Amazon is reportedly negotiating to acquire MGM for about $9B
businessinsider.com
businessinsider.com
$9bn is 0.5% of AMZN's current market cap, so $9bn represents a daily price fluctuation. They also have $45bn in cash reserves, so amazon could buy 5 MGMs without borrowing or issuing stock.
That's not even a lot! Apple, Google & FB have $200bn, $140bn & $65bn respectively. Dividends don't seem to be a thing, and it's basically impossible to invest this much cash internally. These companies don't have factories to build, or any kind of hard capital investments to make. Even an epic, blue sky cash sink like Waymo isn't capable of burning through their available capital, nevermind credit. Large capital investment at meaningful scale is not part these companies' culture, or competencies.
Acquisition is the only thing they can do, besides buying bitcoin and vanguard. Meanwhile, acquisitions bid up prices and exasperate the scenario further.
Morals and regulatory potential aside, does it not make sense for Tesla to buy and bury one or two major auto manufacturers? Ford is worth $50bn, GM is $80bn. Tesla is $600bn. Why bother competing?
^I'm purposely overstating, to make the provocative point... especially in regards to Tesla, who have no cash and other ways of doing capital investment anyway. Obviously, there is debt financing and other factors that complicate all of this.
Apple arguably does have factories to build, given how utterly dependent on China it is.
But the bigger scare of TI being acquired is that they are a major manufacturer of commodity components and Apple is a vertically integrated consumer electronics business. It would be devastating to American semiconductor marketplace if their portfolio was no longer available.
The problem is that Dallas (and other areas) have been sucked dry of talent by tech companies for a while - even before the conservative economic policies you're handwaving about came into effect. Some of that is on the state for not being competitive enough, other parts of that have been on predatory practices by businesses that fuel things like state to state income inequality.
Second, I don't need to be told what to be afraid of, so your condescending tone can take a listening stance. A software engineer in Dallas Texas doesn't make near the cost of living difference between a San Francisco job while doing the same thing and that is a problem. Full stop.
That problem can be remedied by bringing more tech businesses to Texas and gating them out of the traditional coastal areas like New York, SF, Seattle, and Portland. There are other ways of remedying the problem and I'd love to hear them, but finger pointing at the Texas government without pointing at companies and other states sounds pretty fruitless.
Why is that a problem? Do you feel that the same gap needs to be closed globally, or just within the US?
> finger pointing at the Texas government without pointing at companies and other states
I don't think anyone is finger pointing at the Texas government while ignoring companies and other states. GP is saying that Texas is doing thing X, coastal states are doing thing Y, leading to companies (and engineers) choosing the coastal states because they prefer Y.
I'm sure you'd find it problematic if you're forced from an area just because of geo-pay. I can't build that kind of empathy for you though, you'll need to go find it.
Nice whatabboutism on the second part. Yes, I think it needs to be closed on both. These companies produce digital products, not geographically sold ones. The contribution of an engineer in one place is the same as another, as long as the impact is the same.
> GP is saying that Texas is doing thing X, coastal states are doing thing Y, leading to companies (and engineers) choosing the coastal states because they prefer Y.
That's pretty much longer form of what I just said. The state can do things differently, but the state isn't even all or most of the answer. A lot of it has to do with wage suppression, which I covered above.
Edit: I realize I come off a bit salty about this. I am. I am not conservative and this problem has personally impacted me. It's annoying to hear people speak about this with such utter lack of empathy, or rather that their political ideology comes shining through, but I get to most people it's probably just Tuesday.
> A lot of it has to do with wage suppression
This is where I get a bit confused. Why would companies artificially push engineers to the areas where they command these disproportionately large salaries? Are you saying that they overpay engineers in general specifically to suppress wages of engineers that _are_ in Texas?
The problem is that an engineer, doing the same job, in a state that is wage suppressed can only retire in a state with even lower cost of living. When you have engineers in coastal areas on average making ridiculous sums over their counterparts in other states when nearly all the products are subject to the same taxes and distribution pipeline that begins to sound a bit problematic, don't ya think?
The problem largely lies in reward structure: coastal engineers tend to get a lot more in terms of RSUs but will get similar cash compensation. When you add inflation and home prices (which are savings vehicles) on top it compounds the problem into what we have today. As I said, some is on the state, some is on companies.
The net outcome is that an engineer retires from SF, can move anywhere they want but picks Texas. They buy a house in cash, most likely beating out native Texans and drive the cost of goods up while salaries remain low. They live like kings while the people who actually built up a community and contributed taxes to the state get priced out. This whole paragraph is just paraphrasing state-to-state income inequality though, feel free to read up on it's effects.
> Why would companies artificially push engineers to the areas where they command these disproportionately large salaries?
Because now that this paradigm exists it's rife for exploitation. Companies will pay engineers in Texas without giving them the same RSUs as their coastal counterparts. That's a savings. So sure, they pay people in SF more but they pay everyone else substantially less (beyond cost of living differences). Therein lies the rub.
When I worked in Texas there was a lot of outsourcing, but usually it's because there's not enough talent in the area to meet demand. It's a cyclical effect, which is what irritates me about coastal folks trying to deny their states and companies have participated in that process.
Lusting after California salaries is a losing game when the salaries are inflated to pay for high taxes and artificially high home prices driven by a chokehold of regulations on new home building.
https://www.thecentersquare.com/california/list-of-companies...
Bonus if far enough North to avoid freeze issues!
