The new media world’s streams lead to Amazon

James Bond has encountered media titans hell-bent on world domination before. Amazon’s desire to buy MGM, the maker of the 007 franchise and the last Hollywood studio to be snapped up, should then be familiar territory.

In fact, it is emblematic of an entertainment landscape that is shifting profoundly. Amazon’s MGM talks were revealed shortly after AT&T confirmed it was selling WarnerMedia — itself home to a storied studio — to Discovery, a maker of reality television programmes. Each deal gives its own answer to the question of when it makes sense to integrate distribution with content, and when not. Amazon’s seems the better response.

The shake-up is testament to Wall Street’s enduring love affair with streaming generally and Netflix in particular, even if the company’s new subscriber numbers are slowing. The pandemic accelerated trends already in evidence: studios face difficulties as cinemas remain largely shut and more of us stay home and stream content. 

Meanwhile, Amazon has profited from the pandemic. Its Prime service has 200m members — it is not clear how many actually stream — to rival Netflix’s 208m. Amazon is constantly trying to expand its customer base, inciting those customers to spend more by staying longer on its platform. Galvanising Prime’s offering through the back catalogue MGM brings therefore makes sense. It is unclear whether more Prime subscribers lured, say, by James Bond (the evil media tycoon is found in Tomorrow Never Dies, incidentally) translates to more purchases for next-day deliveries of toilet roll. 

AT&T’s retreat is an indictment of the telecom giant’s $85bn bet on entertainment when it acquired Time Warner less than three years ago, after a run-in with the US Department of Justice. The planned disposal eases AT&T’s $150bn debt pile, and leaves it better positioned for a parallel gold rush: that of 5G and fibre-broadband. Providing the plumbing to entertainment companies makes better sense for AT&T than trying to be an entertainment company ever did. Shareholders deserve focus after years of confused strategy and eroded value. 

Competition for content should result in better customer choice, at least initially. The fear is entertainment is becoming a market where size matters more than anything else. Consumers could end up paying the price as a captive audience subject to fee hikes. US audiences used to paying an average $200 a month for cable television may not be that concerned. But the true exchange is personal data bartered for convenience in a world where Big Tech increasingly pervades our lives. 

That leaves questions for advertisers and regulators. More streaming services mean fewer eyeballs on advertisements. Advertisers must work out new ways of reaching those audiences. Big Tech, once established in a market, has shown itself to be adept in accommodating advertisers, and not necessarily in the most transparent of ways. 

And so to regulators: the deals may not be problematic from a traditional antitrust perspective. But they come as politicians on both sides demand better oversight of Big Tech, and as the DoJ’s antitrust division and Federal Trade Commission are due new leadership. President Joe Biden’s FTC nominee is Lina Khan, a vocal critic of Big Tech whose 2017 student article on Amazon examined whether existing US antitrust laws focusing on what customers pay ignore potential anti-competitive behaviour in digital markets (EU watchdogs take a more expansive view). Should regulators’ interest be piqued by these new media deals, that will be worth tuning in for.