The Briefing By Martin PeersMay 26, 2021Greetings!Amazon’s $8.45 billion purchase of MGM signals, for Hollywood, just how much video streaming has reshaped the entertainment landscape. Tech-driven companies are taking more of Hollywood’s real estate while older players, like WarnerMedia and Discovery, join forces so as to better compete. But does the deal mean much for Amazon, the e-commerce-cloud-computing-everything-else-in-the-world conglomerate? Not on the most obvious metrics. Amazon spent nearly twice as much money to buy Whole Foods in 2017 and laid out several billion dollars more on capital expenditures in the first quarter alone than what MGM is costing. Amazon’s press release seemed designed to send a “this is not a big deal” signal: It quoted Mike Hopkins, a senior vice president, whereas the Whole Foods purchase announcement prominently featured a quote from CEO Jeff Bezos. Then again, discerning the significance of Amazon’s entertainment operations to the company has never been easy. Amazon doesn’t report any metrics about Prime Video’s usage, for instance, and the only reference to content expense is in a footnote to its financial statements. As the video streaming service is a feature of Amazon Prime, rather than a service in its own right, even knowing Prime’s subscriber numbers wouldn’t tell us much about Prime Video’s popularity. But Amazon doesn’t disclose Prime subscriber numbers on a regular basis, either. Prime Video is likely more successful than anyone might think. A report today from Cowen & Co., which cited a survey showing that Amazon ranks close behind Netflix in penetration of the video streaming market, well ahead of Disney and everyone else. In the same vein, we reported last month on how successful Prime Video had been in India, unlike Netflix. All that suggests video streaming may be helping attract Prime subscribers, making it valuable to Amazon. That would explain Amazon’s willingness to double down with the MGM deal. And it is a costly deal, aside from the money involved, bringing Amazon a lot of attention from politicians and antitrust regulators. If Bezos is willing to endure that scrutiny, we should assume he’s in entertainment for the long haul.THE WAY WE LIVE NOWGordon Gekko’s famous “greed is good” line from the movie “Wall Street” seems to reverberate in much of tech land nowadays, as our story today about outsize equity grants to founders highlights. Yes, equity grants for company CEOs are nothing new. What is new is the idea of giving founders who already have a sizable stake even more stock when a company goes public (and in some cases as part of their regular pay).Check out DoorDash co-founder Tony Xu, who had $1.5 billion worth of stock when the food delivery company went public in December. But the company has granted him stock awards that will be worth an additional $6 billion if he can nearly quadruple DoorDash’s stock price over the next seven years. And he’s just one of many founders enjoying this largesse.It wasn’t always this way. As we noted in our story, founders of Google, Facebook and Amazon didn’t get big grants when those companies went public, because the founders already owned a lot of stock (they also didn’t take much, or any, annual compensation). The argument nowadays is that founders need an extra incentive to stick around, according to the people we talked to. What about the value of the stock they already have? This comment in our story, from Latham & Watkins partner Tad Freese, seems to sum up the state of affairs:“How do you motivate these founders, who created this incredible thing, to take it to the next level when they already have enough to sit on the beach forever, on their own island?”THE ELEPHANT IN THE ROOM IN AXIOS-AXEL SPRINGER TALKSOne by-product of a potential Axel Springer-Axios tie-up could be some awkwardness among Politico Europe’s two owners: Axel Springer and Politico. As journalism watchers will remember, Politico’s owner, Robert Allbritton, has an unhappy history with Axios co-founder Jim VandeHei.To recap: VandeHei co-founded Politico with Allbritton’s backing, and over the course of nine years built it into a political news powerhouse. In 2014, Politico and Axel Springer formed a joint venture to launch a European offshoot. A couple of years after that, VandeHei left after a falling out with Allbritton. He took star columnist Mike Allen with him and the two soon launched Axios. Selling Axios to Axel Springer would be sweet revenge for VandeHei. According to this Washingtonian account of the breakup, VandeHei wanted Allbritton to sell Politico to Axel Springer, in a deal that could have yielded a big payday for VandeHei. VandeHei didn’t get his way then, but he seems poised to do so now. Oh, to be a fly on the wall in the next Politico Europe board meeting.IN OTHER NEWS…Amazon CEO Jeff Bezos will hand the reins to Andy Jassy on July 5, Bezos told shareholders Wednesday, Bloomberg reported.Google is getting access to a new trove of patient data from hospital chain HCA Healthcare to develop algorithms that help monitor and treat patients, The Wall Street Journal reported. The deal includes cloud storage for HCA.A former Microsoft board member, Maria Klawe, said in an interview with Business Insider she was pushed off the company’s board as a result of a controversy around CEO Satya Nadella’s comments about how women should get pay increases. Klawe also said former CEO Bill Gates wasn’t interested in diversity.Nvidia reported 84% higher revenue for its first fiscal quarter to May 2, while net income more than doubled.NEW FROM OUR REPORTERSRecent IPOs Yield Huge Equity Grants for FoundersChina-Backed African Payment Startup OPay Raising $400 Million to Fuel ExpansionWHAT WE’RE READINGA New Crop in Pennsylvania: WarehousesSEC Weighing New Investor Protections for SPACsThe Super Rich Are Choosing Singapore as a Safe HavenInside Bill Gates’ Private Investment FirmTwitter Raises Heat on Twitter, Google and Facebook in Online Crackdown |
