscle it would give Amazon Prime’s streaming offer.

Tim Richards, CEO of the VUE chain, said cinema box office takings would always be far bigger than streaming releases and predicted Amazon would still do theatrical releases of MGM’s blockbusters before streaming them.

“When you have films that are grossing well in excess of $1 billion [on cinema release], any business in the world would look at that and not change the model.”

He disputed the narrative that takings from home streaming was beating cinema releases, saying that over the last 10 years before the pandemic there had been a slow decline in home while cinema box office receipts had been growing healthily.

“2019 was a $43 billion box office year. This was growing every single year.”

He said Amazon would be mostly keen on MGM’s rich library of hits and its high quality production team.

“MGM is a production studio that, with an injection of capital [from Amazon] could do really great,” he said.

Amazon has been investing heavily in buying in premium content to attract new subscribers to its Prime Video service, recently having spent $465 million on making a Lord of the Rings TV series.

Sanchit Jain, tech and media analyst at research group Enders agreed that MGM’s rich back catalogue would be Amazon’s main target and that it could justify paying a huge amount to own it.

“They may be prepared to pay more because you get people into Prime Video and two or three weeks later they go for fully-charged Amazon Prime with ecommerce, music etc. It makes the entry point to the Amazon flywheel more appealing. With Amazon it is all about subscription growth.”

Jain added, however that Amazon could move into owning cinemas through the MGM studio in part of a “multichannel” strategy. A recent US Department of Justice ruling means studios can now buy theatre chains.

He cited the example of Disney’s takeover of Marvel Studios which meant superhero fans could, post the DoJ ruling see the movie in a Disney cinema then the TV series on the Disney Plus, buy the merchandise in the Disney store and go on the ride at the Disney theme park.

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