Content is King: Ted Turner’s acquisition of MGM Studios

Ted Turner was a name in business circles in the 1980s. He started CNN and owned the Atlanta Braves and Atlanta Hawks. Turner tried to acquire CBS, but ultimately failed in the endeavor. He then looked for a bigger acquisition. 

In March 1986, Turner’s company Turner Broadcasting agreed to buy the prestigious but fledgling Metro-Goldwyn-Mayer film studio (MGM) for $1.5 billion. The deal sent shock waves throughout the entertainment industry. By any measure, Turner over paid for MGM and the deal put his company in significant debt. Turner was under so much debt that he sold off most of MGM’s asset back to Kirk Kerkorian, the same person he initially bought them from for $480 million. This transaction took place just three months after the first one!

Looking at the transactions from a numbers vantage point, Turner lost on all accounts. He ended up getting less than half back from what he previously paid for the company just three months prior. Turner did not give all of MGM’s assets back though, he kept MGM movie catalog which spawned from 1924 to 1986. The catalog included classic movies like The Wizard of Oz, Casablanca, Gone with the Wind, 2001: A Space Odyssey and Singin in the Rain. Turner was panned for the moves. Everyone thought he lost his mind. Critics would eventually eat their words about Turner.

In 1986, Turner Entertainment was established to oversee the film and television properties now owned by Turner thanks to the MGM deal. Turner had the films syndicated on his nationwide television stations. In 1988, the Turner Network Television (TNT) was established with its initial showing of Gone with the Wind. Turner would later create the Turner Classic Movies channel (TCM) in 1994. The channel aired all MGM’s pre 1986 movies and those of Warner Brothers made before 1950.

The MGM catalog also included early Looney Tunes, Merrie Melodies and Popeye cartoons. Turner turned that content into the Cartoon Network. Three different channels all started with one studio catalog. Analysts estimated the MGM catalog to be worth $100 million a year back in 1986. From 1986 to Time Warner’s merger with AOL in 2001, Turner earned around $1.5 billion from the MGM catalog. If you add that to the $450 million he got in the resale, Turner more than silenced his critics.

Ted Turner had the visionary foresight to see content is king. In 1996, Bill Gates wrote an essay titled “Content is King.” In it he states, “Content is where I expect much of the real money will be made on the Internet, just as it was in Broadcasting.” Turner had this thought back in 1986. MGM catalog was the real golden goose out of all the MGM assets, but only Turner had the foresight to see it.

The mechanics of acquiring the MGM catalog were wonky, but the result ended up being a stroke of genius. Turner used long-term thinking with the MGM catalog move. Most people focus all their energy and efforts on short term thinking. Short-term thinking is thinking of ideas that immediately pay off or that we can see an immediate benefit from. In the game of life, one has to use more long term thinking. Be willing to forego short-term benefits for a longer term gain.

Turner ended up losing money in his first maneuvers to gain the MGM catalog. Most people wouldn’t have tried to gain the MGM catalog because of the risk involved. Most people would have panic sold all the MGM assets to minimize the amount of loss they received. Turner endured the criticism and stuck it out through the tough times and was ultimately vindicated.

Today, we are quick to mock or criticize things that don’t immediately work out. We want quick answers and quick responses to everything. If someone or something initially struggles, we call them a bust and dash on the next big thing. With content, classics or soon to be classics are the ultimate goal. Classics take time to make or create. You can’t just microwave an idea and expect a classic to grow. It took Michelangelo 9 years to finish the Sistine chapel. Yet by today’s thinking, the project would have been canceled a couple years in because there was no pending pay off. 

The lessons to take from this story are that:

1. Think long term over short term when making decisions

2. Content is one of the most valuable assets one can own or buy

3. Weather through the short-term storms, to keep sight of the bigger picture

All the business analysts in the 1980s mocked these deals, but it ended up working out for Turner and providing many lessons we can apply to business today.

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