Amazon’s Stargate Acquisition May Be In Trouble

UPDATE: Amazon and MGM announced on March 17, 2022, that they have completed the acquisition. Read the story here. (The original report follows …)

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A decision on whether Amazon will be permitted to purchase MGM Studios is imminent.

The deal for the consumer giant to acquire Metro-Goldwyn-Mayer and all of its assets is approaching a major crossroads this month, with the $8.45 billion deal still uncertain. And as the final decision from regulators looms pressure to reject the deal is mounting from opponents. The future of MGM-owned properties like Stargate might hang in the balance.

Since Amazon and MGM announced the agreement last May the companies have been waiting for regulatory approval from the U.S. government, as well as from regulators in the European Union. And while Federal Trade Commission executives have a history of voicing opposition to the consolidation of media companies, actual legal challenges are more rare — and a victory against mergers rarer still.

Citing sources close to the deal, this week news site The Information reports that FTC heads are taking steps to prepare for a legal challenge to Amazon’s acquisition of MGM Studios, including looking at hiring expert witnesses. But the final decision on whether to bring legal action against the deal is currently split, 2 to 2.

The report says that the FTC will decide whether or not to bring the case in the next few weeks.

The FTC’s fifth and deciding vote belongs to its next commissioner. President Biden nominated Alvaro Bedoya last fall, but his Senate confirmation has been in limbo. Deadline states that a committee vote on the nomination is scheduled for this week, but he may not be seated in time to weigh in on the Amazon-MGM deal.

Meanwhile the EU’s antitrust regulators have said that they will make their own preliminary decision on whether to approve Amazon’s acquisition of MGM by March 15.

OBJECTIONS

Giant corporations buying out smaller companies to consolidate power within an industry always face some measure of public outcry. In this case Deadline reports that 34 public interest groups have registered their objections to Amazon’s acquisition of MGM. This includes a coalition of various labor unions and, perhaps most notably, the Writers Guild of America West.

Critics argue that, while Amazon is not lacking competitors in the streaming video-on-demand space, the company has already displayed anti-competitive practices that are harmful to consumers. That includes building its SVOD market share by bundling the Prime Video subscription with Amazon Prime, the delivery service oriented around physical goods, which streaming competitors like Netflix obviously do not have.

These interest groups have an ally in the FTC’s new chair, Lina Khan. Khan has been a vocal opponent of major media mergers in the past, and has worked at an antitrust advocacy group and for the House Judiciary antitrust subcommittee. She also wrote a piece for the Yale Law Journal in 2017 criticizing the strength of current antitrust law, and calling out Amazon in particular. For these reasons in June Amazon filed a petition for Khan to formally recuse herself from involvement in any of the FTC’s antitrust matters related to the company.

Amazon stated in its filing: “Given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind. Indeed, doing so would require her to repudiate the years of writings and statements that are at the foundation of her professional career.”

Certainly Khan’s career as an antitrust watchdog is what prompted her appointment by the Biden administration to be a Commissioner of the Federal Trade Commission, which receives testimony from interested parties and exercises some regulatory authority over business done within the United States.

Whether Khan or the agency has any real power to thwart Amazon’s purchase of MGM, though, is another matter.

LOOKING FOR STARGATE

Stargate’s television co-creator Brad Wright has been working with MGM since at least early 2019 on a new Stargate project, set within the existing universe that he helped to create. Stargate SG-1 and its spin-offs Stargate Atlantis and Stargate Universe ran for a combined 17 seasons over 14 years, and were a cornerstone of the film and television industry in British Columbia.

The economic crisis of 2008 and 2009, combined with MGM’s own bankruptcy in 2010 and U.S. broadcaster Syfy Channel’s change in creative direction, brought a swift and surprising end to a science fiction franchise that looked like it would go on for years to come. Plans for a third SG-1 movie were shelved, along with a finished script to the Atlantis movie Stargate: Extinction.

In 2011 Stargate Universe went off the air, having been cancelled by the network after only two years of its planned 5-year story.

With MGM under new management the Stargate franchise has largely sat idle over the decade since. In 2014 news broke that the studio’s film division had given Roland Emmerich and Dean Devlin — the original creators of Stargate’s 1994 feature film — a green light to develop the first of a potential new trilogy of theatrical films. Screenwriters were hired and development began in earnest, but by 2016 it was clear that the new movie was going nowhere.

Devlin stated that he was no longer involved with the project, and in fact finished working under the constraints of the Hollywood studio system altogether. “Honestly, I’m so much happier working independently,” he told Variety in 2019. “That’s how we did the first movie. I am not really anxious to go work in a studio again. So, I think that may have also been a factor in why it fell apart.”

He later said that he also was not enthusiastic about the creative direction the new Stargate movie was taking.

