Even among other CEOs, Jeff Bezos has known for being an especially aggressive businessman. He's really good at playing the game of capitalism, where the imperative for any company is to grow and keep growing. So Bezos wants to have a hand in almost every aspect of his customers daily lives. And when he hits the wall, he's known for buying his way in. When Amazon struggled to sell shoes, they bought Zappos for about a billion dollars. When they were flailing around with their grocery delivery business, they bought Whole Foods, and then in May, Jeff Bezos did it again. Amazon today just did some shopping of its own, buying MGM for nearly eight and a half billion dollars. But this is coming as Amazon continues it's push to try and figure out Hollywood, try and figure out how to make this work with streaming that's kind of been all over the map. This is so fascinating. You have this company that's really the epitome of the modern company buying a film studio that was founded in the silent era. Amazon said it was buying one of the most storied names in Hollywood. MGM is home to movies like Rocky and RoboCop, Fargo and the Survivor TV series, and of course Bond James Bond, Mr Bond. The deal surprised even obsessive Amazon and Hollywood watchers. Here's my colleague Lucas Shaw, who covers the entertainment industry. The response was at first shock at the number Amazon was paying almost nine billion dollars from GM, which far exceeded what anybody really thought it was worth on paper. And the other reason the deal surprised Hollywood was what it said about Amazon's and Jeff Bezos's overweening ambition. For ten years, Amazon had offered TV shows and movies as a free perk to Prime members, but Amazon streaming service was seen as trailing Netflix. Making original TV shows and films was even considered something of a vanity project for Jeff Bezos. He seemed to love attending award shows and throwing parties for big name actors at his home in Beverly Hills. But the purchase of MGM suggested that Bezos was far more serious, that owning content was a vital piece of Amazon's future. The deal is the clearest indicator yet that that Amazon is not just fooling around in Hollywood. It's not just some other kind of interloper from another industry that thinks it's cool to go to parties. They want to play to win. The day of the announcement, Beazos talked about it during the company's annual meeting with shareholders. We're really excited about MGM. The acquisitions thesis here is really very simple. MGM has a vast, deep catalog of much beloved intellectual property, and with the talented people at MGM and the talented people at ms On Studios, we can reimagine and develop that i P for the twenty one century. It's gonna be a lot of fun work and people who love stories are going to be the big beneficiaries. But this was more than a busines and steal. It seemed like another inevitable step in Bezos's own remarkable reinvention into something of a celebrity himself. And this company, which started as an online store then became a cloud provider than an AI company with Alexa, now had a new target. Hollywood. You're listening to Foundering. I'm your host brad Stone. In this episode, we're going to tell the story of Prime Video and Amazon's beleaguered path into the entertainment industry. It's a story that starts with a strange choice by Jeff Bezos to create original content. Amazon Studios launches a few celebrated shows, a few more notorious bombs, and then gets consumed by a me too controversy that shook the company to its core. Bezos's decisions in Hollywood would end up changing the company and himself in ways that no one predicted. We'll tell you more after a quick break. Let's go back a decade and a half before Amazon came to buy MGM, before they were investing billions of dollars in making movies every year, The mid odds were a fertile period for Amazon. This is around the time that Jeff Bezos was conceiving the Kindle and Aws, and when Amazon was furiously entering new industries and new countries. Back then, Netflix was a company that sent their customers DVDs in the mail. But then in two thousand seven, Netflix introduced a streaming service called watch Now at no additional church. It was the official start of the streaming revolution. Piso saw what Netflix was doing as the future of home entertainment, and he wanted to join the race, but Amazon didn't have a vast streaming content library. They didn't feel comfortable charging customers for an inferior product. Bezos himself came up with the answer that Amazon would give away its content for free as well two members of its Prime Shipping club. He argued that making TV shows and winning awards would help with Amazon's core business. Here's Bezos speaking a few years later at the Recode Conference in two thousand sixteen. So, uh, from a business point of view, for us, when we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way because when people if you look at Prime members, they buy more on Amazon than non Prime members. And one of the reasons they do that is once they've paid their in your fee, they're looking around to see how can I get more value out of the program, and so they look across more categories, they shop more, they do they there are a lot of their behaviors change in ways that are very attractive to us as a business. Bazos saw the Prime video could get more people to buy Prime memberships, get people to interact with Amazon dot Com every day, and if a competitor like Walmart, also geared up to deliver in two days. Amazon Prime would already be offering something more. Years later, when antitrust authorities were investigating the Amazon MGM deal, critics would point to this moment as an example of Amazon behaving anti competitively. They were using their dominance in online shopping to give themselves a big head start in online video. Amazon introduced Prime Video. In February two eleven, we saw Amazon dot Com take on Netflix directly, Amazon starting an unlimited streaming video service with five thousand movies and TV shows. It's for its existing Prime customers, are already pay seventy nine dollars per year. The selection was thin, old episodes of The Dick Van Dyke Show, PBS documentaries, and old films like Stanley Kubrick's two thousand one Open the Pod Bay Doors Help. I'm sorry, Dave, I'm afraid I can do that. But slowly Amazon started licensing more TV shows and movies for media companies like Viacom and Epics, which added stuff like Jersey Shore, SpongeBob SquarePants, All Right, pin Head, Your Time is up, The Hunger Games movies, and The First Avengers such better that might be a really good time for you to get angry. That's my secret, Jetty. I'm always angry. And because paying for rights to stream blockbusters and popular TV shows was so expensive, because they were getting into bidding wars with Netflix and Hulu, Amazon decided they wanted to control their own destiny. They would create their own TV shows. But at the time, you know, people were skeptical. They were like, wait, you guys are an online bookstore or something, and now you're gonna try to be you know, NBC or some or whatever. You're gonna try to be a real network. Like I'm not sure I believe of you. You know, I'll come back in a few years um, And so you have to to some extent earn credibility. That's Roy Price, the first head of Amazon Studios, as we'll get too later in this episode. Roy was later outsted for sexual harassment allegations, but he was also responsible for some of Amazon's early successes. When Roy started creating TV shows was a really