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Amazon acquires MGM studios for 8.5 billion USD: see what the deal means and everything that comes along with it

On Wednesday, Amazon Inc. had announced that they are willing to buy the famous MGM studios, which is considered as a home to the franchise of James Bond, for about 8.45 billion USD. This deal will give Amazon a massive collection of TV shows and films, hence building up the competition with rival streaming platforms like Disney+ and Netflix.

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MGM or Metro Goldwyn Mayer was founded in the year 1924 and it makes popular TV shows including Shark Tank, Fargo, and Vikings and along with it, the studio also owns the Epix cable channel.

This deal will help Amazon strengthen its Amazon Prime video by keeping its users engaged and occupying by paying an annual subscription for the same, something that guarantees quick delivery of the purchases made by the users from the online store.

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Mike Hopkins, who is a senior vice president of Prime Video and Amazon Studios believes that the real financial value with this deal is the intellectual property that they have planned to reimagine and develop with the talented team of the MGM studios.

Amazon Prime Video has a long list of competitors which includes famous streaming platforms like Netflix, HBO Max, Walt Disney Co’s Disney+, and Apple Inc’s Apple TV+. These companies have been reported to have been increasing their spending and expansion in the international markets, intending to take advantage of the shift to binge-watching shows line due to the pandemic.

It is pretty clear that with the pandemic hitting the world and several lockdowns being imposed in different countries, many people have had to stay in their homes, and during this time of spending time at home with themselves and their families, many people had started this habit of binge-watching. This proved to be an advantage for many online streaming platforms.

Amazon has picked up a long-term deal with National Football League, which, according to the estimates, is going to cost them around 1 billion USD each year. According to analysts, after having a break during the pandemic, this seems like a big motivation for one more round of consolidation of media properties.

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Recently, AT&T had announced its deal combining Discovery Inc while spinning out its WarnerMedia business. The deal is worth approximately 43 billion USD and is considered one of the most important and ambitious in the online streaming era.

Jesse Cohen, who is a senior analyst at invetsing.com said that Amazon is on its way to becoming the more prominent player in the entertainment world and he thinks there is no other way to do it better than to buy one of the most iconic and popular movie studios in Hollywood, he also thinks as the war for streaming heats up, its the content that matters the most.

This acquisition by Amazon is considered as the second-biggest acquisition after it acquired Whole Foods Market in the year 2017 which was worth about 13.7 billion USD.

MGM was estimated to be worth approximately 5.5 billion USD when it started its formal sale process in December. This deal with MGM is being seen as the doubling down business strategy put forth by Jeff Bezos at a conference that took place in the year 2016. In the conference Bezos mentioned that when the company wins Global Globe, it will help them sell even more shoes, referring to the company’s diverse business areas and divisions.

In April, Amazon announced its fourth consecutive record for quarterly profit by the company and announced over 200 million loyal Prime subscribers.

It has been seen that Amazon has won Academy Awards over the past years and has moved toward content from art-house fare with huge appeal. Amazon’s shares have risen by about 0.3% in the early trading. This acquisition with MGM will give Amazon rights to James Bond, which is considered as one of the most lucrative franchises in film history which have earned almost 7 billion USD at the box office globally. It is known that MGM has a huge collection of classic films that include Rocky, The Silence of the Lambs, and Moonstruck.

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Two of the former executives at Amazon told Reuters that this potential of mining intellectual property by creating new films and shows based on famous characters is going to help Amazon gain new viewers to Prime.

This deal with MGM will not e cheap or easy for Amazon in any way. In most cases, the content of MGM is tied up with television networks as a part of multi-year deals, as mentioned by the former executives at Amazon. For instance, Amazon can not air reality shows like “the voice” since the show is in the hands of NBC, based on the contract.

According to the sources, bringing in content such as James Bond Saga to Prime users will not be easy, it might be particularly difficult because control lies in the hands of the Broccoli family, the Bond films’ producers as a part of the contract.

The news for acquisition followed quickly the announcement of Jeff Blackburn, who is Amazon’s former senior vice president whose work was to oversee content and M&A, who was reported to have early this year.

Andy Jassy, CEO of the Amazon web series, had trust in Blackburn after having worked together at Amazon for decades, he hoped that he had shepherded a complicated merger, according to the sources.

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