Get in the KNOW
on LA Startups & Tech
Xftc
This is the web version of dot.LA’s daily newsletter. Sign up to get the latest news on Southern California’s tech, startup and venture capital scene.
When it comes to streaming movies and TV shows, Amazon is hardly a monopoly.
As anyone who’s tried to figure out which show is on which platform can tell you, there are myriad streaming options these days, most with their own exclusive content libraries. Within this crowded field, Amazon’s Prime Video does not have the most subscribers; that title belongs to Netflix, while newer entrants like Disney Plus and HBO Max are also gaining ground. As the “streaming wars” moniker implies, there’s a lot of competition.
So at a glance, it would seem that Amazon’s planned $8.45 billion purchase of MGM should be a relatively straightforward proposition sans regulatory hurdles. Except that Amazon is much more than just a streaming service: It is a trillion-dollar “Everything Store” empire, and the Federal Trade Commission is reportedly gearing up for a potential challenge to the merger with that broader view in mind.
As The Information reported last week, FTC staffers have asked about streaming rivals’ relationships with Amazon Web Services (AWS), the retail giant’s cloud computing arm. When WarnerMedia and Amazon were at loggerheads over carrying HBO Max on Amazon’s Fire TV platform, WarnerMedia reportedly resolved the issue in part by agreeing to extend its deal with AWS. And as Amazon finds itself in a labor dispute with warehouse workers seeking to unionize delivery operations, the FTC has explored how the Amazon-MGM deal would affect the latter’s film production workers, according to The Information.
Could the FTC, led by Big Tech critic Lina Khan, successfully challenge the Amazon-MGM deal? Legal experts say the agency could face long odds. In recent years, federal antitrust regulators have either lost or declined challenges to big media mergers—including Disney’s purchase of 21st Century Fox, AT&T’s acquisition of Time Warner, and Discovery’s takeover of WarnerMedia. And even with a beloved library that includes the “James Bond” and “Rocky” film franchises, MGM pales in size compared to those media giants.
But if the FTC did manage to convince a judge to strike down the Amazon-MGM deal, its victory would have ramifications far beyond streaming. America’s tech giants have spread their tentacles far afield from their initial search engine, smartphone and social media businesses. Take Apple, which now has its own streaming service, also kicked the tires on MGM and has been floated as a potential buyer of Peleton to boost its fitness business.
An FTC challenge to Amazon’s purchase of MGM could prove a bellwether for how far tech giants are allowed—or, rather, not allowed—to expand in markets that they don’t yet dominate. — Christian Hetrick
Griffin Gaming Partners Closes Massive $750 Million Fund
The Santa Monica-based venture capital firm's new fund is one of the largest to focus on the fast-growing gaming sector. Griffin now has more than $1 billion in assets under management.
The Founders of a Social Media App for NFTs Raise $15M for a New Fund
The South Pasadena-based fund—whose name seemingly references the widespread, derisive joke about non-fungible tokens being little more than overpriced JPEG images—raised the $15 million from a solitary investor.
GoodRx Acquires Pharmacy Platform VitaCare
Santa Monica-based GoodRx acquired VitaCare from TherapeuticsMD for $150 million, and will pay up to an additional $7 million based on VitaCare’s financial performance through 2023, it said.
The Revolution Is Coming for the Curb—Is LA Ready?
At Friday's Curbivore conference in Downtown L.A., business and tech leaders discussed a new program that aims to help cities better manage some of their most profitable real estate: street curbs. The hope is that delivery and ride-sharing companies will use the program to build their own curb management systems.
Food Industry Experts: Yes, You Should Pay $24 for That Hamburger
During a panel moderated by dot.LA reporter Keerthi Vedantam, restaurateurs and founders weighed in on the highs and lows of the industry since the pandemic first shut down in-person dining establishments nationwide in early 2020.
🎧 Listen Up: Invisible Universe’s CEO on Creating IP on Social Media
Tricia Biggio joined this episode of the PCH Driven to talk about how and why she took her love for animation to new platforms at a time when many younger folks are turning to social media for entertainment.
What We're Reading Elsewhere...
- Netflix pulls out of Russia; TikTok halts Russians' ability to post.
- Some Disney employees are upset by CEO Bob Chapek's remarks on Florida's 'Don't Say Gay' Bill.
- SoCal-based RocketCart launches a grocery delivery service for Korean food.
- South Korea-based GenBody opens a manufacturing facility in Jurupa Valley to build COVID rapid test kits
We're Trying Something New
Notice some changes to the daily newsletter? We heard you and we're working to make the newsletter more informative, with deeper analysis and more news about L.A.'s tech and startup scene. Let us know what you think in our survey, or email us!
- Analysts Say Gaming and Shopping Won't Save Netflix - dot.LA ›
- Amazon Buys MGM for $8.45B, Acquires Bond Franchise - dot.LA ›
Lockheed, the world’s largest defense contractor, said Sunday that it will not move forward with its purchase of El Segundo-based Aerojet Rocketdyne after the FTC sued last month to block the transaction. The merger, which was first announced in December 2020, raised antitrust concerns that Lockheed could “cut off” other defense contractors from key missile components built by Aerojet, described by the FTC as the “last independent U.S. supplier of missile propulsion systems.”