In 2018 MGM dipped a toe into new media, with a 10-part Web series called Stargate Origins. This was modestly budgeted and appeared only on the studio’s subscription site, Stargate Command — though later a film-length cut was sold on digital storefronts. Origins was not well received by long-time fans, and the site was shuttered the next year.

It was at this point that Brad Wright re-entered the picture, opening conversations with MGM about a new Stargate project. Wright completed a pilot script for a fourth live-action, in-canon series that would continue the existing universe — complete with a new team and return appearances from favorite actors and their characters.

He eventually revealed that the new show would have the Stargate now as public knowledge.

Fans (like us) speculated wildly about where a new Stargate show might end up. But just as the pitch was ready to take out to networks and potential streaming partners in the spring of 2020, the COVID-19 pandemic shut down all film and television production globally. Wright and his fourth series were put on standby.

Then, in May of 2021, MGM announced it was selling to Amazon. The retail giant is looking to boost its Prime Video streaming library, but also to utilize MGM’s wealth of film and television IP for new productions. New Stargate is primed and ready for a green light … but fans must wait a little longer until the sale is actually finalized.

WHAT’S NEXT?

With the FTC’s decision imminent there are three scenarios for how all of this works out, with varying degrees of likelihood.

• One possibility is that the Commissioners make known their opposition to Amazon’s purchase of MGM but take no action to stand in the way of the deal. This would lead to a quick closure and, with any luck, a quick announcement that Amazon will deliver what fans have been asking for.

• A second scenario would see the FTC file a lawsuit against Amazon to send the merger to court. Here of course the agency does not get the final say, but would have to present its case to convince a judge that Amazon’s ownership of MGM would violate U.S. antitrust law. This would extend the time table greatly, and if the judge were to be convinced … then the deal is off. MGM would remain independent, and its investors’ ability to sell the company for such a high price would be greatly diminished.

• Third and finally, of course, the FTC could take Amazon to course and lose. This outcome would still require more time and more waiting for Stargate fans, but it reflects the reality that the Trade Commission’s bark is worse than its bite. A judge could decide in favor of Amazon, or simply dismiss the suit.

When EU regulators announce their own decision this month it will be preliminary: They will either OK the deal, or announce the commencement of a larger investigation into the matter.

Legal experts suggest that current U.S. antitrust laws do not give Khan and the FTC much room to argue against the MGM acquisition. That’s because, while Amazon may have a corner on the retail goods market as well as a foot in several other commercial sectors, its Prime Video entertainment service is nowhere near monopolistic. Amazon faces stiff competition for consumer dollars from the likes of Netflix, Hulu, Disney+, HBO Max, and others.

U.S. antitrust law, as it is currently written, requires evidence that a merger will result in harm to consumers (such as higher prices for the same goods, due to less competition in the market). That’s a high bar for a legal challenge to meet in this case, suggesting that opponents to media mergers will have to work to reform the law as it stands before they’ll see much success challenging mergers in court. However that may not stop antitrust advocates from looking to make Amazon’s business deals as difficult as possible.

MGM is also quite small relative to other Hollywood production studios, and the $8.45 billion sale — while a major win for MGM’s investors — is nowhere near the behemoth deals that have recently closed in this space. In 2018 AT&T purchased entertainment giant Time Warner for more than $85 billion (ten times the going rate for MGM). The following year Disney acquired Fox’s film and television business for a whopping $71.3 billion.

Both of those deals received protest from labor unions, members of Congress, and others — but went through anyway. In the case of Time Warner the U.S. Department of Justice even got involved, but AT&T won the antitrust lawsuit. (AT&T’s acquisition of Time Warner took about 20 months, including the antitrust suit; Disney’s pickup of 21st Century Fox was over in 15 months.)

Compared to those, MGM is relatively small potatoes. Picking up the rights to James Bond, Rocky, Stargate, Vikings, Legally Blonde, and the Pink Panther isn’t likely to give Amazon anything approaching a monopoly in the film, television, and streaming spaces. And so it is difficult to see why the FTC or the courts would choose to block the much smaller sale of a much smaller company, simply because in this case Amazon is the buyer.

The FTC has stated in the past that its greatest concern is with horizontal integrations, where companies who produce goods in the same space merge, resulting in less competition. While Amazon does have its own streaming platform and Amazon Studios production arm, the buyout of MGM is more likely being considered as a vertical integration — with the retailer becoming a bigger and bigger player across not only numerous retail categories but multiple industries.

It might be true that the Amazon-MGM deal will “create further harmful vertical integration,” as the labor unions argue. But it’s hard to block one specific drop of water when the faucet is running and the bucket is already halfway filled.

However all of this goes down, it’s going to happen soon.

Stick with GateWorld for the latest as we monitor for signs of a new Stargate project coming down the road!