Amazon will ‘reimagine' storied movie and television brands after purchasing MGM for $8.45 billion

Amazon.com announced on Wednesday that it will pay $8.45 billion for MGM, the storied American film studio that is home to the James Bond franchise, bolstering its library of films and TV shows and increasing competition with streaming rivals Netflix and Disney+.

Amazon will ‘reimagine' storied movie and television brands after purchasing MGM for $8.45 billion.


Privately owned MGM, or Metro Goldwyn Mayer, was founded in 1924 and owns the Epix cable channel, as well as producing popular television shows such as "Fargo," "Vikings," and "Shark Tank."


The deal is intended to help Amazon boost its Amazon Prime Video service by keeping customers engaged and paying an annual subscription that also ensures fast delivery of purchases made on the company's website.

Read More: Today's 'Palestine March' in Karachi promises a power display by Jamaat-e-Islami

“The true financial value of this transaction is the vast amount of (intellectual property) in the deep catalogue that we plan to reimagine and develop with MGM's talented team. Mike Hopkins, senior vice president of Prime Video and Amazon Studios, said, "It's very exciting and provides so many opportunities for high-quality storytelling."


Netflix Inc, Walt Disney Co's Disney+, HBO Max, and Apple Inc's Apple TV+ are among Amazon's Prime Video's competitors. Companies are increasing spending and expanding internationally in order to take advantage of the pandemic-driven shift to binge-watching shows online.


Amazon has also placed large bets on wooing sports fans and has secured lucrative streaming licenses, including a long-term deal with the National Football League worth an estimated $1 billion per year.


Streaming services are also scrambling for new brands to add to their portfolios, as well as libraries of older shows and movies. According to analysts, this is a major motivator for a new round of media consolidation following a brief hiatus during the pandemic.


Last week, AT&T Inc. announced a $43 billion deal to spin off its Warner Media business and merge it with Discovery Inc., one of the most ambitious streaming deals to date.


“Amazon is looking to expand its presence in the entertainment industry, and there's no better way to do so than by purchasing one of Hollywood's most storied studios,” said Jesse Cohen, senior analyst at Investing.com. “As the streaming war heats up, it's all about content.”


After Whole Foods Market, which Amazon bought for $13.7 billion in 2017, this is Amazon's second-largest acquisition.


In comparison to other offers, the price is quite high. According to Reuters Breaking views, the price is about 37 times MGM's estimated EBITDA for 2021, or nearly triple the enterprise value-to-EBITDA multiple implied by Discovery's deal for AT&T's content assets.


MGM began a formal sale process in December, when the company's value was estimated to be around $5.5 billion.

The deal can be seen as a reaffirmation of Amazon CEO Jeff Bezos' business strategy, which he articulated at a conference in 2016: "When we win a Golden Globe, it helps us sell more shoes," he said, referring to the company's various business divisions.


Amazon reported a record quarterly profit for the fourth time in a row in April, with more than 200 million Prime members.


In early trading, Amazon's stock rose 0.3 percent.


RIGHTS TO LUCRATIVE FRANCHISE

Over the years, Amazon has amassed a slew of Academy Award nominations and has gradually shifted away from art-house fare toward more mainstream fare. MGM's acquisition accelerates that process by giving it the rights to James Bond, one of the most profitable film franchises in history, with nearly $7 billion in global box office receipts, according to MGM.


MGM also has a large library of classic movies, such as "Rocky," "Moonstruck," and "The Silence of the Lambs."


According to two former Amazon executives, the ability to mine this intellectual property by creating new shows and films based on popular characters will help Amazon draw viewers to Prime.


Nonetheless, Amazon's efforts to profit from MGM's library will not be simple or inexpensive.


According to the former Amazon executives, MGM's content is frequently tied to multi-year deals with television networks. Amazon, for example, is unable to air MGM's reality show "The Voice," which is contractually owned by NBC.


According to the sources, bringing a new instalment of the James Bond saga to Prime viewers could be a particularly difficult task. The Broccoli family, who produce the Bond films, retains control of the franchise under the terms of MGM's acquisition.


The acquisition was announced shortly after Jeff Blackburn, Amazon's former senior vice president of content and M&A, returned from a leave of absence earlier this year.


After decades working together at Amazon, incoming Amazon CEO Andy Jassy had particular faith in Blackburn, the sources said, hoping he could navigate a complicated merger.

Post a Comment

0 Comments