“Our planned acquisition of Aerojet Rocketdyne would have benefitted the entire industry through greater efficiency, speed, and significant cost reductions for the U.S. government,” Lockheed Martin CEO James Taiclet said in a statement. “However, we determined that in light of the FTC's actions, terminating the transaction is in the best interest of our stakeholders.”
The deal has sparked conflict within Aerojet Rocketdyne’s hierarchy, as well—leading to a proxy war between board members vying for control of the company, Law360 reported last week. Aerojet CEO Eileen Drake and three other board members have sued four fellow directors including executive chairman Warren Lichtenstein, who allegedly opposed and sought to undermine the Lockheed deal. Lichtenstein has leveraged his investment firm, Aerojet shareholder Steel Partners Holdings, to propose a new CEO and board of directors at the company.
Aerojet’s lawsuit alleges that Lichtenstein was “clandestinely telling industry participants that he is unhappy with Aerojet’s agreement to merge with Lockheed Martin,” and that he planned to take over the company if the merger failed. In turn, the lawsuit seeks to remove Lichtenstein from Aerojet’s board. Lichtenstein told Law360 that the board was “evenly split” regarding the Lockheed merger and claimed that Aerojet Rocketdyne is seeking to discredit him with its lawsuit.
With the Lockheed deal now in tatters, Aerojet could still market itself for a similar buyout by another company—though that may have to involve a smaller aerospace and defense firm, or a private investor, in order to avoid further antitrust scrutiny. Aerojet said it will update investors on its acquisition strategy when it reports its quarterly earnings Feb. 17.
- 6 Ways LA's Defense Industry Soared in the Years Since 9/11 - dot.LA ›
- FTC is Suing Lockeed Martin's Purchase of Aerojet Rocketdyne - dot ... ›
- Aerojet Rocketdyne’s Boardroom Battle for Control Is Heating Up - dot.LA ›
Why the FTC is Suing to Block Lockheed Martin’s $4.4 Billion Purchase of Aerojet Rocketdyne
One of the most significant aerospace industry deals in years is now in jeopardy after the Federal Trade Commission announced it is suing to block defense contractor Lockheed Martin’s $4.4 billion purchase of Aerojet Rocketdyne, the rocket and missile propulsion manufacturer based in El Segundo.
The federal antitrust regulator is arguing that if the acquisition goes through, it would allow Lockheed—already the world’s largest defense contractor—to maintain a monopoly over the missile industry. Aerojet Rocketdyne is currently an independent supplier to many other defense contractors, and the FTC expressed concern that if “our nation’s last independent supplier of key missile inputs” is bought out, Lockheed would have a stranglehold on components needed by the rest of the industry.
“Lockheed is one of a few missile middlemen the U.S. military relies on to supply vital weapons that keep our country safe,” FTC Bureau of Competition Director Holly Vedova said in a statement Tuesday. “If consummated, this deal would give Lockheed the ability to cut off other defense contractors from the critical components they need to build competing missiles.”
Lockheed Martin and Aerojet Rocketdyne first inked the merger in December 2020. The transaction has been under review ever since by federal regulators, who are now proceeding with a federal district court complaint looking to stop the acquisition. A trial is currently scheduled to begin on June 16, meaning that Lockheed Martin can either defend the deal in court or simply back out of the transaction.
Both companies did not immediately respond to requests for comment. In its fourth-quarter earnings report on Tuesday, Lockheed said it “continues to believe in the benefits of the transaction for the United States and its allies, the industry, and all of the company's stakeholders.” Aerojet Rocketdyne—whose stock slid more than 18% Tuesday on the back of the FTC announcement—issued an identical statement.
The vote to block the merger was unanimous among the FTC’s four current commissioners, with the body’s two Democrats and two Republicans all agreeing to challenge the deal. The FTC’s rebuttal is rare; the agency said the intervention is its “first litigated defense merger challenge in decades.”
While Lockheed competes with several other large U.S.-based aerospace and defense firms for government missile contracts—including Raytheon, Northrop Grumman and Boeing—it’s by far the largest company of its kind, with revenues surpassing $67 billion in 2021.
The FTC noted that Aerojet only competes directly with one other firm, Northrop Grumman, to sell vital propulsion inputs for missiles and other weapons systems. If the deal is allowed to close, it argued, “The combined firm could disadvantage rivals by affecting the price or quality of the product, the quality of the engineering support, and the schedule and contract terms for developing and supplying” those components.
The agency also expressed concern over Aerojet Rocketdyne’s status as a subcontractor for many of the firms that Lockheed competes against; it said Aerojet’s access to “sensitive information” about those firms’ technical innovations and business strategies could allow Lockheed to “exploit its access to its rivals’ proprietary information to gain an advantage in competitions against them.”
Regulators added that the acquisition’s impact on competition could also raise prices on Lockheed’s largest customer: the U.S. government.
“Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation,” Vedova said. “We cannot afford to allow further concentration in markets critical to our national security and defense.”
- NASA Rover to Land on Mars With 3D Printed Parts - dot.LA ›
- ABL Space System Raises $49M, First Mission Set for 2021 - dot.LA ›
- 6 Ways LA's Defense Industry Soared in the Years Since 9/11 - dot.LA ›
- Lockheed Martin Cancels Aerojet Rocketdyne Merger - dot.LA ›
- Aerojet Rocketdyne’s Boardroom Battle Is Taking Off - dot.LA ›