big leap. Bezos and his fellow geeks in Seattle thought that they could come down to Hollywood and swim in their pool. The plan was audacious, maybe even arrogant Bezos believed that Hollywood had such a low successory and stumbled so frequently with expensive movies that bombed, that Amazon could do things differently and better. In two thousand twelve, Amazon Studios opened up their first office in Sherman Oaks, above a food Ruckers restaurant. Bezos informally dubbed it the Scientific Studio. The idea was that Amazon would be methodical about only making shows that people wanted to watch. They gave their customers a set of pilots and let viewers vote online about which shows they wanted to expand in the full series. It was a very silicon value approach. Let's tap into the wisdom of the crowd, and most Hollywood veterans rolled their eyes. There was a lot of experimentation and and it was actually a somewhat amateur on them. We said, all right, but we really do need some real professional shows on the site. Among the first shows that viewers chose were the political comedy Alpha House, which was like a watered down version of Veep, and a tech industry spoof called Beta's, which was a poor version of the HBO comedy Silicon Valley that debuted the next year. They weren't exactly hits. Around this time, the Netflix original show House of Cards was a huge success, so Amazon was playing catch up. So we had to sort of convinced people that you know, this is this is actually adding value over and above all the TV you already have. So you've you've got to be distinctive and bringing something that is it's it's like film on TV and it's great and it's setting a high bar. So Roy decided to seek out prestigious projects. He wanted Amazon Studios to look like a place that was friendly to artists and where audiences could find shows that weren't on mainstream TV networks. Amazon's original programming when it first started to really roll out, was notably quirkier. That's Danny Gabby. Danny used to be a Hollywood agent, and he remembered having a terrible time trying to sell a project called Mozart in the Jungle about hijinks in a fictional New York City symphony. It is my honor to introduce to you someone special. At twelve years old, he was the youngest person to ever win the Maler Award for Young Conductors. That thing died on the vine. It wasn't really going anywhere. And then a couple of years later, I remember seeing it turning up on Amazon and I thought, oh, wow, they're really taking a chance for such a for such a unique, quirky show. And I always really loved that show and really loved That's loved that pilot script. Mozart in the Jungle was Amazon's first modest hit, but their next show made Amazon a serious player in Hollywood. Here's Roy. When I read the script for Transparent, it was it was so moving, and it was so great and it was so real that you know, we had to make that show. It's a show about a fictional Los Angeles family where the father played by Jeffrey Tambor, decides the transition later in life. Are you saying that you're gonna start dressing up like a lady? All of them? My whole life, I've been dressing up like a man. This is Transparent was a critical hit. Activists praised it for a sensitive portrayal of transgender issues. The show made Amazon seemed progressive and forward thinking, and in January, Transparent won a Golden Globe, making Amazon the first streaming service to win a major award. They beat Netflix at something for the first time Transparence producer and writer Choe Soloway stood on stage and accepted the award and thanked Jeff Bezos. I want to thank Amazon, Jeff Bezos. I want to thank the trans community. They are our family. They make this possible. This award is dedicated to the memory of Lead. It was a tremendous validation of Amazon's efforts in Hollywood and if Roy Price's initial strategy, and it was a sign of the times viewers were beginning to pull away from cable to look for high quality shows online. How after their big win at the Golden Globes, the Transparent team Joey Salaway and Jeffrey Tambor appeared on CBS this morning for a victory lap, and they brought along Jeff Bezos. He pledged that Amazon's approach with TV shows and movies was different. There are two ways to go about deciding whether to make a show. You can ask yourself how many millions of people are going to watch this show? I think that leads you into corners that aren't interesting. Or you can say, you know, is the creator of this show incredibly passionate about this topic? Is the creator of this show one of the world's great storytellers. Can they assemble a cast to make this thing come to life? You know? And so if you're asking that, if you're saying, you know, can we build something truly remarkable? I think remarkable storytelling always finds an audience. Bezos is saying here that Amazon would keep making more transparence, that he would choose passion and artistry over popularity, that streaming would offer an alternative to the Hollywood formula. This approach would lead to a few more critical hits for Amazon Studios, like the marvelous Mrs Masal I would like to repeatedly kick every man in here in the ball the next several hours. I won't so. I am still a lady. Your wife must have a sense of humor. She's seeing you naked. And the wonderful Phoebe waller Bridge comedy Fleabag Tell the Truth. It's horrendous. It's horrendous, It's modern. Don't lie, I'm not look like a pencil. Both were projects with messy feminist heroines. They made Amazon seem to stand apart from the rest of Hollywood. Here's Roy. One of the ways that the studio record was truly distinctive is we I think led the league in shows created and led by women, winning Emmy's and sort of going from nowhere to being, you know, internationally famous and from you know, Transparent, you know, Fleabag and Mazel and many many in between. And I'm glad to say that a lot of the shows really stood out. And you know, we won the Globe for Best Comedy four years out of six. We won the Best Comedy Director at the Emmy's four years out of five. But as Netflix also started to mint even bigger streaming hits like Stranger Things, that approach wouldn't last. After a few years, Amazon retired its quirky pilot voting system. Bezos wanted larger audiences. He sought it experienced tastemakers and storytellers Hollywood. It turned out was changing the company instead of the other way around. We'll tell you more after the break. On December three, two thousand sixteen, Jeff Bezos through the buzziest party at Hollywood at as Beverly Hills Estate. Tons of famous people were there, Matt Damon and Ben Affleck, Diane Keaton and Ben Kingsley, t Bone, Burnett and Beck and many more. They were there to celebrate Manchester by the Seat. It was Amazon Studio's biggest movie hit yet. It's a very depressing family drama starring Casey Affleck. The movie was up for several major awards, continuing a winning streak for Amazon Studios. At the center of attention was Bezos. He seemed to be loving it. His wife, Mackenzie, was nowhere in sight. Friends of the couple told me she disliked these kinds of parties. It looked like Bezos was at the start of a major personality shift. He used to be content to stay out of the limelight, focused on the business and on a secret technology projects. But now, with Amazon stock price tripling over the previous five years, he was one of the richest men in the world, and that status came with adulation and social opportunity. Bezos seemed to relish it. At the Golden Globes, he sat near the stage and laughed