(Bloomberg Opinion) -- It took just three years for AT&T Inc. to admit it couldn’t manage the collection of entertainment assets it scooped up through its $102 billion acquisition of Time Warner Inc. Don’t expect Amazon.com Inc., which is reportedly considering a multi-billion-dollar takeover of Metro-Goldwyn-Mayer, to fail so easily.
These deals aren’t directly comparable. Buying a complex machine that includes a major movie studio, a news network and an award-winning producer of premium television programming for $102 billion, as AT&T did, is one thing. Buying an expansive film library, a boutique cable network, some snappy cable series and the James Bond saga for about $5 billion to $10 billion, as Amazon is considering, is quite another.
Still, the comparison is useful because a pair of starchy behemoths have recently punted ambitious plans to combine their telecommunications networks with exotic content offerings that they thought they could better foster in-house. Verizon Communications Inc. tried with AOL, Yahoo and the Huffington Post, but whiffed. And AT&T just finished its epic bungle.
Mergers have notoriously bad track records. Most fail, perhaps 70% to 80% of them, according the Harvard Business Review. Poor pricing and ham-handed integration are often cited as the culprits behind deals that torch billions of dollars, often throw employees’ lives into disarray and don’t deliver corporate “synergies.”
I suspect another factor is at work when a plain vanilla corporation goes shopping for a creative enterprise. Effectively recruiting, managing and inspiring creators who work in books, media, film, music and the like are tasks that elude stopwatches and spreadsheets. For suits and bean counters unaccustomed to working with independent thinkers who bridle at authority, prize personal loyalties and favor infighting, it’s like herding cats. And it distracts the new owners from sustaining the familiar core business they had been running. Car crash.
Yet Amazon has much to show for its own efforts. So it will be interesting to see if the MGM deal progresses. Has Amazon unlocked the secret to hosting creators in a corporate environment? It’s too soon to know, but there’s much to consider.
Amazon runs a massive digital retailing empire and a thriving cloud-computing business, among other things. It has also made a robust push into smart-home tools, including its Alexa products, that exist essentially because the company’s founder, Jeff Bezos, willed them to. Executives involved in the Alexa push knew what that meant, as my Bloomberg News colleague Brad Stone explains in his new book, “Amazon Unbound.”
“Bezos’s close involvement made their lives more difficult but also produced immeasurable results. Jeff ‘gave us the license and permission to do some of the things we needed to do to go faster and to go bigger,’” one executive told Stone.
Mike George, an Amazon executive, was a Bezos favorite tasked with making Alexa successful. Stone describes him as “a bald, charismatic, cowboy boot-wearing Amazonian with a penchant for face paint, who liked to walk into meetings with an Amazon Tap under his arm, blasting music.” Bezos liked George’s “fungible” energy and “deployed him like a firefighter to douse the flames of chaos and instill order” around the company.
So Bezos was demanding and hands-on, but also willing to let characters roam his hallways to get the job done. It’s hard to imagine Mike George working at AT&T or Verizon.
Amazon also has already done well running an amalgam of entertainment properties that includes podcasts, a music division, Twitch and, of course, Prime Video (its streaming and rental service) and Amazon Studios (which produces films). Amazon Studios got a dozen Oscar nods this year and won two for “Sound of Metal.”
The company spent heavily making Prime Video successful. Bezos plowed forward even when his board of directors grew antsy about the effort. “Jeff was ahead of us in thinking about the relationship between content and Prime,” one former board member told Stone. Bezos also stood by Amazon Studios — and personally monitored its output — as it navigated touchy production decisions, developed an identity and survived a scandal. Jeff Blackburn, a soft-spoken, former Amazon veteran with a passion for creative projects, is returning to the company to lead a new global unit that will house all of its entertainment operations.
Bezos has been, perhaps, the best corporate manager in U.S. history, and while he is ruthless, tough and demanding, he also has given subordinates plenty of room and resources to take risks. He also seems to have an authentic appreciation for and dedication to creative people. One of his ventures outside of Amazon, the Washington Post, was rejuvenated by his financial and managerial resources — and by his willingness to let the paper be run independently and boldly.
Bezos plans to step aside as Amazon’s chief executive sometime in the third quarter, so it will be up to his successors to make the MGM deal work, if it happens. I doubt that they will fail. Amazon has shown it can make creative businesses thrive, often by analyzing them endlessly and then knowing when to get out of the way so inventive types can do their thing.
There’s a lesson here for the next time the M&A crowd goes Hollywood.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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