During Hollywood’s “Golden Era” of the 1930s, five studios dominate film production; Warner Brothers, RKO, Fox, MGM and Paramount. These were known as “the Big Five” and the smaller studios of Columbia, Universal and United Artists both competed and collaborated in the rough and tumble market. Now, some 90 years later, only Warner Bros and Universal remain at the top of the list, although they are now each owned by larger corporations, AT&T and NBCUniversal, respectively.

Barely over a year into the Streaming Wars, we have already seen big names, such as Fox and Sony bow out of the fight, as well as players moving to dominate specific corners of the larger marketplace. Large or small, the objective has been the same – acquire content, enticing viewers to subscribe. Fox’s vast library, dating back to 1935 was the prize that Disney and Comcast squared off over. AT&T wrestled with government regulators to acquire Warner Bros’ trove. Divorced corporate siblings CBS and Viacom with the latter’s Parmount Studios reunited reuniting decades of cinematic and television production under one roof.

As it has been for years before the Streaming Wars kicked off, content is king.

And, as the Wall Street Journal is reporting, one of the biggest, independently-owned content libraries is coming to the market with MGM Holdings looking to divest itself of its investment, putting James Bond and other valuable properties up for grabs.

Not the First Time on the Block

Metro-Goldwyn-Mayer, or MGM was formed in 1924 with the merger of the three studios that make up its name. Despite being the last studio to switch to “talkies”, MGM dominated Hollywood through the 1950s, making such classics as Gone with the Wind, The Wizard of Oz, Gaslight (from where the term comes), Ben-Hur and Forbidden Planet among others. It was also the home to the Hanna-Barbera animation studio and its award-winning Tom and Jerry cartoons. However, it was slow to react to changing times and started hemorrhaging money through the 60s until it was bought and sold twice in three years and becoming a source of low-budget and low-quality productions before ceasing to distribute its own movies in 1973 following a failed attempt to merge with 20th Century Fox two years earlier. Many of the studio’s historic props and properties were sold along with MGM Records.

Despite the financial hardships, Logan’s Run, Westworld and Kelly’s Heroes emerged from the studio. Then in 1981, its owner bought up its distribution partner, United Artists following the failure of that studio’s Heaven’s Gate. With United Artists, or UA came ownership of the James Bond franchise and the success of the Roger Moore-starring films brought a resurgence that lead to the studio to produce and release the iconic WarGames, Red Dawn and Rainman, but also some geek-favorite ones like Beastmaster, Ice Pirates and Spaceballs. It would continue to be bought and sold – twice returning to Kirk Kerkorian, the corporate raider who had purchased it in ’73. In 2004, it was the subject of a bidding war between Ted Turner and Time on one side, and Sony Pictures on the other. Sony, seeking a library to support its Blu-Ray format won out over Turner who had purchased the pre-1986 portion of its library.

Five years later however, the effects of the Great Recession had reduced the studio to insolvency and it was bought out by a group of its senior executives. Since then, the owners of this now “mini-major studio” have occasionally sought to maximize the return on their investment, but have never found a buyer willing to meet the desired value – up to $6B at its peak. Now, some 10 years after buying the studio and operating it for far longer they expected, a number of the investors want out as growing financial pressure – including those due to pandemic-delayed film releases adding to the urgency. With a large library of over 4,000 movies including the profitable James Bond franchise, plus numerous TV productions including Fargo, Handmaid’s Tale and Vikings, MGM’s owners are hoping for a bidding war among and a number of streaming services looking for new and old content with the starting price of $5.5B although the largest shareholder had wanted $7.5B.

Who Would Be Buying?

Even with nominally corporate-friendly government industry regulators, AT&T’s purchase of Warner Brothers was years in the making. Disney’s purchase of Fox was relatively trouble free, in part due to Fox owner Rupert Murdoch’s friendly relationship with the occupant of the White House, but even then, it had to carve off some sections of Fox to pass legal muster. Going forward, a large studio may not be willing to take the chance that an acquisition would not be greenlit, due to objections over monopoly. And between the large studios’ own recent purchases and the expectation that movie theaters will remain dark through at least next September, it may be enough to reduce the field of potential buyers. Smaller studios are also less likely to try a merger of equals. Like MGM, Lionsgate is also feeling economic pressure. Sony, the smallest of the current Big Five, has long indicated that it wants out of the film production business, and has instead given increasing focus to anime and video games.

MGM’s owners are hoping that a private equity firm may be one of the non-traditional media buyers to express interest, but there are also the non-Hollywood players to be considered. Netflix has long committed to becoming a studio in its own right and it is easier to buy an existing studio rather than build one from scratch. Apple and its Apple+ streaming service has already put out, or bought the streaming rights to, a few original cinematic productions, including Tom Hanks Grayhound and the alternate history space race series For All Mankind. For its part, Apple has been repeatedly cited as a potential buyer for Sony Studios, although the reported reversion of the rights for Spider-Man and related characters back to Disney should such a sale occur, do reduce its value to an extent. According to some reports, both Netflix and Apple have engaged in some preliminary talks. Amazon could also be a potential player, but has apparently not yet expressed interest or been invited.

Meet the New Boss, Same as the Old Boss

As the Streaming Wars progress, we may be left with a Hollywood that is once again dominated by five or six major studios. Disney leads the pack with some 30% of production and box office (in a normal year), with Amazon, Apple, AT&T, Comcast, Amazon and Netflix forming “The Big 6” studios, although no longer all centered in Hollywood’s Thirty Mile Zone (TMZ). Of those, Netflix, Disney (Hulu) and Amazon are already in the “The Big 4” streaming services in the first, third and fourth positions, respectively. And, while Apple is relatively late to the party, it has by far the largest market capitalization of around 1.4 trillion dollars, surpassing even Amazon’s 965B which itself is more than any two of the remaining four contenders. In addition to the aforementioned MGM and Lionsgate, Steven Spielberg’s Amblin, AMC, Sony Pictures, Discovery and even CBSViacom are all too small to compete effectively in these rarified levels and are themselves potential targets. For the moment, at least, the family-owned AMC (Dolan family) or CBSViacom (Redstone family) are the least likely to put themselves on the market, but with at least one other studio (Sony) besides MGM signaling its willingness to be acquired it could be more of a buyer’s market than MGM’s owners hope. And then, it could likely boil down to studio and production facilities being as equally important as library content.

Regardless of who winds up buying and who winds up selling, the driving force will be that size matters and there is likely to be a growing divide between those who can compete at the top level and those who can only survive at the edges.

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