uproariously as Jimmy Fallon made jokes about him. Amazon did pretty well tonight, eleven nominations for Amazon. So Jeff Bezos is here tonight. He actually arrived yesterday, but there was no one around a sign for him. Uh that night. Manchester by the Sea won five Golden Globes, including Best Drama Motion Picture. But behind the scenes, Bezos wanted big changes. He was no longer content with Roy Price's niche artists driven shows. He wanted Prime Video to grow, to drive customers to Amazon Prime in hundreds of countries around the world. Here's Roy, you know, over time, uh, your audience gets bigger. I mean, as your service grows, as you grow around the world, you really need some tent pole shows. So you've got to have your um whatever it is, you know, a Lord of the Rings or what have you, um, Game of Thrones, you know, whatever it is. So Bazos tells Roy at a meeting, bring me my Game of Thrones. That's a direct quote. He was frustrated that he didn't have a blockbuster franchise. At another meeting, Basis gave Roy a sort of ingredients list of what he believed was essential for every huge show. His list includes stuff like a heroic protagonist and compelling antagonist, positive emotions, negative emotions, wish fulfillment, and diverse world building. Those last, to her common tropes in science fiction and fantasy. Anyway, Basos came up with this on the spot and from that point on, every time an Amazon executive wanted to greenlight a show, they had to explain how the project contained all thirteen of Bezos's storytelling elements. And I gotta tell you, when I first wrote about this list and it came out, people were really upset about it that this billionaire founder thought he could boil down creativity into some formula of his own making. It was weird, but it's just another part of Bezos's analytical mind, sort of like the pilot voting scheme. Bezos wanted to systematize the process of creating hits. He believed you can impose a rigorous process around the very act of imagination. The quest to find the next Game of Thrones put a ton of pressure on Roy Price because those big shows and movies that Bezos wanted they take time to make, and Roy was about to run out of time because in two thousand seventeen, and entertainment journalists named Kim Masters was hearing things, bad things about life at Amazon Studios. Kim says she got a call from a source. This source painted a picture of cultural dysfunction, a sexist work environment. It was kind of a bro environment. Um the upper ranks Roy's people that he had brought in. Let's just say the source felt that they were not doing great job and dubiously qualified. And that's not all. Kim source also intimated something more serious, that Roy Price had been accused of sexual harassment back in by Issa Dick Hackett. She's the executive producer of the Amazon show Man in the High Castle and the daughter of the writer Philip K. Dick. There was an incident at Comic Con I think in San Diego. They were there. There was a dinner where Lisa and Roy were in proximity to each other. He was being, in her mind, very harassing, which ultimately led to a car ride where he re inappropriately started talking about his genitalia and um. There were other people in the car who were witnessed to this and tried to get help her fend him off, and he was aggressively pursuing this. And then they arrived at this after party and he walks up to her and whispers something the very graphic sex act in her ear, just randomly, very odd, and she was very upset about it. Kim's article alleges that Roy Price set outrageously explicit things to Issa Dick Hacket, such as you will love my dick and anal sex. I reached out to Issa Hackett for this episode and she did not want to rehash the incident, but back in she told Kim that Roy's comments in the car and at the Amazon studio after party were quote shocking and surreal that he did not relent when she told him that she was not interested, that she was married and had a wife and children. And here's Roy Price's version of the same event. He denies the specific comments attributed to him in the article, but concedes the incident happened and that a sexually explicit remarks were failed jokes. Well it, you know, it was obviously unfortunate and unintended. And I went down to San Diego to look at a pilot screening at Comic Con of Man in high Castle, and uh, we had a dinner party. I got an uber to go to an after party afterwards. I had never met kak It, and she hopped in my uber along with the guy from Amazon, and you know, there was banter in the uber and I deeply apologize. I'm sorry if the band enter was you know, overboard. Um, and we get to the after part. I mean it was very short. It was like whatever, ten blocks at one in the morning. Anyway, So I don't know, we get out, we take a self I thought everything was copasetic, and but obviously, you know, one person's copsetic is it's everyone has the right to define their own line of humor and copestic and not copessetic. And I'm not objecting to that, and again I'm I'm sorry for it. Two years after all this happened, Kim Masters published her article in The Hollywood Reporter. Her piece came out in October. The Roy Price story went public the same week that the New York Times and New Yorker published their bombshell stories about Harvey Weinstein and pervasive sexual harassment in Hollywood. And but that was it. You know, that was not a good week to have a bad article, and so it was not really kind of to stay under the circumstances, and so that was it. Says a Fox's alert. This is just breaking Roy Price, Amazon's entertainment chief is taking a leave of absence following a sexual harassment claim. Now this comes as the massive Harvey Weinstein scandal is now expanding. Roy's career in Hollywood. Never recovered and What's more, some of the most prestigious projects he brought into Amazon Studios, including Manchester by the Sea, Transparent, and a four movie deal with Woody Allen, all got clouded by their own sexual harassment and assault scandals. With Roy gone, Bezos needed a new leader for Amazon Studios. He was at a turning point. He wanted a huge hit, and at the same time he was getting personally interested in expanding his profile in Hollywood. That's next. About three months after Roy Price resigned, Amazon Studio's got a new boss. Here's my colleague, Lucashaw Jen Sulky. Is you know a Hollywood veteran, at tried and true person. Uh. She was at the time one of the top executives that at NBC UM someone who had relationships with people all over town. I don't know that she was seen as kind of the pinnacle of great taste, but she had a very good sensibility for what people wanted to watch. Amazon was sending a clear message by hiring a prominent woman to head the studio at a time of me too controversy. Here's Jen Sulky at a panel held by Vanity Fair. I've never met Roy Price and UM so I don't I can't speak about him personally, but what I can say is that there had been a lot of um negativity and trauma, a little bit of trauma around the company, understandably, and then there had been a lot of healing that had already started, which I was really happy about. Chen Sulky's arrival signal something more subtle. Amazon's tastes were changing, and I think to a lot of people as symboled a clear departure from the Roy Price era, in both in that they brought in someone who was the consummate Hollywood insider, and in that she had more broad and commercial taste. She was not going to come in trying to make another transparent Jeff Bezos wanted big franchise TV shows and movies