America's No. 1 financial conglomerate

Chapter 652 The Next Direction of Media Development

Ernst was adamant about the construction of MGM Grand.

Robert Iger looked at him and said helplessly, "The investment in MGM Resorts will certainly not bankrupt MGM's finances, but what if MGM needs a lot of money for other acquisitions?"

Ernst's gaze sharpened slightly upon hearing this, somewhat surprised. "What do you want to do?"

Robert Iger made no attempt to hide anything, leaning slightly forward with an increasingly serious expression, his tone revealing his confidence in future trends: "I want to break down channel barriers and build a closed-loop industry chain encompassing content and channels."

Upon hearing this, Ernst's expression became somewhat complicated, while Karmazin, sitting on the other side, was clearly taken aback, a hint of surprise flashing in his eyes.

He hadn't expected that MGM, which had just completed its $124 billion acquisition of CBS and was still in a state of internal chaos and integration, would already be planning the next phase of its channel strategy.

His strategic vision was far-sighted, which truly exceeded his expectations.

"Viacom?" Ernst asked softly after regaining his senses.

What is the current status of MGM Resorts International?

It can be said that they have taken content creation to its peak.

Following the acquisition of CBS, MGM's business scope now comprehensively covers all aspects of media content production, including film production, television series development, variety shows, and news broadcasting.

Moreover, it is at the forefront of the media industry in terms of the richness of its content reserves, the professionalism of its production team, and the number of viewers it can reach.

However, MGM still lags far behind in terms of distribution channels, with obvious shortcomings.

Although CBS's television network, together with MGM's television network, constitutes the largest television broadcasting channel in the United States.

However, there is still a considerable gap compared to true channel giants.

In terms of the integration of content and distribution channels, the most successful Hollywood company at present is undoubtedly Viacom, led by Sumner Redstone.

Viacom has completed the entire chain layout from content production to channel distribution, forming a stable business closed loop.

Its satellite channel MTV has successfully covered more than 160 countries and regions around the world with its accurate positioning and high-quality content, becoming a model of cross-regional channel operation.

"No," Robert Iger slowly shook his head, denying it firmly. "It's not Viacom. Sumner Redstone is old. The Telephone & Telegraph Corporation's thinking is the one that truly points to the future of the media and communications industry."

He turned his attention to Ernst, saying, "Although Telephone and Telegraph Group's broadband business has been consistently losing money, their pioneering strategic direction of building a broadband television ecosystem with ADSL technology is undoubtedly very forward-thinking."

"I commissioned a professional research institution to complete an industry survey report. With the popularization of broadband technology and the improvement of transmission speed, users' viewing habits will definitely undergo fundamental changes."

"Users are no longer passively receiving the content pre-set by TV stations, but can instead choose various resources such as movies, TV series, and live broadcasts through broadband TV to achieve a personalized viewing experience."

"This model is something Viacom's satellite network can't do," Robert Iger said, his tone growing increasingly impassioned. "And the Telephone and Telegraph Corporation's decision to divest its broadband business to Continental Telecom was its biggest strategic blunder, which also provided us with a rare opportunity."

Ernst looked at him, and if the other person wasn't a man, he would have wondered if he had been talking in his sleep and the man had overheard him.

He thought of the latest generation of television that ITech was secretly developing, and he thought of Redwood City, where Bell Labs had already assembled the HFC network research team, which had undergone multiple rounds of testing.

"You're not thinking of acquiring China Telecom, are you?" Ernst asked curiously.

Following this line of thought, television networks will no longer be an important channel, and telecommunications companies will take over the responsibility of being the channel.

The closed loop of content + channel that Robert Iger mentioned naturally refers to telecommunications companies.

"If conditions permit, Continental Telecom is undoubtedly the best target for MGM to integrate channel resources." Robert Iger responded without hesitation. "After acquiring Telephone and Telegraph Group's broadband business, Continental Telecom will not only have the other party's broadband technology, but also a good broadband network infrastructure and user base, which can perfectly complement MGM's content advantages and quickly build a complete industry chain ecosystem from content production to channel distribution to user terminals."

"Ha," Ernst chuckled. "You're overthinking it."

Robert Iger looked at Ernst with a serious expression and said, "I think it was a very foolish decision to let Telephone and Telegraph Group acquire Continental Telecom."

