Amazon is reportedly negotiating to acquire MGM for about $9B • Hacker News Board

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#91

Post by huitzitziltzin » Tue, May 18, 2021, 3:09 PM UTC

ignoramous wrote: post #33

huitzitziltzin wrote: post #27

Earlier quoted context omitted.

what job do you want the FTC to do here? I assume you think there is an antitrust angle on this potential acquisition? I am an economist and that is my field. I disagree with your take, if that is what you mean. 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 i…

> I am an economist and that is my field. I disagree with your take, if that is what you mean. 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. 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, "Exp…

> Not saying you're lying

Thanks. You can read this material for yourself in any undergraduate industrial organization textbook!

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#92

Post by vmception » Tue, May 18, 2021, 3:11 PM UTC

e3bc54b2 wrote: post #74

lotsofpulp wrote: post #16

Earlier quoted context omitted.

The better way to address this would be reducing copyright lengths to 20 years or something reasonable.

That means losing out exclusivity on endless remakes, reboots and sequels. Since that's the majority of Hollywood money, I sincerely doubt it will change.

Many legislative opportunities just require shining a light on it.

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.

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#93

Post by bhupy » Tue, May 18, 2021, 3:12 PM UTC

paganel wrote: post #55

huitzitziltzin wrote: post #27

Earlier quoted context omitted.

what job do you want the FTC to do here? I assume you think there is an antitrust angle on this potential acquisition? I am an economist and that is my field. I disagree with your take, if that is what you mean. 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 i…

> If your prediction is that this will result in a welfare loss to consumers I would ask that you offer some evidence. 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 nam…

It feels like the aversion to the "trillion" market value is strictly psychological in response to an arbitrary order of magnitude. Keep in mind that the total value of all US companies combined as of March 2021 is $49 trillion (https://siblisresearch.com/data/us-stock-market-value/); Amazon represents just 4% of that.

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...).

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#94

Post by donavanm » Tue, May 18, 2021, 3:12 PM UTC

dalbasal wrote: post #66

There reality of current equity valuations is such that, if sustained, there is some some pretty savage consolidation to come. The only limit is antitrust, or fear of. $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…

> Large capital investment at meaningful scale is not part these companies' culture, or competencies.

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?

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#95

Post by mnd999 » Tue, May 18, 2021, 3:12 PM UTC

ghaff wrote: post #40

ignoramous wrote: post #33

Earlier quoted context omitted.

> I am an economist and that is my field. I disagree with your take, if that is what you mean. 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. 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, "Exp…

I suppose it depends on how you view Amazon. They are a (primarily streaming) content distributor although they're also a (primarily TV) studio. It's a reasonable argument that a distributor acquiring a large back catalog of film IP is a vertical merger. Although to the welfare-improving point, giving that back catalog a straightforward route to consumers is not necessarily a bad thing.

It is a bad thing for the consumer because it means more exclusive titles which is gives rise to a false market. It looks like consumers have a choice of platforms with content, but when that content is exclusive the consumer ends up having to pay for all the platforms to see the content they want to see. This in effect means more costs for the consumer and less choice.

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#96

Post by mnd999 » Tue, May 18, 2021, 3:14 PM UTC

ameister14 wrote: post #64

jjcon wrote: post #47

Earlier quoted context omitted.

> I am an economist and that is my field. I disagree with your take Maybe economists need to get a new take cause this shit is obviously ridiculous EDIT: see the already pending antitrust litigation against Amazon in EU and US

It can't be that obvious, because I don't see it. How does Amazon buying MGM create a negative outcome for consumers?

Exclusive content.

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#97

Post by JohnHaugeland » Tue, May 18, 2021, 3:14 PM UTC

afavour wrote: post #43

JohnHaugeland wrote: post #24

Earlier quoted context omitted.

Why else would the SEC or the FTC be involved? This isn't rent seeking. That phrase is becoming much too popular with the Apple store debacle.

The FTC exists to protect the interests of consumers. They're not just the "Anti-Monopoly Commission".

The FEC only gets involved over specific things.

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?

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#98

Post by rckclmbr » Tue, May 18, 2021, 3:15 PM UTC

hindsightbias wrote: post #45

JohnWhigham wrote: post #32

Earlier quoted context omitted.

The Rockefellers and Vanderbilts of yester-century would be red with envy at the size and power of today's tech companies.

Rockefeller became vastly more wealthy when Standard Oil was broken up. Same will happen to Bezos, and he'll be the largest share holder of whatever pieces there are.

Rockefeller became more wealthy because he bought a ton of real estate in Manhatten during the Great Depression, not because of Standard Oil being broken up (although yes it was after, so technically you are right)

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#99

Post by iso1631 » Tue, May 18, 2021, 3:15 PM UTC

dalbasal wrote: post #66

There reality of current equity valuations is such that, if sustained, there is some some pretty savage consolidation to come. The only limit is antitrust, or fear of. $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…

It seems the smart move in today's market is to acquire an organization for free with a leveraged buyout.

Re: Amazon is reportedly negotiating to acquire MGM for about $9B

#100

Post by bhupy » Tue, May 18, 2021, 3:17 PM UTC

NoSorryCannot wrote: post #90

huitzitziltzin wrote: post #76

Earlier quoted context omitted.

Vertical integration in steel production could as easily involve intellectual property as it does here. 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 rea…

The measure of "consumer welfare" used by US antitrust is mostly concerned with prices, which I've always thought was a bit cynical but it is what it is. Do consumers stand to pay higher prices when a single company controls the production, licensing, and distribution of content? I would argue yes and the government has argued it, too, when they forced movie studios to divest their stakes in movie theaters.

I think you're both arguing the same point: that monopoly markups can negatively impact consumer welfare.

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.