with bankable stars that could capture the attention of customers and recruit new prime members UM. They wanted shows that could speak to the middle of America, speak to the kind of person you think of as the average Amazon customer UM, and that resulted in shows like Jack Ryan, which was political thriller adaptation of a Tom Clancy novel, and resulted in the show Like The Boys, which was this sort of cynical, acerbic take on the popularity of superhero shows. Maybe not super mainstream, but one of the most popular shows on Amazon. Danny Gabby, the former agent it's now a vice Studios executive. He sat in meetings with Amazon. He felt their desperation for some kind of big, blockbuster content. They all looked us and they said, you know, we've been having a lot of internal discussions and we need to figure out how we're going to be working on bigger, tentpole content, think real events series, series like Game of Thrones. And they started throwing out Game of Thrones a lot in conversation, and then I remember it was there was this mantra that everybody started to beat and beat out in the meetings all around the same time. And the sense I got was maybe they were having some issues with eyeballs on some of their programming, and some of the people at the top looked at the studios team and said, you all need to start thinking a bit more commercially, because we're not going to keep sinking money into this thing if you don't. Amazon executives were reluctant to admit that ESOS was dictating this change in strategy, but Danny would often receive calls with urgent request to create slideshow decks for meetings with Amazon. I'd have a lot of last minute late nights where I'd have to be throwing together decks about our upcoming film or series or documentary slate that they could take up with them to Seattle. I remember once I was literally at Coachella. I think I was trying to trying to watch Kanye perform, and I got a phone call from our then president saying, I need I need a deck about all of our film pipeline that we can go and discuss with tomorrow Bezos, maybe at the meeting. This new sensibility was accompanied by bigger investments. Amazon would spend about five billion on prime video in eighteen eight billion, and an astounding eleven billion. It's money that even surprises the film industry. Here's Brad Fuller, producer on the Jack Ryan series. He's talking to us while sitting by the pool, which is why you can hear the sound of water lapping. I remember going into an airport right after they dropped the first season of the show, and I was traveling and I looked in the paperback section in the In this you know in the Airport's store and John Krisnsi's face was on every single Tom Clancy title, like they were promoted and it said watched Jack Ryan on Amazon, and um, we were getting packages from Amazon and John's face was on the box. Do you know what I'm saying? Like they I had never felt promotion like what they did on that show in the first season. Oh my god. I didn't know that this could actually occur. It was amazing. Brad Fuller never got hard numbers about how the show did, but he knew it was a success because Amazon immediately started talking to him about a second season. They're very secretive about their data. As someone who who likes numbers and likes to understand analytics and what's happening, I was continually pressing and pressing and pressing. And that's Todd Lieberman, a producer of the Amazon film The Aeronnuts, starring Felicity Jones and Eddie Redmain. He was told it was one of the most successful original movies ever released on Amazon acclaim. Amazon repeats to many of its partners, and like those other partners, he never got hard evidence. Movie studios released box office numbers. TV networks issue ratings reports, but streaming services like Amazon provide almost no data publicly or privately. It's impossible to determine just how Amazon stacks up against Netflix, Hulu, and newer players like Apple, TV Plus or Disney Plus. Amazon has more than two hundred million Prime members, but it doesn't reveal how many people watch or how many new Prime subscriptions it gets from its movies and shows. But one thing was clear, Amazon and Jeff Bezos are in the streaming game to stay. When they bought MGM, they basically purchased a vault of valuable intellectual property that they could mind for sequels, reboots, and TV series, and Bezos kept gravitating towards Hollywood. Every fall, he hosted a top secret event in Santa Barbara for entertainment executives and actors called Campfire. It was like his own private Davos or TED conference. He invited Oprah and Shonda Rhymes, as well as speakers like Jane Goodall and Ruth Bader Ginsburg. Bezos brought his family and regularly called it the highlight of his year. More and more of his private life was being swept up into this world of celebrity. He kept attending award shows and sat prominently in the audience. Here's Chris Rock and Steve Martin at the Oscars. Jeff Bezos is it? Oh, Jeff Bezo, great actor? He's got cash when he writes to check the bank bouts. Jeff Bezos is so rich. He got divorced and he's still the richest man in the world. The Jeff Bezos that was sitting there at the Oscars seemed like a much different man. He had come a long way from the guy who predicted that he could build an everything store in the Internet. Here are you? I'm Jeff Bezos, what is your claim to fame? And the founder of Amazon dot Com. It wasn't just a change in Jeff bezos interests, personality, or how he was spending his time. There was a physical transformation too. In full view, Bezos was getting buffer. He was working out a few years earlier, there was this famous photograph of him from the Sun Valley Mogul's conference wearing Aviator sunglasses, his biceps bulging. He was kind of coming to resemble the action stars that he wanted for his movies. It was ironic. The journey had begun with Bezos trying to transform the way Hollywood created hit TV shows and films. But in the end he was the one who changed, letting go of his quirky attempts to re engineer the entertainment business. Years journalists Kim Masters again. I mean, this is a pattern that we're seeing with the with the tech companies. They come in here and they think they know how to reinvent the wheel, and that everybody here is it's been doing it wrong, and they're not that bright. After all, it's l a, it's Hollywood. And then they've started the higher legacy media people. So Jen Sulky is at Amazon, they find out that sometimes those dumb Hollywood rules exists for a reason. You know, the old rules exist for a reason. This was something Bezos was about to learn the hard way in the main part of his business, because while he was off coverting in Hollywood, the Amazon marketplace was going wild. It had evolved into a massive online bizarre where there were practically no rules to who could sell or what they could sell, and what tactics they could use to win the sale. Fraud and counterfeits were running rampant. How Amazon built a global marketplace and then try to tame it We'll tell you that story in the next episode. Foundering is hosted by me brad Stone. Sean When is our executive producer. Lucas Shaw contributed reporting to this episode. Raymondo is our audio engineer. Molly Nugent as our associate producer. Mark Million and Vander may Robin Agello and Molly Shoots are our story editors. Francesco Levi is the head of Bloomberg Podcasts. Be sure to subscribe and if you like our show, leave a review. Most importantly, tell your friends see you next time.

