MGM Is For Sale (Again)
Back in December of 2017, when Disney first reached an agreement to buy Twentieth Century Fox, Disney and Netflix had essentially entered a race that would define this moment in time for distribution. Could Disney become Netflix before Netflix became Disney? We know the answer now, here at the beginning of 2021: Disney could soon be both the leader of the theatrical business—with Marvel, Star Wars, Pixar and their animated remakes—and can mine their properties (including Fox’s rich vein of intellectual property like Die Hard Planet of the Apes, Alien, Night at the Museum, and Ice Age) for additional streaming content. They launched Disney+ shortly thereafter and are closing in on 100 million worldwide subscribers ahead of schedule. Everyone else, Netflix included, is playing catch up.
When the long-expected news broke that MGM had hired consultants to facilitate a sale, it opened the door to more consolidation by the biggest studios in Hollywood as streaming continues to grow into the primary way viewers watch movies. MGM has been bought and sold and bounced around so many times it’s comical. In fact, a big chunk of their library is permanently at Warner now (check out MGM’s wikipedia page for the full history), but their current, still-large library will always have real value in the entertainment world. MGM also offers several intriguing parts beyond their library like full production and distribution capabilities for both movies and television, the streaming company EPIX, a 50 percent ownership share in the James Bond franchise (which is currently the largest movie franchise not being released by a major studio), and additional franchises that can be mined in the streaming world like Rocky, Poltergeist, Carrie, Pink Panther, Legally Blonde, Robocop, and Poltergeist. While this means they have something to offer everyone, in theory, it’s better to think of this opportunity as one-stop shopping for any company that wants to get in at the ground floor and become a fully functional studio overnight.
Where will they end up? Lets make some educated guesses based on the following criteria:
- You need at least $5.5 billion in cash on hand. Yes, you can be creative, but for the purposes here, I want to narrow the list down some. This eliminates Lionsgate ($0.5b cash on hand) and ViacomCBS/Paramount ($3b cash on hand), but I’m going to pitch one idea that includes them below.
- You have a need for MGM’s:
- Stake in James Bond;
- Production capacities;
- Distribution capacities;
- Additional IPs for new content;
- Streaming service EPIX.
The more needs MGM fills, the better the fit, and therefore the more likely I think a sale will happen. Let’s start with the companies I feel have the worst odds to buy MGM and finish with my bet on the likely home.
DISNEY (50 to 1)
Cash on Hand: $18b
Needs: Stake in James Bond
Does not need: Library, Production capacities, Distribution capacities, Additional IPs for new content, EPIX
Disney will certainly be interested in a franchise as large as James Bond, but given the uncertainty in the theatrical market and the simple fact they are overflowing with the biggest movie properties already, I think their interest in Bond will be somewhat limited. The MGM library has some PG content but also a lot of adult fare that Disney is indicating will not go to Disney+ and their Hulu/Star strategy is strangely complicated. They are probably content to sit this one out. It’s good to be the king.
AT&T/WARNER MEDIA (30 to 1)
Cash on Hand: $10b
Needs: Stake in James Bond, Additional IPs for new content
Does not need: Production capacities, Distribution capacities, Additional IPs for new content, EPIX
AT&T would love to have Bond, but they are feeling the heat from announcing they are dumping their entire 2021 theatrical slate to HBO Max. They are also selling assets right now, a process that started with the anime streaming site Crunchy Roll and will likely continue with DirecTV. Dropping billions on MGM for Bond would reverse their current strategy, which is why I think it’s unlikely MGM will end up with the Burbank studio. Their current library is even more extensive and valuable than MGM’s, though they’ve yet to utilize it well on HBO Max. In fact, everything about HBO Max right now is troubled and their focus should be—and likely will be—righting that ship. This could be a major distraction and that suggests they’ll sit this one out.
SONY (20 to 1)
Cash on Hand: $42b
Needs: Stake in James Bond, Additional IPs for new content, Library, EPIX
Does not need: Production capacities, Distribution capacities
If you want a good book about the current state of the movie business, you have to read Ben Fritz’s The Big Picture: The Fight for the Future of Movies, which studied the emails made available from the Sony hack in 2014 and was able to tell the story of the decline in Sony’s movie business through those emails. It’s fascinating, and for our purposes here, it can detail how the MGM purchase could help cure what ails Sony. They would be able to enter the streaming age with EPIX and be armed with a complete catalog as well as being able to roll out new movies or shows around the MGM properties. The reason they aren’t higher given all the fits is because Sony has noticeably avoided getting into the streaming wars so their internal strategy might preclude them from buying MGM (again). Sooner or later, however, Sony will want to own its own streaming platform (besides Crackle, which they just exited). This would give them an opportunity that’s better than launching an entirely new platform with zero subs, but I don’t think they’ll go for it now given they haven’t indicated a shift in their overall thinking toward streaming.