Unlike most if not all other companies that outsource manufacturing. Apple still has the known how and detail view in not only the factory but the whole supply chain. They could, should they choose to, instantly assemble everything by themselves.
Compared to other companies, they are making design changes and working with contract manufacture, but they have no idea how those machines in production actually works.
Buying Semi or Fabs also doesn't make sense unless they intend to Fab for others.
They can't "instantly" assemble everything by themselves at the scale they need, because almost all their infrastructure and supply chain for that is located in China. My bet is that it would take them on the order of a decade to build up alternate infrastructure and supply changes, and that's assuming the detailed knowledge they have about their processes.
This is an interesting article about how Apple's dependence has played out: https://www.nytimes.com/2021/05/17/technology/apple-china-ce....
That said, Apple have a hell of job turning $200bn into factories.
The scale of money, currently... is quite something to live up to.
The way I see it, Amazon, as a growth machine, keeps its growth options (organic/inorganic) open and when sees an opportunity for inorganic growth they will go for it. The most recent example being their acquisition of Whole Foods. They were anyway investing in growing their brick-and-mortar presence and opportunistically acquired Whole Foods to fast-track it.
Relatedly, Amazon has to be one of the most diverse corporations ever. From AWS to media studio. Which other corporations come close?
Yamaha's logo is three tuning forks. Always cracks me up seeing that on a dirtbike.
That is the exact problem Steve Yegge described [1]. Americans has a world view that equals to America. Amazon doesn't even compare with Samsung in vertical integration.
And in terms of diversity, it doesn't even need to be Korea Chaebol, dozens of other East Asia conglomerate are way more diverse than Amazon.
[1] https://steve-yegge.medium.com/hurricane-china-how-to-prepar...
2021 Amazon has AWS, which is hugely cash generative... hence the growing cash balance. They can't invest faster than it accumulates. Financially, they're like Apple, Google, Etc. now.
Also, "capital intensive" is relative. Warehouse's investment numbers tend to be publicized, because politics. A big one is $200m, and that's a "media story" number which may be higher than the real, "capital investment" amount.
Company valuations are one thing, but $10bn is a lot of capital. It's hard to actually invest that much. That's why the big software companies have so much of the damn stuff.
I like the insight. What you are saying is that liquidity needs to get much deeper to account for all the currency made available and consolidated.
Costco is a good example of how to treat workers.
Define "livable" in the context of wages
Am I missing something? The latest Amzn 10-Q shows $45B of “Purchases of property and equipment” $11B in lease principal payments in the past year. That’s on the $42B cash on hand and $26.9B net income. Cash flow and capital investment seems like the crank Amazon has been turning for 20 years?
Why only consider acquisitions over $1 billion though? They have quite a few $250 million+ acquisitions that were pretty big or key players in their respective niches.
Google has had Youtube, DoubleClick, Android, Motorola, Nest, HTC, Nest, Looker, Fitbit, Waze... and that's just what I remember.
Facebook has had at least Instagram, WhatsApp and Oculus, but they've been around close to two decades less.
For a company of Amazon's scale, it's lack of acquisitions is relatively surprising.
Whether or not they pay dividends or buy back stock, the average net is large. That's why they've accumulated these record busting sums.
That being said, it does seem like equity markets are in a bubble. Tesla at least is absurdly overvalued. If i had signifcant stake in TSLA I would be getting out asap and let someone else hold on to shares that are probably 300% overvalued.
Then they weren't.
The argument for Tesla, much like Uber, is that they are going to figure out the rest. It's really almost a faith based investment, either way.
What about data centers?
This is a vertical merger. Vertical mergers are quite different in their welfare effects to consumers than horizontal mergers. Vertical mergers can frequently be welfare-improving to consumers.
Indeed, this is why vertical mergers are harder to regulate than horizontal mergers. The welfare effects are not obvious ex ante. This has a decent chance to be pro-consumer. I don’t see any reason for the FTC to object to this on antitrust grounds.
Most of the hate Amazon gets on this site for being a “monopoly” is extremely wide of the mark. If your prediction is that this will result in a welfare loss to consumers I would ask that you offer some evidence.
I think you have to examine vertical integration in copyright affected industries differently than you would in, say, the vertical integration of steel production with a company that consumes steel.
The interaction with copyright invariably creates issues for the end-consumer, which is why consumers in the media ecosystem are often better off when distributors and producers are separate.
As a hypothetical example, imagine if Apple had sourced the M1 chip from a third party which it now proposed to buy. There would be intellectual property at stake there too. This case is no different.
And indeed, in the Apple hypothetical you could well expect consumers to be better off and for exactly the same reason: if Apple purchases an input (the M1 chip) from a monopoly supplier (the hypothetical non-Apple-producer), vertical integration removes one monopoly markup.
I do not know exactly what will happen in this case, but it seems like Amazon's proposing to buy a single studio is very unlikely to result in harm to consumers.
The copyright issues do not make the case relevantly different.
I didn't say Intellectual Property, I said Copyright. Copyright—much more than other forms of IP—has a significant impact on our shared culture and cultural transmission. Yes, there may be other factors with IP that we should consider when dealing with mergers, but end-users and everyday people are harmed much much more often due to copyright issues than they ever are due to patent and trademark issues.
> I do not know exactly what will happen in this case, but it seems like Amazon's proposing to buy a single studio is very unlikely to result in harm to consumers.