Even among other CEOs, Jeff Bezos has known for being an especially aggressive businessman. He's really good at playing the game of capitalism, where the imperative for any company is to grow and keep growing. So Bezos wants to have a hand in almost every aspect of his customers daily lives. And when he hits the wall, he's known for buying his way in. When Amazon struggled to sell shoes, they bought Zappos for about a billion dollars. When they were flailing around with their grocery delivery business, they bought Whole Foods, and then in May, Jeff Bezos did it again. Amazon today just did some shopping of its own, buying MGM for nearly eight and a half billion dollars. But this is coming as Amazon continues it's push to try and figure out Hollywood, try and figure out how to make this work with streaming that's kind of been all over the map. This is so fascinating. You have this company that's really the epitome of the modern company buying a film studio that was founded in the silent era. Amazon said it was buying one of the most storied names in Hollywood. MGM is home to movies like Rocky and RoboCop, Fargo and the Survivor TV series, and of course Bond James Bond, Mr Bond. The deal surprised even obsessive Amazon and Hollywood watchers. Here's my colleague Lucas Shaw, who covers the entertainment industry. The response was at first shock at the number Amazon was paying almost nine billion dollars from GM, which far exceeded what anybody really thought it was worth on paper. And the other reason the deal surprised Hollywood was what it said about Amazon's and Jeff Bezos's overweening ambition. For ten years, Amazon had offered TV shows and movies as a free perk to Prime members, but Amazon streaming service was seen as trailing Netflix. Making original TV shows and films was even considered something of a vanity project for Jeff Bezos. He seemed to love attending award shows and throwing parties for big name actors at his home in Beverly Hills. But the purchase of MGM suggested that Bezos was far more serious, that owning content was a vital piece of Amazon's future. The deal is the clearest indicator yet that that Amazon is not just fooling around in Hollywood. It's not just some other kind of interloper from another industry that thinks it's cool to go to parties. They want to play to win. The day of the announcement, Beazos talked about it during the company's annual meeting with shareholders. We're really excited about MGM. The acquisitions thesis here is really very simple. MGM has a vast, deep catalog of much beloved intellectual property, and with the talented people at MGM and the talented people at ms On Studios, we can reimagine and develop that i P for the twenty one century. It's gonna be a lot of fun work and people who love stories are going to be the big beneficiaries. But this was more than a busines and steal. It seemed like another inevitable step in Bezos's own remarkable reinvention into something of a celebrity himself. And this company, which started as an online store then became a cloud provider than an AI company with Alexa, now had a new target. Hollywood. You're listening to Foundering. I'm your host brad Stone. In this episode, we're going to tell the story of Prime Video and Amazon's beleaguered path into the entertainment industry. It's a story that starts with a strange choice by Jeff Bezos to create original content. Amazon Studios launches a few celebrated shows, a few more notorious bombs, and then gets consumed by a me too controversy that shook the company to its core. Bezos's decisions in Hollywood would end up changing the company and himself in ways that no one predicted. We'll tell you more after a quick break. Let's go back a decade and a half before Amazon came to buy MGM, before they were investing billions of dollars in making movies every year, The mid odds were a fertile period for Amazon. This is around the time that Jeff Bezos was conceiving the Kindle and Aws, and when Amazon was furiously entering new industries and new countries. Back then, Netflix was a company that sent their customers DVDs in the mail. But then in two thousand seven, Netflix introduced a streaming service called watch Now at no additional church. It was the official start of the streaming revolution. Piso saw what Netflix was doing as the future of home entertainment, and he wanted to join the race, but Amazon didn't have a vast streaming content library. They didn't feel comfortable charging customers for an inferior product. Bezos himself came up with the answer that Amazon would give away its content for free as well two members of its Prime Shipping club. He argued that making TV shows and winning awards would help with Amazon's core business. Here's Bezos speaking a few years later at the Recode Conference in two thousand sixteen. So, uh, from a business point of view, for us, when we win a Golden Globe, it helps us sell more shoes. And it does that in a very direct way because when people if you look at Prime members, they buy more on Amazon than non Prime members. And one of the reasons they do that is once they've paid their in your fee, they're looking around to see how can I get more value out of the program, and so they look across more categories, they shop more, they do they there are a lot of their behaviors change in ways that are very attractive to us as a business. Bazos saw the Prime video could get more people to buy Prime memberships, get people to interact with Amazon dot Com every day, and if a competitor like Walmart, also geared up to deliver in two days. Amazon Prime would already be offering something more. Years later, when antitrust authorities were investigating the Amazon MGM deal, critics would point to this moment as an example of Amazon behaving anti competitively. They were using their dominance in online shopping to give themselves a big head start in online video. Amazon introduced Prime Video. In February two eleven, we saw Amazon dot Com take on Netflix directly, Amazon starting an unlimited streaming video service with five thousand movies and TV shows. It's for its existing Prime customers, are already pay seventy nine dollars per year. The selection was thin, old episodes of The Dick Van Dyke Show, PBS documentaries, and old films like Stanley Kubrick's two thousand one Open the Pod Bay Doors Help. I'm sorry, Dave, I'm afraid I can do that. But slowly Amazon started licensing more TV shows and movies for media companies like Viacom and Epics, which added stuff like Jersey Shore, SpongeBob SquarePants, All Right, pin Head, Your Time is up, The Hunger Games movies, and The First Avengers such better that might be a really good time for you to get angry. That's my secret, Jetty. I'm always angry. And because paying for rights to stream blockbusters and popular TV shows was so expensive, because they were getting into bidding wars with Netflix and Hulu, Amazon decided they wanted to control their own destiny. They would create their own TV shows. But at the time, you know, people were skeptical. They were like, wait, you guys are an online bookstore or something, and now you're gonna try to be you know, NBC or some or whatever. You're gonna try to be a real network. Like I'm not sure I believe of you. You know, I'll come back in a few years um, And so you have to to some extent earn credibility. That's Roy Price, the first head of Amazon Studios, as we'll get too later in this episode. Roy was later outsted for sexual harassment allegations, but he was also responsible for some of Amazon's early successes. When Roy started creating TV