NETFLIX (12 to 1)
Cash on Hand: $8b
Needs: Stake in James Bond, Library, Additional IPs for new content
Does not need: Production capacities, Library, EPIX, Distribution capacities
For Netflix, being able to reboot something like Robocop is important, but let’s be honest: This is all about Bond for Netflix. Netflix has been trying to build their own big franchises and has been largely unsuccessful, save for Stranger Things. They don’t want to directly compete with other studios (they see Youtube and video games as their main competitors), but they do see their growth now dependent on being a lot like Disney in that they want to control several large, mainstream IPs. Being able to land something like Bond is a holy grail for them. Disney may have beaten them and built a successful streaming branch before they could collect a number of high demand franchises, but this is the chance for them to make a splash. We’ve already known they kicked the tires with MGM on buying No Time to Die, but I do wonder if the price tag for buying all of MGM is too much given their primary interest in MGM is just in one franchise. However, we have to acknowledge they are going to be one of the bidders. If the price tag goes to ten or eleven billion, they probably can’t compete.
AMAZON (10 to 1)
Cash on Hand: $64b
Needs: Stake in James Bond, Additional IPs for new content, Library, EPIX, Distribution capacities
Does not need: Production capacities
Amazon is working with several third party producers and they produce some content, including their Lord of the Rings series that is right around the corner, themselves. They also had their own theatrical distribution team under Bob Berney until a string of unsuccessful releases had them turn their focus away from theatrical. (Berney left Amazon in 2019.) These elements of MGM aren’t as interesting to Amazon but everything else is. The MGM library and the ability to make series or movies from all the existing IPs would boost their Prime streaming. They also have a second window deal with EPIX that they could bring in-house and away from Hulu so that content could become exclusive and now first window. But all that pales in comparison to getting something like Bond at Amazon. They are going to take a long, hard look at MGM.
COMCAST/UNIVERSAL (7 to 1)
Cash on Hand: $14b
Needs: Stake in James Bond, Additional IPs for new content, Library
Does not need: Production capacities, EPIX, Distribution capacities
Comcast isn’t as good as Disney in terms of being forward thinking, but they are close. They came in second for Fox back in 2017, but they were smart enough to get the European premium network Sky as a consolation prize. They also place a huge value on big IPs and they have all international rights on Bond. I think they are going to go after MGM after losing out on Fox and they are going to be aggressive. While they don’t need EPIX, they do need original content for Peacock and the MGM library and its IPs present a lot of opportunity there as well.
APPLE (3 to 1)
Cash on Hand: $192b
Needs: Stake in James Bond, Additional IPs for new content, Library, Production capacities, Distribution capacities
Does not need: EPIX
This is Apple’s moment of truth. MGM can give them everything they need to become a fully operational studio overnight: the library, lots of IPs, production, distribution, and Bond is the cherry on the cake. Like Netflix, they have already shown interest in James Bond and this would give them the ability to go from being an afterthought to a real player. Their original content so far hasn’t drawn in a ton of paying subs as most of their base has the service through a free trial and most of those folks aren’t even using it despite it being free. They’ve shifted gears in 2020 to go after big titles like Greyhound and Emancipation and I think they are only going to double down in that space. MGM’s production and distribution capabilities would give them the ability to be a lot like Netflix and create a lot of their own movies and shows themselves.
Finally, given how much money Apple has, I can see them in the near future going after several studios that aren’t in the best position (including Lionsgate, Paramount, and Sony), as those assets are greater under one roof than being sold to multiple companies and Apple is frankly the only place that can do them all.
There you have it. MGM is for sale and its assets are going to be too valuable for it to go unsold. On paper, I think Apple is the best fit given their needs and what MGM has, but it’s not often something as big as Bond hits the open market so that’s enough for everyone to at least have internal conversations and preliminary talks with the banks representing MGM. If it goes for a lot—ten billion or more isn’t out of the question—I suspect smaller studios will follow suit and end up for sale. There’s gold in them thar streaming hills, but it’s only going to be for a select few and who those few will be clearer after this sale.