Sure, and I do not know exactly what will happen when we place a straw on a camel's back. But in each case it seems like it's very unlikely that the camel's back will break. It's a sorities paradox in reverse: Which individual acquisition is the point at which network effects start creating problems. Each individual M&A is unlikely to be the one that causes the problem, and yet if you allow each one because it is unlikely, eventually the system stops functioning correctly.
Based on this line of reasoning, literally any acquisition that increases the power of copyright holders has downsides.
I'm not saying acquisitions can't also have have upsides. I'm not saying that the net benefit can't be positive for the end-consumer.
I agree with huitzitziltzin that it's possible that this acquisition is net welfare-improving. I think we probably mostly disagree in:
- the extent of the downsides to increasing the power of copyright holders, AND
- the probability that this particular acquisition is net welfare-increasing
I would argue yes and the government has argued it, too, when they forced movie studios to divest their stakes in movie theaters.
The central argument is whether Amazon specifically is a monopoly in any of the industries in which it operates, so as to be able to charge higher prices you speak of — that's not what's happening.
In fact, the GP comment laid out exactly why vertical acquisitions often improve consumer welfare, in the case that the company being sold is itself a monopoly:
> And indeed, in the Apple hypothetical you could well expect consumers to be better off and for exactly the same reason: if Apple purchases an input (the M1 chip) from a monopoly supplier (the hypothetical non-Apple-producer), vertical integration removes one monopoly markup.
I think it's hard to avoid the conclusion that increasingly strong copyright holders (given all of the media mergers) implies increasingly strong copyright law.
Add that to the expanding ability of parsing for copyright violations and I can imagine the Disney Police parachuting in to arrest you for that counterfeit Micky Mouse watch 150 years after Steamboat Willie.
No human consumes enough TV media to warrant subscribing to every single streaming service at the same time, and there's certainly a lot that can be improved to make the "a la carte" experience of selectively subscribing/unsubscribing to services on demand more seamless — but the way the industry operates across the entire supply chain is dramatically different today.
Now we have subscriptions. It would be as crazy as it sounds, we are almost at the point where a preference of Picard over Kirk could have an effect on which toilet paper you end up buying.
But I agree in so far as that it is far from as bad as it could be if they tightened down on unsubscribe/resubscribe (which I think will inevitably happen one day). Still, I've been to that party that end with one room full of "Amazons", one room full of "Neflixers" and those left over wondering what they all talk about.
I really like what you said here. A familiar analogy that I like to use is cable TV: Netflix and Amazon are just "channels", each with different shows. When one half of the room is full of "Amazons", that's just the half of the room that's interested in some subset of shows not too dissimilar from what it might have been like to be a regular viewer of a serial television series in the days of yore.
However, whereas before, you had to subscribe to all of the channels in bulk. Today, you have the option to pick and choose the "channels" you want to pay for on any given month given the TV shows you care about. I think we agree that the experience to do this can be improved, but I think we also agree that it will inevitably happen one day.
The average human being consumes 2-3 TV shows at most on any given month. In the absolute worst case, that extends to 2-3 separate streaming subscriptions. The only thing that changes over the course of the year is which 3 TV shows one is watching (and therefore which underlying streaming service they care about).
The future isn't a $200 bundle of every streaming service available on-demand; the future is an LRU cache that automatically unsubscribes you from a streaming service if you haven't watched a show on it in the last month, and then re-subscribes you the moment you do. Given the current price of streaming services, it probably works out closer to (at most) $45/month, on average.
The future is rolling window two years subscription or something along those lines, because someone will inevitably build that LRU and it will be quite poplar for all seven weeks of operation.
And addressing it via enforcing separate distributors and producers allows the copyright issue (the real issue) to go unchecked, since politically, it’s harder to attack it as a problem.
It might even be politically necessary for people to feel the pain before we can get back to decent copyright lengths.
So, from my perspective, any system that allows those powerful entities to continue to accumulate more power and wealth is always going to harm efforts to change copyright law.
We need to weaken the power that companies wield over copyright law, and that's harder the more powerful those companies are.
I fully agree w/ this criticism of copyright law. I do not think that has a substantial intersection w/ the competitive effects of this proposed acquisition.
My understanding is that MGM has a large holding of copyrighted media, and therefore substantial interests in protecting and extending the rights and terms afforded by copyright law. For example, they have led consortiums of large entertainment companies in the past to bring copyright lawsuits to the Supreme Court (MGM Studios, Inc. v. Grokster, Ltd).
My other understanding is that Amazon is a very powerful corporation, that has complex interactions with copyright law already (they are a distributor of both physical and electronic media through Amazon Video and Amazon Music; they are a content producer through Amazon Games studios and Amazon Original Series [also already built on the back of other acquisitions]). This acquisition gives another significant interest in copyright protection to an entity that is already extremely powerful.
We're going to M&A our way to another Mouse on the copyright front (which was also built largely on the back of "mostly-harmless-at-the-time-but-problematic-in-aggregate" acquisitions), until massive swaths of our cultural expression are owned by a very small handful of organizations.
I suppose maybe a disconnect we have is there is a non-financial "consumer welfare" question that I don't see being asked. Consumer welfare is generally only approached from the financial perspective of: "what will the financial cost to a consumer be to obtain the rights to consume media"; I don't see anyone attempting to defend consumer welfare from a _cultural_ perspective of: "Which entities do we have to ask permission from in order to interact with important elements of our culture and society?"
The idea that media is "consumed" is an artifice. When you consume a media product, it actually still exists and nothing is meaningfully physically depleted.