He assumed Ernst was referring to the Telephone & Telegraph Corporation's buyback agreement.

Karmazin's eyebrows twitched twice. Although he and Robert Iger didn't get along very well, was it really okay to talk to the big boss like this?

You're practically ready to grab their neck and point at them, calling them an idiot.

Ernst wasn't angry; he even saw relief on the other person's face.

A series of thoughts flashed through Karmazin's mind. Could this big boss, this American tycoon, be a masochist?

Why don't you find some time to rant a few words yourself?

Ernst was unaware of his thoughts; his expression of satisfaction stemmed solely from Robert Iger's assessment of the future situation.

He wasn't wrong. Just like investing in stocks, the integration of channels and content in the future will be the steady upward trend of the market, and that's what the main force is.

Ernst is a high-level player; he's going to be the tank.

Selling China Telecom to Telephone & Telegraph Corporation was his strategy of selling at a high price and waiting for a pullback to buy back in.

However, he cannot tell the other party these things now, and MGM's acquisition of distributors can indeed create a false impression.

At that time, the Telephone and Telegraph Corporation will believe that Ernst was forced to sell Continental Telecom due to contractual obligations.

MGM's actions indicate that it remains optimistic about the telecommunications industry.

Furthermore, China Telecom's business is located on the East Coast, while MGM's is on the West Coast, allowing for dual development and creating market complementarity.

"How about this, MGM will allocate a certain percentage of its funds each year to acquire those small telecommunications companies on the West Coast. MGM has no experience in this area, so it's best to proceed cautiously."

"Moreover," Ernst paused for a moment, then said cautiously, "the market capitalization of tech stocks and the telecommunications industry has clearly deviated from the normal range."

"The stock market can't keep rising like this forever; a correction is inevitable."

"Investing too much now would not be a good thing for MGM."

Robert Iger frowned slightly, lost in thought, and finally nodded in agreement with his suggestion.

Ernst nodded slightly, then changed the subject, "However, for MGM right now, the most crucial and urgent issue is still compliance with the Paramount Act."

Upon mentioning the Paramount Act, Robert Iger's expression instantly turned serious, and he responded in a somber tone, "Disney's acquisition of ABC, Viacom, Murdoch's News Corporation, the merger negotiations between AOL and Time Warner, plus our MGM acquisition of CBS—the five major media giants are all pushing for deregulation. Washington simply has no choice but to concede; the Paramount Act must be amended or repealed."

In order to comply with the antitrust provisions of the law, MGM was forced to divest its 2500 cinema assets and split them into 23 independent cinema chains.

From that time onward, MGM, the absolute hegemon at the time, gradually declined, and Hollywood entered an era of fierce competition and fragmentation.

After 45 years, MGM completed its acquisition of CBS for a record $124 billion, rebuilding its vertical business chain from film production to television distribution to terminal broadcasting.

This is not fundamentally different from the business model that was judged to be a monopoly back then.

It's certain that the Federal Trade Commission will cause trouble. As early as a month ago, Walton had already announced that he would thoroughly investigate MGM's trade monopoly.

Fortunately, this time MGM wasn't attacked from all sides, but rather had many allies.

The same situation occurred with Disney's acquisition of ABC and Murdoch's News Corporation; the lawsuits never stopped.

Even Viacom is like that.

Time Warner is currently in talks with AOL, with both parties expressing interest in a merger.

MGM then acquired CBS at this opportune moment, and the Paramount Act had to be amended, which was the voice of all capital.

"Let's be careful and proceed with caution."

Ernst knew that the Paramount Act was only truly repealed in 2020. Although it was effectively dead, major media giants pushed for it despite investigations, lawsuits, and fines, which took quite some time.

Putting everything else aside, just the prohibition of bundled sales alone would make MGM a target of the Federal Trade Commission.

The Marvel series, Harry Potter and other IPs acquired by Dolly Pictures, and later Pixar animations.

MGM cannot possibly require film and television companies in other countries to purchase intellectual property without bundling it with their intellectual property.

Otherwise, how could MGM sell its low-budget, poorly performing films and recoup its costs?

And then there's the clause about maintaining theater prices, which is even less likely.

The future belongs to IP, not distribution channels. How can revenue sharing possibly remain the same?

Therefore, MGM will be closely monitored in the future, and lawsuits are inevitable.