shows was a really big leap. Bezos and his fellow geeks in Seattle thought that they could come down to Hollywood and swim in their pool. The plan was audacious, maybe even arrogant Bezos believed that Hollywood had such a low successory and stumbled so frequently with expensive movies that bombed, that Amazon could do things differently and better. In two thousand twelve, Amazon Studios opened up their first office in Sherman Oaks, above a food Ruckers restaurant. Bezos informally dubbed it the Scientific Studio. The idea was that Amazon would be methodical about only making shows that people wanted to watch. They gave their customers a set of pilots and let viewers vote online about which shows they wanted to expand in the full series. It was a very silicon value approach. Let's tap into the wisdom of the crowd, and most Hollywood veterans rolled their eyes. There was a lot of experimentation and and it was actually a somewhat amateur on them. We said, all right, but we really do need some real professional shows on the site. Among the first shows that viewers chose were the political comedy Alpha House, which was like a watered down version of Veep, and a tech industry spoof called Beta's, which was a poor version of the HBO comedy Silicon Valley that debuted the next year. They weren't exactly hits. Around this time, the Netflix original show House of Cards was a huge success, so Amazon was playing catch up. So we had to sort of convinced people that you know, this is this is actually adding value over and above all the TV you already have. So you've you've got to be distinctive and bringing something that is it's it's like film on TV and it's great and it's setting a high bar. So Roy decided to seek out prestigious projects. He wanted Amazon Studios to look like a place that was friendly to artists and where audiences could find shows that weren't on mainstream TV networks. Amazon's original programming when it first started to really roll out, was notably quirkier. That's Danny Gabby. Danny used to be a Hollywood agent, and he remembered having a terrible time trying to sell a project called Mozart in the Jungle about hijinks in a fictional New York City symphony. It is my honor to introduce to you someone special. At twelve years old, he was the youngest person to ever win the Maler Award for Young Conductors. That thing died on the vine. It wasn't really going anywhere. And then a couple of years later, I remember seeing it turning up on Amazon and I thought, oh, wow, they're really taking a chance for such a for such a unique, quirky show. And I always really loved that show and really loved That's loved that pilot script. Mozart in the Jungle was Amazon's first modest hit, but their next show made Amazon a serious player in Hollywood. Here's Roy. When I read the script for Transparent, it was it was so moving, and it was so great and it was so real that you know, we had to make that show. It's a show about a fictional Los Angeles family where the father played by Jeffrey Tambor, decides the transition later in life. Are you saying that you're gonna start dressing up like a lady? All of them? My whole life, I've been dressing up like a man. This is Transparent was a critical hit. Activists praised it for a sensitive portrayal of transgender issues. The show made Amazon seemed progressive and forward thinking, and in January, Transparent won a Golden Globe, making Amazon the first streaming service to win a major award. They beat Netflix at something for the first time Transparence producer and writer Choe Soloway stood on stage and accepted the award and thanked Jeff Bezos. I want to thank Amazon, Jeff Bezos. I want to thank the trans community. They are our family. They make this possible. This award is dedicated to the memory of Lead. It was a tremendous validation of Amazon's efforts in Hollywood and if Roy Price's initial strategy, and it was a sign of the times viewers were beginning to pull away from cable to look for high quality shows online. How after their big win at the Golden Globes, the Transparent team Joey Salaway and Jeffrey Tambor appeared on CBS this morning for a victory lap, and they brought along Jeff Bezos. He pledged that Amazon's approach with TV shows and movies was different. There are two ways to go about deciding whether to make a show. You can ask yourself how many millions of people are going to watch this show? I think that leads you into corners that aren't interesting. Or you can say, you know, is the creator of this show incredibly passionate about this topic? Is the creator of this show one of the world's great storytellers. Can they assemble a cast to make this thing come to life? You know? And so if you're asking that, if you're saying, you know, can we build something truly remarkable? I think remarkable storytelling always finds an audience. Bezos is saying here that Amazon would keep making more transparence, that he would choose passion and artistry over popularity, that streaming would offer an alternative to the Hollywood formula. This approach would lead to a few more critical hits for Amazon Studios, like the marvelous Mrs Masal I would like to repeatedly kick every man in here in the ball the next several hours. I won't so. I am still a lady. Your wife must have a sense of humor. She's seeing you naked. And the wonderful Phoebe waller Bridge comedy Fleabag Tell the Truth. It's horrendous. It's horrendous, It's modern. Don't lie, I'm not look like a pencil. Both were projects with messy feminist heroines. They made Amazon seem to stand apart from the rest of Hollywood. Here's Roy. One of the ways that the studio record was truly distinctive is we I think led the league in shows created and led by women, winning Emmy's and sort of going from nowhere to being, you know, internationally famous and from you know, Transparent, you know, Fleabag and Mazel and many many in between. And I'm glad to say that a lot of the shows really stood out. And you know, we won the Globe for Best Comedy four years out of six. We won the Best Comedy Director at the Emmy's four years out of five. But as Netflix also started to mint even bigger streaming hits like Stranger Things, that approach wouldn't last. After a few years, Amazon retired its quirky pilot voting system. Bezos wanted larger audiences. He sought it experienced tastemakers and storytellers Hollywood. It turned out was changing the company instead of the other way around. We'll tell you more after the break. On December three, two thousand sixteen, Jeff Bezos through the buzziest party at Hollywood at as Beverly Hills Estate. Tons of famous people were there, Matt Damon and Ben Affleck, Diane Keaton and Ben Kingsley, t Bone, Burnett and Beck and many more. They were there to celebrate Manchester by the Seat. It was Amazon Studio's biggest movie hit yet. It's a very depressing family drama starring Casey Affleck. The movie was up for several major awards, continuing a winning streak for Amazon Studios. At the center of attention was Bezos. He seemed to be loving it. His wife, Mackenzie, was nowhere in sight. Friends of the couple told me she disliked these kinds of parties. It looked like Bezos was at the start of a major personality shift. He used to be content to stay out of the limelight, focused on the business and on a secret technology projects. But now, with Amazon stock price tripling over the previous five years, he was one of the richest men in the world, and that status came with adulation and social opportunity. Bezos seemed to relish it. At the Golden Globes, he sat near the