Intellectual property is an artificial law construct meant to "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries" according to the Constitution.
Sitting on your ass and collecting rent every time someone watches a movie from the 1940's for the next 150+ years--which is an action on a copy of a work and not really equivalent to anything involving real property--is not promoting the progress of anything but the wealth and power of media conglomerates. Combine this with the ability of money to buy laws and you are looking at establishment of permanent legacies through copyright.
This isn't some kind of new idea, in the 1930s the US government forced movie studios to be separate companies from movie theaters on antitrust grounds.
On the other hand, it is their content.
I find this to be sort of self-contradictory. On the one hand, monopolies are bad, but on the other, having 5+ platforms is bad. Which is it?
My (perhaps unpopular) opinion is that having more and more streaming platforms ("balkanized", to use your term) is extremely good for consumers. The low barriers to entry and the near-zero marginal distribution costs make this the perfect industry for competition (and as a result, consumer welfare).
It's a common misconception that having N streaming platforms necessarily means that consumers spend N * subscription cost dollars per month, but that's not a sensible user pattern. Nobody consumes from every single streaming service at the same time. Instead, we have a sort of TDMA style consumption of media that allows us to constantly subscribe/unsubscribe/resubscribe from services as we chew threw our respective TV show backlogs. Savvy consumers have benefited the most from this reality, and it's only a matter of time until we see subscription management products that extend this benefit to un-savvy consumers in seamless ways.
One day, streaming services will look to consolidate so as to be able to extract monopoly rents. These are horizontal acquisitions that would be terrible for consumer welfare, and those are the kinds of acquisitions the US FTC would likely police.
The problem isn't that there are 5 platforms; it's that they don't have the same content.
Having multiple platforms have different content is not all that different from having multiple TV channels have different content, except now I'm not forced to subscribe to a giant bundle of channels when I only realistically use 2-3 at any given time.
It’s their content and they can do what they want; but you can’t stop piracy
And Amazon Prime Video is quite good. Certainly HBO stuff was never available elsewhere (except for purchase or physical rental). Yes, Disney siphoned some stuff off the other services, but again much of that wasn't available for subscription streaming pre-Disney+ (which at current pricing is actually a pretty good deal).
I really can't be bothered with piracy unless I really want to see something and just can't find it elsewhere.
I said we shouldn't uncritically allow massive copyright holders to both produce and distribute their media.
https://en.wikipedia.org/wiki/United_States_v._Paramount_Pic....
As can be horizontal mergers given economies of scale and/or network effects.
It's an interesting area of the law (anti-trust) as it strikes me as one of the few really excellent uses for the heavy hand of the government. Lots of cooks in the kitchen of legislation.
It does grate my ears to hear the word 'consumer' rather than 'citizen' but I suppose it's a natural side effect of a country that is made up of decreasingly self-sufficient individuals.
Other than competition, easily bought out when you're working with a $600 billion valuation of Amazon, or loss of consumer interest, what incentive does a for profit company have to shift any gains from economies of scale/etc to consumers? Why not make your product for 10% less, charge the same, and pass on the difference to shareholders?
Apple is a great example. If they buy out the group making the M1 to reduce cost and improve supply chain efficiency, what incentive is there to lower prices especially for a company whose marketed image is all about premium? That money is going right into ongoing costs or to recoup the initial merger costs.
Any improvement to consumers are either hypothetical, relate directly to fending off competition, listed as bullets on a PowerPoint slide between VPs, or carefully constructed to pass regulatory questions, not to help their customers save money.
You'd have to have listen in to a Walmart upper management meeting to see why, but my guess is that all commerce is somewhat fungible. There's always a bit more growth to be eked by lowering prices or increasing value of products.
I'm not saying that this always happens, or that it isn't shared with increasing profits. Gigantism in box stores could be used in areas for monopoly pricing where they have wiped out smaller competitors (who themselves wiped out smaller competitors) but there are numerous cases where it hasn't happened. I'd say that fear of anti-trust action is only part of the reason.
https://www.yalelawjournal.org/note/amazons-antitrust-parado...
> The current framework in antitrust fails to register certain forms of anticompetitive harm and therefore is unequipped to promote real competition—a shortcoming that is illuminated and amplified in the context of online platforms and data-driven markets. This failure stems both from assumptions embedded in the Chicago School framework and from the way this framework assesses competition.
> Notably, the present approach fails even if one believes that antitrust should promote only consumer interests. Critically, consumer interests include not only cost but also product quality, variety, and innovation. Protecting these long-term interests requires a much thicker conception of “consumer welfare” than what guides the current approach. But more importantly, the undue focus on consumer welfare is misguided. It betrays legislative history, which reveals that Congress passed antitrust laws to promote a host of political economic ends—including our interests as workers, producers, entrepreneurs, and citizens. It also mistakenly supplants a concern about process and structure (i.e., whether power is sufficiently distributed to keep markets competitive) with a calculation regarding outcome (i.e., whether consumers are materially better off).
> Antitrust law and competition policy should promote not welfare but competitive markets. By refocusing attention back on process and structure, this approach would be faithful to the legislative history of major antitrust laws. It would also promote actual competition—unlike the present framework, which is overseeing concentrations of power that risk precluding real competition.
But... I didn’t think much of it the first time. I don’t think the claims are well motivated. I think she assumes “Amazon bad” from the beginning and contorts some not-very-strong arguments in favor of that conclusion.
