The Amazon Playbook

Their Strategy, the Antitrust Lawsuit & More

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Background & The Streaming Wars

Amazon just acquired MGM Studios1 for 4.85 Billion. from their press release:

MGM has a vast catalog with more than 4,000 films… as well as 17,000 TV shows—that have collectively won more than 180 Academy Awards and 100 Emmys,” ~ Mike Hopkins, Senior Vice President of Prime Video and Amazon Studios.

You can read the full press release here

As stated previous aggregators are the new monopolies and Amazon is perhaps biggest aggregator currently. The punditry is talking about the “Streaming Wars” and indeed Amazon Prime does need more titles to be appealing. Previously it was losing to both Disney and Netflix. Though it does not want to be like Netflix and pay for licensing. Licensing is the death of any streaming service, as it a major cost while not conferring any of the major benefits such as product merchandising. Exclusives as where the money is to be had.

And this acquisition does offer them a way for exclusives. But why did they buy MGM? Indeed MGM does have a vast catalogue of titles and IP as mentioned by their Senior VP Mike Hopkins, but it isn’t cutting edge, nothing new has really come from the Lion’s den in quite some time. But Amazon doesn’t plan on making anything “New”.

Hoppkins again:

“The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team. It’s very exciting and provides so many opportunities for high-quality storytelling.”

Amazon plans on rebooting many of the previous held IP and cashing in on Nostalgia.

Reviving the “Classics” be it brands or stories will be common and wanted, to provide some stability and comfort. When everything is in flux people want something in stasis.

They plan on cashing in on a major business trend; In part, because no one knows what to make anymore, so they’ll recycle old material until they find a new trend. Further with the shock of the Covid-19 Pandemic many people retreated to their favourite shows and movies. People want, and wanted “normalcy”; nostalgia gives them that. In addition the success of Marvel and Star Wars with their “expanded universe” has lead to executives looking for easy wins and quarterly gains.

Yet, while everyone is talking about the “Streaming Wars” this smacks of something far older: Cable TV & the Theatre Wars. Indeed soon we will be back in an age where every movie and TV show is within their own walled garden ecosystem with no cross over. The future looks alot like the past of paying for specific content and the consumer getting shafted by sky high prices.

The Amazon Strategy

“When we win a Golden Globe, it helps us sell more shoes” ~ Jeff Bezos

Amazon continues its strategy which I outlined nearly a year ago:

Amazon seeks to become a true ecosystem. One where someone could from the time they wake up to the time they go to bed only use and interface with Amazon products. From Work to Play, Food to Medicine.

Amazon’s Strategy is becoming a protocol: an aggregation ecosystem; and it has done so successfully. From Books to Grocery and now haircuts Amazon is all encompassing. A strategy which has positioned Amazon being a feudal lord over both consumers and subsequent markets.

The AntiTrust Lawsuit

Doing so has made them fairly impervious to antitrust as “independent” businesses similarly to Walmart become vassals for them. A practice which has the DC Attorney General bringing a long awaited antitrust case regarding market manipulation. The Lawsuit is based upon Amazon’s previous contract:

Until 2019, Amazon included a clause in that document, referred to as a “price parity provision,” which prohibited sellers from offering their products on a competitor’s online marketplace at a lower price than what their products sold for on Amazon. 

However since this provision has been removed, which may stall the case legally, unless it can be proven their “totally different” policy has similar effects:

even after Amazon removed the pricing parity provision from its agreement with third-party sellers, it added a nearly identical clause, referred to as its “fair pricing policy.” The fair pricing policy enables Amazon to “impose sanctions” on a seller that offers their product for a lower price on a competing online marketplace.

Prosecution will need to prove not only is this clause is similar, but additionally items such as: unofficial price floors by Amazon with their “Basics” line and the search algorithm in likely biased in favour of their own products.

Even if this suit were successful though, Amazon by my estimation has become far too powerful to even consider this a threat.

Coda

We will see how this feudal defence holds up. For AntiTrust wasn’t designed for the Amazon approach of a small market share from every market. AntiTrust was designed to smash monopolies, not ecosystems. Until a verdict has been reached, perhaps even after; the tendrils of Amazon’s Aggregation Ecosystem will continue to grow.

1

Note this is a wholly separate entity from MGM Resorts International which owns the hotels and casinos globally.

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