stage and laughed uproariously as Jimmy Fallon made jokes about him. Amazon did pretty well tonight, eleven nominations for Amazon. So Jeff Bezos is here tonight. He actually arrived yesterday, but there was no one around a sign for him. Uh that night. Manchester by the Sea won five Golden Globes, including Best Drama Motion Picture. But behind the scenes, Bezos wanted big changes. He was no longer content with Roy Price's niche artists driven shows. He wanted Prime Video to grow, to drive customers to Amazon Prime in hundreds of countries around the world. Here's Roy, you know, over time, uh, your audience gets bigger. I mean, as your service grows, as you grow around the world, you really need some tent pole shows. So you've got to have your um whatever it is, you know, a Lord of the Rings or what have you, um, Game of Thrones, you know, whatever it is. So Bazos tells Roy at a meeting, bring me my Game of Thrones. That's a direct quote. He was frustrated that he didn't have a blockbuster franchise. At another meeting, Basis gave Roy a sort of ingredients list of what he believed was essential for every huge show. His list includes stuff like a heroic protagonist and compelling antagonist, positive emotions, negative emotions, wish fulfillment, and diverse world building. Those last, to her common tropes in science fiction and fantasy. Anyway, Basos came up with this on the spot and from that point on, every time an Amazon executive wanted to greenlight a show, they had to explain how the project contained all thirteen of Bezos's storytelling elements. And I gotta tell you, when I first wrote about this list and it came out, people were really upset about it that this billionaire founder thought he could boil down creativity into some formula of his own making. It was weird, but it's just another part of Bezos's analytical mind, sort of like the pilot voting scheme. Bezos wanted to systematize the process of creating hits. He believed you can impose a rigorous process around the very act of imagination. The quest to find the next Game of Thrones put a ton of pressure on Roy Price because those big shows and movies that Bezos wanted they take time to make, and Roy was about to run out of time because in two thousand seventeen, and entertainment journalists named Kim Masters was hearing things, bad things about life at Amazon Studios. Kim says she got a call from a source. This source painted a picture of cultural dysfunction, a sexist work environment. It was kind of a bro environment. Um the upper ranks Roy's people that he had brought in. Let's just say the source felt that they were not doing great job and dubiously qualified. And that's not all. Kim source also intimated something more serious, that Roy Price had been accused of sexual harassment back in by Issa Dick Hackett. She's the executive producer of the Amazon show Man in the High Castle and the daughter of the writer Philip K. Dick. There was an incident at Comic Con I think in San Diego. They were there. There was a dinner where Lisa and Roy were in proximity to each other. He was being, in her mind, very harassing, which ultimately led to a car ride where he re inappropriately started talking about his genitalia and um. There were other people in the car who were witnessed to this and tried to get help her fend him off, and he was aggressively pursuing this. And then they arrived at this after party and he walks up to her and whispers something the very graphic sex act in her ear, just randomly, very odd, and she was very upset about it. Kim's article alleges that Roy Price set outrageously explicit things to Issa Dick Hacket, such as you will love my dick and anal sex. I reached out to Issa Hackett for this episode and she did not want to rehash the incident, but back in she told Kim that Roy's comments in the car and at the Amazon studio after party were quote shocking and surreal that he did not relent when she told him that she was not interested, that she was married and had a wife and children. And here's Roy Price's version of the same event. He denies the specific comments attributed to him in the article, but concedes the incident happened and that a sexually explicit remarks were failed jokes. Well it, you know, it was obviously unfortunate and unintended. And I went down to San Diego to look at a pilot screening at Comic Con of Man in high Castle, and uh, we had a dinner party. I got an uber to go to an after party afterwards. I had never met kak It, and she hopped in my uber along with the guy from Amazon, and you know, there was banter in the uber and I deeply apologize. I'm sorry if the band enter was you know, overboard. Um, and we get to the after part. I mean it was very short. It was like whatever, ten blocks at one in the morning. Anyway, So I don't know, we get out, we take a self I thought everything was copasetic, and but obviously, you know, one person's copsetic is it's everyone has the right to define their own line of humor and copestic and not copessetic. And I'm not objecting to that, and again I'm I'm sorry for it. Two years after all this happened, Kim Masters published her article in The Hollywood Reporter. Her piece came out in October. The Roy Price story went public the same week that the New York Times and New Yorker published their bombshell stories about Harvey Weinstein and pervasive sexual harassment in Hollywood. And but that was it. You know, that was not a good week to have a bad article, and so it was not really kind of to stay under the circumstances, and so that was it. Says a Fox's alert. This is just breaking Roy Price, Amazon's entertainment chief is taking a leave of absence following a sexual harassment claim. Now this comes as the massive Harvey Weinstein scandal is now expanding. Roy's career in Hollywood. Never recovered and What's more, some of the most prestigious projects he brought into Amazon Studios, including Manchester by the Sea, Transparent, and a four movie deal with Woody Allen, all got clouded by their own sexual harassment and assault scandals. With Roy gone, Bezos needed a new leader for Amazon Studios. He was at a turning point. He wanted a huge hit, and at the same time he was getting personally interested in expanding his profile in Hollywood. That's next. About three months after Roy Price resigned, Amazon Studio's got a new boss. Here's my colleague, Lucashaw Jen Sulky. Is you know a Hollywood veteran, at tried and true person. Uh. She was at the time one of the top executives that at NBC UM someone who had relationships with people all over town. I don't know that she was seen as kind of the pinnacle of great taste, but she had a very good sensibility for what people wanted to watch. Amazon was sending a clear message by hiring a prominent woman to head the studio at a time of me too controversy. Here's Jen Sulky at a panel held by Vanity Fair. I've never met Roy Price and UM so I don't I can't speak about him personally, but what I can say is that there had been a lot of um negativity and trauma, a little bit of trauma around the company, understandably, and then there had been a lot of healing that had already started, which I was really happy about. Chen Sulky's arrival signal something more subtle. Amazon's tastes were changing, and I think to a lot of people as symboled a clear departure from the Roy Price era, in both in that they brought in someone who was the consummate Hollywood insider, and in that she had more broad and commercial taste. She was not going to come in trying to make another transparent Jeff Bezos wanted big franchise TV