I do remember the claim in the first quoted paragraph that there was something unique about the threat (I guess that’s how she sees it?) posed by Amazon. That had the potential to be an interesting claim, but I really didn’t see any evidence to back it up in the article.
The second quoted paragraph contains one suggestion which is just completely false: that consumer product variety is limited by Amazon. I mean, have you ever tried to wade through pages of junk to find the thing you searched for? I have. There is an absolute profusion of goods on the site. That claim does not stand up to the slightest scrutiny.
If the idea is instead that the fact that most consumers choose amazon instead of some other retailer is the channel by which variety is harmed, well... that also does not stand up to scrutiny in a world with Walmart and target and Etsy and a million other online retailers.
The thing in the same paragraph about the “legislative history” of antitrust is Khan’s idea to try to reorient antitrust law with (from my recollection) a specific desire to punish or break up Amazon in particular in mind. The claim that Amazon does not compete in a competitive market which is supposed to justify this does not stand up to scrutiny either.
I don’t agree (in the third paragraph) that antitrust should be reoriented away from a consumer welfare standard, but even if I did, I think Amazon does compete in competitive markets already! (Why would we orient away from consumer welfare anyway? Would we like (e.g.) all consumers to pay higher prices (lowering welfare) but have the “product variety” provided by hypothetical, post-break-up Amazons 1, 2 and 3? What would be the point of that?)
My overall impression was that the entire article was written with the conclusion “Amazon is bad” in mind.
For what it's worth a company that is valued at between 1.5 and 2 trillion usd has to come with evidence of how it isn't a monopoly/abusing its monopoly position, we can't reasonably talk about a "free market" when those numbers are involved.
I'm not an economist and I'm not good with remembering names, but I do seem to remember that there was more than one economist in the past who said that one of the few ways of getting/acquiring "value" is to reach a monopoly position. $1.5 trillion is a hell lot of value.
There is no good evidence I'm aware of which suggests that Amazon is a monopoly or anything like one in any market I'm aware of: certainly not in retail to consumers, nor in AWS (to pick a frequent target of criticism that I see on this site). If you have evidence which suggests Amazon is a monopolist in some market it competes in, please cite it.
Amazon is large because it is successful. It is successful because it generally offers products cheaply and delivers them quickly. Period.
That is exactly the case that you do not want antitrust law to punish. Antitrust should preserve competition while not punishing successful firms.
It is indeed true that one way to become valuable is to acquire a monopoly position in a market. That is not the only way. And it is not the way that Amazon has become such a valuable company.
If we were to try to define Amazon's market, there's no reasonable definition you could come up with in which Amazon holds more than a 40% market share (https://www.ben-evans.com/benedictevans/2020/10/31/market-de...).
> Amazon has well over half of US book sales, and probably three quarters of ebook sales. So if we’re arguing about how Amazon runs its books business, it unquestionably has market dominance. You have to pull out a segment, not the whole company.
To speak more generally, my understanding is that arguments that Amazon is a monopolist are stronger when we focus on Amazon Marketplace than on (say) AWS, partly because there are many "segments" in which almost all products are sold through Amazon. But I wish that I had more data about this particular claim.
Notwithstanding that, I think the general point is that this is a vertical acquisition completely unrelated to that market, in which Amazon has nowhere close to that kind of market share.
Keep in mind that nobody here is arguing that we ought to have a free-for-all in acquisitions and do away with the FTC entirely. It's just that the FTC doesn't operate off of knee-jerk reactions to absolute dollar amount market valuations. Instead, the level of analysis is one that's more in line with what the GP commenter has been arguing.
I'm curious how this could possibly turn out to be anything but anti-consumer.
I'm sure that in general and in the past there can be and have been welfare-improving vertical mergers. But this particular one seems questionable.
> What job do you want the FTC to do here?
I would like them to carefully and thoroughly evaluate the welfare effects of this merger, and block the merger if it's not obviously welfare-improving, and not in the Kaldor-Hicks sense.
Again... why? The easiest vertical merger cases I teach to undergrads are welfare-improving. I don't see any reason to think that this one is anti-consumer. What do you think will go wrong here?
> I would like them to carefully and thoroughly evaluate the welfare effects of this merger,
They will b/c that's what they do. The OP to whom I was replying suggested that the FTC had "failed" us somehow. I would not expect the FTC to find any grounds to block this acquisition, though I could be wrong.
That probably would happen, by way of more MGM properties becoming available and costing less on the Amazon streaming platform. My concern is that "welfare of consumers who use Amazon to stream MGM movies" is not a useful proxy for "overall effect on society".
Moreover, Amazon is already vertically integrated. They are already a movie and TV studio. They already own and produce a lot of their own content.
What is the broader effect on the market? Will this snowball into further acquisitions that don't benefit consumers later? None of that is covered by the textbook model.
Unless there's serious research that corroborates the textbook outcome in a "realistic" (messy) scenario like this, I can't set my prior to anything but "extremely pessimistic."
Not saying you're lying (I am out of my depth here, for once), but your post reminds of this piece on noahpinion.substack.com, "Experts will lie to you": https://archive.is/ErWwa
An MGM buy just further buys into the practice
Thanks. You can read this material for yourself in any undergraduate industrial organization textbook!
The root of the problem is that all of these platforms users are harmed by the siloed nature of the industry, in more or less the same ways. A better solution for the customer would be something akin to the way licensing works in the music industry. Let everyone host everything, charge what they will, and pay fixed royalties out of their income.
