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Unions: Reject Amazon-MGM Merger

The unions don't want Amazon to buy the movie studio saying it will give the company to much power

Brian Young's picture
Aug 11, 2021

A group of unions, representing close to 4 million workers is calling on the Federal Trade Commission (FTC) to reject the pending acquisition of MGM by Amazon.

The letter was sent by the Strategic Organizing Center (SOC), which is a group of unions that includes the Communications Workers of America (CWA), Teamsters, SEIU, and the Farmworkers union. The Teamsters not only represent a significant amount of people in the movie and film industry, but they have also announced that they will be launching an organizing campaign to bring Amazon workers into the union. The SOC sent a letter to the acting director of the FTC’s Competition Bureau, Holly Vedova saying that the deal would let Amazon further leverage its power to the detriment of consumers, competitors, and the film industry.

“Amazon’s proposed acquisition of MGM would further bolster Amazon’s ability to leverage power across multiple lines of business related to the SVOD market and create further harmful vertical integration in the film industry at large,” the SOC’s Executive Director Michael Zucker wrote. “Amazon’s current practices in SVOD and related markets – including leveraging e-commerce power to build SVOD market share, bundling Prime Video with delivery and offering Prime Video at below-market prices, and exclusionary use of its dominance in the streaming device and cloud computing markets – already raise serious questions of anti-competitive conduct in the specific market that would be affected by the merger.”

Amazon offers Prime Video to all of their Amazon Prime members and the company has said that they consider the streaming service valuable in driving signups to Prime, especially since Prime Video is something that users can use daily, even if they aren’t using Prime delivery on a daily or monthly basis.

The unions argue that Amazon has a long history of using unfair and anti-competitive practices to gain dominance in vertically adjacent markets and that it would be expected that they would do the same for streaming video on demand. Some of the ways they envision Amazon doing this include offering Prime video at below-market prices and exclusionary use of their dominance in the streaming device and cloud computing markets. They also argue that the explosion of streaming video on demand has created an imbalance between large vertically integrated firms and their smaller competitors. If MGM was bought by Amazon, it would give them a huge advantage in getting their content out there over smaller firms that are not backed by one of the largest streaming providers in the world. They also worry that this deal would allow streaming video on-demand providers to limit the content that is available to consumers, meaning that Amazon could become the exclusive home to MGM content and if you want to watch an MGM movie you would be forced to buy a Prime membership. For workers, this would also likely mean less money in upfront and residual payments. Scarlett Johansen is currently suing Disney over this after they decided to release her latest movie, Black Widow, in theaters and on the Disney+ app. While it allowed more people to see it, Johansen’s contract only gave her a cut of the box office revenue, not the streaming revenue, meaning that she was losing out on millions in earnings, while Disney was still charging people to stream the movie. By limiting who can see content, it would also likely limit the number of residual payments that an actor gets from a show or movie.

The SOC believes that with a more consumer-friendly FTC, this might be the opportunity to put a pause on the expansion of Amazon.

“The dangers of vertical integration are particularly acute with respect to dominant digital platforms such as Amazon because of their ability to leverage their gatekeeper power in one market into multiple other lines of business. This merger presents an opportunity for the FTC to curb Amazon’s expansion of power in yet another line of business and place reasonable limits on how one of the country’s largest and most dominant companies is permitted to compete. For these reasons, as described more fully below, we urge the Commission to block Amazon’s acquisition of MGM.”

Currently, 5 companies control 72% of the streaming market with Amazon having the second-largest percentage at 16%, although Disney technically has a higher amount since they own a majority of Hulu (13%) and own Disney+ (11%). Each of the major streaming platforms operates its own studios and serves as a distribution channel for the content they acquire or produce themselves. However, unlike these other streaming services, Amazon has a built-in e-commerce site, streaming devices, and cloud computing component that allows them to push more and more people to their content, which SOC believes will give them an unfair advantage in the streaming market.

With their Fire devices being used by more than a third of all streamers, they have leveraged this power to get better deals for the company. For example, when NBC/Universal launched their Peacock app last year, Amazon banned it for 14 months from their devices so that Amazon could get a bigger split of the ad revenue. They also initially prevented downloads of the Disney+ app until Disney agreed to reserve a large portion of their ad space for Amazon. Companies are also forced to work with Amazon due to many using Amazon Web Services (AWS) the leader in web hosting. All of the major streaming sites use AWS and just the threat of Amazon kicking them off could be catastrophic to their business.

SOC believes that without intervention on this deal, Amazon will once again run through the streaming industry, knocking off major competitors and gaining the lion share of the market like they did in e-commerce.

The full letter from SOC can be seen by clicking here.

“The dangers of vertical integration are particularly acute with respect to dominant digital platforms such as Amazon because of their ability to leverage their gatekeeper power in one market into multiple other lines of business. This merger presents an opportunity for the FTC to curb Amazon’s expansion of power in yet another line of business and place reasonable limits on how one of the country’s largest and most dominant companies is permitted to compete. For these reasons, as described more fully below, we urge the Commission to block Amazon’s acquisition of MGM.”

Currently, 5 companies control 72% of the streaming market with Amazon having the second-largest percentage at 16%, although Disney technically has a higher amount since they own a majority of Hulu (13%) and own Disney+ (11%). Each of the major streaming platforms operates its own studios and serves as a distribution channel for the content they acquire or produce themselves. However, unlike these other streaming services, Amazon has a built-in e-commerce site, streaming devices, and cloud computing component that allows them to push more and more people to their content, which SOC believes will give them an unfair advantage in the streaming market.

With their Fire devices being used by more than a third of all streamers, they have leveraged this power to get better deals for the company. For example, when NBC/Universal launched their Peacock app last year, Amazon banned it for 14 months from their devices so that Amazon could get a bigger split of the ad revenue. They also initially prevented downloads of the Disney+ app until Disney agreed to reserve a large portion of their ad space for Amazon. Companies are also forced to work with Amazon due to many using Amazon Web Services (AWS) the leader in web hosting. All of the major streaming sites use AWS and just the threat of Amazon kicking them off could be catastrophic to their business.

SOC believes that without intervention on this deal, Amazon will once again run through the streaming industry, knocking off major competitors and gaining the lion share of the market like they did in e-commerce.

The full letter from SOC can be seen by clicking here.

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