shows and movies with bankable stars that could capture the attention of customers and recruit new prime members UM. They wanted shows that could speak to the middle of America, speak to the kind of person you think of as the average Amazon customer UM, and that resulted in shows like Jack Ryan, which was political thriller adaptation of a Tom Clancy novel, and resulted in the show Like The Boys, which was this sort of cynical, acerbic take on the popularity of superhero shows. Maybe not super mainstream, but one of the most popular shows on Amazon. Danny Gabby, the former agent it's now a vice Studios executive. He sat in meetings with Amazon. He felt their desperation for some kind of big, blockbuster content. They all looked us and they said, you know, we've been having a lot of internal discussions and we need to figure out how we're going to be working on bigger, tentpole content, think real events series, series like Game of Thrones. And they started throwing out Game of Thrones a lot in conversation, and then I remember it was there was this mantra that everybody started to beat and beat out in the meetings all around the same time. And the sense I got was maybe they were having some issues with eyeballs on some of their programming, and some of the people at the top looked at the studios team and said, you all need to start thinking a bit more commercially, because we're not going to keep sinking money into this thing if you don't. Amazon executives were reluctant to admit that ESOS was dictating this change in strategy, but Danny would often receive calls with urgent request to create slideshow decks for meetings with Amazon. I'd have a lot of last minute late nights where I'd have to be throwing together decks about our upcoming film or series or documentary slate that they could take up with them to Seattle. I remember once I was literally at Coachella. I think I was trying to trying to watch Kanye perform, and I got a phone call from our then president saying, I need I need a deck about all of our film pipeline that we can go and discuss with tomorrow Bezos, maybe at the meeting. This new sensibility was accompanied by bigger investments. Amazon would spend about five billion on prime video in eighteen eight billion, and an astounding eleven billion. It's money that even surprises the film industry. Here's Brad Fuller, producer on the Jack Ryan series. He's talking to us while sitting by the pool, which is why you can hear the sound of water lapping. I remember going into an airport right after they dropped the first season of the show, and I was traveling and I looked in the paperback section in the In this you know in the Airport's store and John Krisnsi's face was on every single Tom Clancy title, like they were promoted and it said watched Jack Ryan on Amazon, and um, we were getting packages from Amazon and John's face was on the box. Do you know what I'm saying? Like they I had never felt promotion like what they did on that show in the first season. Oh my god. I didn't know that this could actually occur. It was amazing. Brad Fuller never got hard numbers about how the show did, but he knew it was a success because Amazon immediately started talking to him about a second season. They're very secretive about their data. As someone who who likes numbers and likes to understand analytics and what's happening, I was continually pressing and pressing and pressing. And that's Todd Lieberman, a producer of the Amazon film The Aeronnuts, starring Felicity Jones and Eddie Redmain. He was told it was one of the most successful original movies ever released on Amazon acclaim. Amazon repeats to many of its partners, and like those other partners, he never got hard evidence. Movie studios released box office numbers. TV networks issue ratings reports, but streaming services like Amazon provide almost no data publicly or privately. It's impossible to determine just how Amazon stacks up against Netflix, Hulu, and newer players like Apple, TV Plus or Disney Plus. Amazon has more than two hundred million Prime members, but it doesn't reveal how many people watch or how many new Prime subscriptions it gets from its movies and shows. But one thing was clear, Amazon and Jeff Bezos are in the streaming game to stay. When they bought MGM, they basically purchased a vault of valuable intellectual property that they could mind for sequels, reboots, and TV series, and Bezos kept gravitating towards Hollywood. Every fall, he hosted a top secret event in Santa Barbara for entertainment executives and actors called Campfire. It was like his own private Davos or TED conference. He invited Oprah and Shonda Rhymes, as well as speakers like Jane Goodall and Ruth Bader Ginsburg. Bezos brought his family and regularly called it the highlight of his year. More and more of his private life was being swept up into this world of celebrity. He kept attending award shows and sat prominently in the audience. Here's Chris Rock and Steve Martin at the Oscars. Jeff Bezos is it? Oh, Jeff Bezo, great actor? He's got cash when he writes to check the bank bouts. Jeff Bezos is so rich. He got divorced and he's still the richest man in the world. The Jeff Bezos that was sitting there at the Oscars seemed like a much different man. He had come a long way from the guy who predicted that he could build an everything store in the Internet. Here are you? I'm Jeff Bezos, what is your claim to fame? And the founder of Amazon dot Com. It wasn't just a change in Jeff bezos interests, personality, or how he was spending his time. There was a physical transformation too. In full view, Bezos was getting buffer. He was working out a few years earlier, there was this famous photograph of him from the Sun Valley Mogul's conference wearing Aviator sunglasses, his biceps bulging. He was kind of coming to resemble the action stars that he wanted for his movies. It was ironic. The journey had begun with Bezos trying to transform the way Hollywood created hit TV shows and films. But in the end he was the one who changed, letting go of his quirky attempts to re engineer the entertainment business. Years journalists Kim Masters again. I mean, this is a pattern that we're seeing with the with the tech companies. They come in here and they think they know how to reinvent the wheel, and that everybody here is it's been doing it wrong, and they're not that bright. After all, it's l a, it's Hollywood. And then they've started the higher legacy media people. So Jen Sulky is at Amazon, they find out that sometimes those dumb Hollywood rules exists for a reason. You know, the old rules exist for a reason. This was something Bezos was about to learn the hard way in the main part of his business, because while he was off coverting in Hollywood, the Amazon marketplace was going wild. It had evolved into a massive online bizarre where there were practically no rules to who could sell or what they could sell, and what tactics they could use to win the sale. Fraud and counterfeits were running rampant. How Amazon built a global marketplace and then try to tame it We'll tell you that story in the next episode. Foundering is hosted by me brad Stone. Sean When is our executive producer. Lucas Shaw contributed reporting to this episode. Raymondo is our audio engineer. Molly Nugent as our associate producer. Mark Million and Vander may Robin Agello and Molly Shoots are our story editors. Francesco Levi is the head of Bloomberg Podcasts. Be sure to subscribe and if you like our show, leave a review. Most importantly, tell your friends see you next time.