I'm not an economist, lawyer, musician or whatever. I'm just a very disgruntled consumer that's seen the potential of the streaming industry get destroyed by greed and overpaid lawyers. There are many shows and movies that are, for no good reasons, only available on aftermarket listings for old vhs, and sometimes dvd. Finding these alternatively is even difficult.
Companies could be working on UX, social functions, or recommendation algorithms but instead they're lighting money on fire to license a revolving pile of meh that'll juice their subscribers enough to hit their quarterly metrics. I'm entirely disinterested in googling where to stream every show and movie and pay between mandatory ads, and North of $5/episode to watch a show on whichever provider has the rights to stream it. It's such a poor experience that I've returned to a personal media library and have opted out of the streaming industry entirely.
Completely off-topic - is there a term for such 'approximate' idioms? I sometimes can't quite remember the exact words in a turn of phrase - my mind goes blank and I substitute words with similar meaning. The more familiar phrase to parent is "Disney is circling their wagons"
Nice catch!
> If your prediction is that this will result in a welfare loss to consumers I would ask that you offer some evidence.
You are going to need to bring some evidence to support that notion, it's not on average people to prove that your merger isn't going to cause harm. Thankfully the Borkist era is very quickly coming to its end.
Consolidation should be blocked by default once companies reach a certain size. In order to proceed they should have to substantially prove that both consumers and labor are not going to be harmed by the merger. Any other arrangement results in speculative handwaving by lawyers and economists, and the supposed benefits almost never materialize, except for shareholders.
> Most of the hate Amazon gets on this site for being a “monopoly” is extremely wide of the mark.
What nonsense. Amazon has consistently used their platform anti-competitively to take over valuable product lines. They keep expanding into unrelated verticals in violation of federal law, and they are committing substantial, transnational labor abuses. Use whatever term you want to describe it.
What does it mean to be "pro-consumer"? You can't reasonably use that metric to decide antitrust cases if you aren't directly querying consumers on whether they want the company to be broken up or not. When the FTC decides what is or isn't pro-consumer, that's the same as me claiming that I know how you're going to vote on issue X, and then claiming that you're "voting against your interests" when you vote the opposite way.
Anyway, there's another lens besides consumer welfare and monopoly here: diversity provides protection against the unforeseen, as well as an increased rate of innovation. We see this in natural selection where species routinely go extinct and, on the occasion, whole classes of animals are wiped off the planet but life as a whole continues because of the diversity before any event.
When we accept high concentration in our economy, we lose the safeguards that come with diversity. With enough concentration the unforeseen events become actual existential threats. I'm not going to claim we're there yet -- if Amazon failed we still have Walmart, and Azure, etc -- but I didn't see anything in your viewpoint that protects against a future where some things become "too big to fail".
tl;dr diversity is a desirable property of most systems, and an antitrust framework should consider it.
Why is everyone ignoring these obvious solutions?
I feel like there are these enormous movements out there to advance byzantine solutions to problems we could readily address with simple new rules. What's worse, these movements champion things like break ups, which will never work for the vast majority of these firms. Many are not monopolies, and do not operate as trusts. (Though FB, Google, and Amazon come closest.) Meeting legal definitions matter to Supremes. No matter how silly the legal definitions may seem to us as laymen.
Two simple new rules. One, make the using of the private data of any user for commercial purposes explicitly illegal with draconian fines assessed per individual violation, not per user. Two, redo copyright in the manner you suggest. No more renewing for what becomes something akin to a copyright perpetuity.
These two rule changes would neuter the power of a lot of these companies.
(Even Disney has publicly recognized to their shareholders their mistake in backing the previous copyright extension act and have no further reason to back more extensions because they've proven the trademark and trade dress moat is plenty sufficient. Seriously, try to make a commercial Steamboat Willy derivative all you want without using Mickey characters or concepts from later shorts/movies/pop culture. Try to do it without violating Disney's long held trademark on Mickey's general head shape. Or to use a different huge empire's with a giant moat of properties, some of the earliest Batman stories just finally entered the public domain, but there's almost no way to commercially create a new Batman story without accidentally using later still copyrighted ideas/characters [early Batman used a gun, feels sometimes unrecognizable to modern expectations; most of his favorite rogues didn't show up for decades later] and without violating extensive trademarks on Bat emblems and the cowl shape, etc.)
Disney lobbied for copyright lengths and other protections because nobody else cared. And didn't ask for more over recent years because people cared.
You can do the same thing.
There are many neglected and unused regulations because markets never formed around them. Congress or a regulatory body thought they were doing something useful but werent.
Edit: Posting this I found because my question was dumb.
https://en.wikipedia.org/wiki/List_of_Metro-Goldwyn-Mayer_fi...
This buyout makes sence.
The monopoly held by the studios was effectively broken up following WWII. Yes, there were multiple studios competing but individually they were engaging in antitrust behavior.
This acquisition is essentially a waiving of the white flag and passing the torch. It will be allowed because big tech/Hollywood own politicians.
However, and I think to your point, it is impossible to reconcile that Netflix is engaging in the same behavior (producing, distributing and exhibiting) as the Hollywood studios when the courts broke up the industry to allow fair competition.
Sure it’s more convenient online, competition being 1 click away, but antitrust still applies to online content creators/distribution businesses.
So it’s more important to ask if you wanted to watch Netflix created content can you watch it outside Netflix? It’s not a simple yes or no, black/white kind of analysis though. You also have to look at the whole of the industry and when you do you will begin to see how the sausage is made and the antitrust nastiness.
Say you want to create a movie/show you contact film company A, Director B, actor C. Turns out you can’t hire any of them because they have contracts with Netflix. New content creators can no longer compete or even enter the market to compete and new distributors will not have any content to distribute so they won’t be able to compete or enter the market.
Even if it results in more/cheaper content, which may or may not be something to brag about, ultimately a competition is harmed and lack of competition is what harms the consumer.
Netflix has over 208 Million subscribers each paying a monthly fee. They are taking in multiple BILLIONS every month in revenue.
They are also in complete control of their expenditures. They don't rely on commodities or regulations. If that isn't making money then I don't know what is.
Netflix's stock price is 480x what it was 20 years ago. It has a market cap of 280 Billion dollars.
Are you one of the people that said "amazon doesn't make money" because they used their revenue to expand for multiple decades?
I'm surprised that they don't buy Penguin. Maybe Bertelsmann has no interest in selling.
If you think about it, publishers of print/music/movies are essentially built on monopoly given the single sourcing of a title. It's not as simple as cornering the market on wheat or oil.
Looking at Publishers Weekly, I see this:
"An important driver of print book sales last year was the continuing increase in backlist sales, McLean said. Backlist titles accounted for 67% of all print units purchased in 2020, up from 63% the year before. In 2010, backlist accounted for only 54% of all unit sales. " https://www.publishersweekly.com/pw/by-topic/industry-news/b...
I think you could make a strong argument for buying a large publisher (or anything really) given a good ROI.
Those who were raised on censored television and waving “the correct flag” went too many times around the sun like that to be able to reconsider themselves as anything but completely appropriate.
Wfh offered a perfect opportunity to exert political pressure; don’t open them laptops!
But the masses identity is game-fied jobs and consumerism. We must not upset the natural order.
Don’t mind me; I quit my job, sold all my gadgets (except an old iPhone) and got into learning music last year, to ride out the pandemic. I’ve gone bonkers.
Same will happen to Bezos, and he'll be the largest share holder of whatever pieces there are.
Google has 90% of the search market because they have the best product. This is the same reason Amazon is doing well – people just love what they're offering. It's not that you need oil and Amazon is the only player in town – it's that Amazon and Google offer the best gas station experience by a large margin.
That's the problem though. No one in the modern age has traditionally won against these companies, they just get happily bought. It's very arbitrary and sure, it's not breaking any laws, but it's also doing absolutely nothing for promoting a healthy industry. Is this the best "free" market we can muster?
With respect to Amazon in general?
this isn't even slightly a monopoly by the legal definition
I think it's fair to ask if it is in consumers interest to have to buy an Apple TV to watch Apple produced shows, an Amazon Fire stick to watch Amazon/MGM content, etc. etc.
I know that isn't the world we're in right now but the spats you see between e.g. Google and Roku (and Amazon and Google) feel indicative of a likely future to me: consolidate, then bring down the hammer.
> from their proprietary devices, and I did not get to watch it whenever, and however I wanted.
That's still quite possible in the future. If providers lock down the hardware you can use to watch then maybe you won't be able to watch on your phone if they don't feel like letting you.
For the rest, like sports and some other live stuff that is stuck in the past, I simply ignore.
I would not go after legislation to prevent mergers to prevent locked down devices or restrictions on how you can watch. We already had that without the mergers, so why would that address the situation?
If the point is to keep the content flowing far and wide, then that should be addressed directly.
The root issue here is excessive copyright terms. Those are the source of the monopoly. We already solved the distribution problem with the internet, now it’s a political issue of reducing copyright lengths. Any other solution will be used by politicians as an excuse to show they did something, or that nothing more needs to be done.
Who cares who buys what once the content is in the public domain. It is a cleaner, resilient, and quicker solution.
Also, it seems unfair that government would be able to dictate what Amazon can and cannot do with its content, but not others, so that is another political fight that can waste time and energy.
Not really. That's an issue, certainly. But the consolidation of media ownership into companies that control the entire process from production to the hardware video is played on has very little to do with how long back catalogues retain copyright protection.
This isn't rent seeking. That phrase is becoming much too popular with the Apple store debacle.
If you want the FEC to be involved, you have to be able to say why they're involved.
Instead of giving a feel good story about what you imagine they're for, please provide an FTC-appropriate vision of what they could get involved over
It'd be like if I knocked a chair over, and you said "I'm calling the police," and I said "why would the police get involved," and you said "the police are there to protect us and our families."
That's nice.
What is the specific basis on which the FTC would get involved in this, please?
On what basis? Legal restriction or historical precedent? This is how we get timid regulation, by never moving beyond what has gone before.
"The basic statute enforced by the FTC, Section 5(a) of the FTC Act, empowers the agency to investigate and prevent unfair methods of competition, and unfair or deceptive acts or practices affecting commerce. This creates the Agency’s two primary missions: protecting competition and protecting consumers. The statute gives the FTC authority to seek relief for consumers, including injunctions and restitution, and in some instances to seek civil penalties from wrongdoers. The FTC has the ability to implement trade regulation rules defining with specificity acts or practices that are unfair or deceptive and the Commission can publish reports and make legislative recommendations to Congress about issues affecting the economy. The Commission enforces various antitrust laws under Section 5(a) of the FTC Act as well as the Clayton Act. The FTC monitors all its orders to ensure compliance."
https://www.ftc.gov/news-events/media-resources/what-ftc-doe...
Your comparison is a little absurd. If the police had a specific role in investigating and preventing unfair chair usage than calling the police would seem like a very logical course of action.
In this case, the FTC has a clear role in preventing unfair methods of competition. Huge media conglomerates closing out access to smaller competitors via the software and hardware consumers use to watch TV could certainly be considered unfair.
It's hard to bring cases when you simply don't have the people anymore.
I don't event want the old crew. Just give us something cool. The only good thing that came out of SG Universe was the opening episode. It was awesome.
1. The plot is pretty thin and always involves a twist. That the twist happens is predictable, and so the contents of the twist become more and more ridiculous to try to reclaim unpredictability.
2. Every episode is a cliff hanger in service of the twist from #1.
3. Unnecessary lewdness means you can't enjoy it with your kids.
4. It probably won't contain the things that made you enjoy the original. What even is fan service if a large number of the fans hate it?
This creates a problem for future development - existing canon severely constraints the writers. Between writers complaining and executives looking to maximize the size of potential target audience, what usually happens is thus a reboot: the preexisting cannon gets dropped, but is often referenced to score cheap points with fans of the old show.
For reference, just look at what happened with Star Trek past its gold era (TNG-ENT).
The setup for SG1 was pure scifi gold, delivering all the frills fans could want:
• 'relatable 20thC/21stC person' space adventures-in-wonderland
• planets-of-the-week plus long arcs of discovery & tech-advancement
• galactic space opera & epic space wars that only sometimes risk Earth itself
• worldly intrigue referencing current politics/culture: evil Senators! human & alien conspiracies! Wormhole X-Treme!
But, eventually accumulated 'canon debt' & the frift of decades of real history makes new consistent stories that are equally relatable to the 2020s nearly impossible. Our heroes got pretty overpowered at times late in SG1 and SGA.
So, clean reboot! It worked great for BSG. Treat the whole past as a mythology to mine & remix, with winking fanservice rather than strained consistency & retcons. Give us some more Aschen & Tollan, Hebridans & Serrakin. Put some more vaguely-interesting unfolding pseudoscience behind the magic woo that dominated later storylines. Add some new mysteries to the gates, the gate network, & the gate-builders.
What's now possible with streaming prestige-series money, improved digital effects, & a smart full-universe paced master plan could be incredible.
Internet radio stations work similarly, but also distribute money to the performer(s) and label.
The core idea of forced licensing to any streaming service willing to pay a set fee could do a lot to prevent consumers from needing to pay for so many streaming services.
https://www.ascap.com/help/royalties-and-payment/payment/who...
You can't just play any music you want on the radio without permission (with an automatic fee attached). I've owned commercial radio stations and while you could play a vast amount of music with no hassle, it's due to the licensing/royalty agreements with companies like ASCAP & BMI that streamline the process.
Pretty much everybody that plays music in the US has an agreement with ASCAP, including XM Sirius, all the streaming services, and just about every radio station.
Any thought on how this could be applied to youtube/podcasting/etc. I miss music shows.
>The core idea of forced licensing to any streaming service willing to pay a set fee could do a lot to prevent consumers from needing to pay for so many streaming services.
I'm skeptical. While there are exclusives, one of the reasons Netflix, for example, doesn't have more content is that it has to balance the size of its catalog with the fact that consumers probably aren't mostly willing to pay $100/month.
I'm thinking more of the example of Disney changing the licensing terms on Netflix's former slate of Marvel based live action shows, before creating their own streaming service.
Streaming services want exclusives, even if it means buying the production company.
Netflix has been warning shareholders for several years of what it sees coming.
>“Our early investment in doing original content more than six years ago was betting that… there would come a day when the studios and networks may opt not to license us content in favor of maybe creating their own services.”
https://www.forbes.com/sites/greatspeculations/2019/03/08/lo...
I daresay many of the same people who complained about the cable bundle are now complaining about having to manage a bunch of different streaming services, a la carte streaming, and yes torrents. Although, to be honest, it's cheaper overall if you can do without live TV (or can get over the air).
People might not like balkanization of content, but it forces different services to compete against each other in a way that produces more and better content overall. More to the point, it's frankly no different to how TV channels used to work in the past.
Presumably, if you had mandatory licensing, you end up with a monopoly or duopoly of streaming services. (Which is more or less what you have in music--though it's arguably a triopoly if you count Amazon.) That's not necessarily bad; it's been pretty much OK (for consumers if not creators) in music. Though it would presumably reduce the incentive to produce tentpole content that brings people to your specific service.
It seems more like another avenue through which a small number of mega-corporations can control ever increasing shares of the media marketplace to me.
In my view, some sort of mandatory licensing scheme would force individually owned production companies to compete against each other to produce the best product.
Always? No.
After the deregulation of the Clinton era? Yes.
Fun fact: At the start of the Clinton administration, banks could not operate in more than one state.
That's why Taylor Swift was able to force her music off of Spotify and they couldn't do anything about it (such as just ignore her and pay a default fee). Obviously if Spotify could have done so at the time they'd have just paid a default compulsory rate and kept her popular albums on their network.
Not as of Aug 2020.
That was vacated last year, in observation that TV and the internet now exist.
https://www.justice.gov/opa/pr/department-justice-files-moti...
[1] Not him specifically, but a bald man described as an "Internet mogul" who is "one of the richest people on Earth" with "tentacles in every aspect of daily life", including "smart speakers in everyone's home"
If Walmart had done this in the 2000's, the DOJ would have stopped them.
https://www.gateworld.net/news/2021/03/next-stargate-project...