on the surface,
Com’s $8.5 billion deal for MGM Holdings is puzzling, in absolute terms. It’s a big acquisition. It’s Amazon’s second-biggest after it bought Whole Foods for just $13.4 billion in 2017. But MGM doesn’t own a particularly attractive set of assets. Why is Amazon paying?
For one thing, the e-commerce giant (short name: AMZN) can afford it. With a market capitalization of $1.6 trillion, $9 billion dropped in the bucket.
MGM offers a library of 4,000 movies and 17,000 TV episodes. The biggest prize is the James Movie Collection. The entire bond—and the rights to make additional movies. Amazon has also received second-tier franchises, including Pink Panther, Rocky, RoboCop, Legally Blonde, Tomb Raider, and Adams family. MGM Television Production produces scripted series such as Maid’s story and Fargoand non-scripted items such as shark tank and soundMGM also offers Epix movie subscriptions. As Bernstein analyst Mark Shmulik wrote in a research note last week, MGM’s libraries are almost game-changing. “What would you pay for a MGM+ subscription?” he asked.
The library has long been stripped of its most famous films. In 1986, Ted Turner bought MGM and quickly sold the studio. while retaining the rights to a number of historical films. Those flicks are controlled by Turner Classic Movies, part of the
(CMCSA) NBC Universal
(VIAC) and WarnerMedia have both built their own streaming platforms. over time They will keep the library in-house. by limiting the content options for the Amazon platform.
But now Amazon can play the same game. As Citigroup analyst Jason Bazinet pointed out in a research note last week, MGM produced seven shows for Disney, four for Comcast, four for WarnerMedia and
(DISCA) three for ViacomCBS and one or two for
(AMCX) and Fox, including some popular shows that may eventually appear on Amazon Prime, including ABC’s. shark tank, NBC’s sound, CBS’s survivor, and AMC real housewife.
MGM generates $1.5 billion in annual revenue. But most of that revenue disappears when the license expires and Amazon migrates content to its own platform. For Amazon, the point is to find a way to mine MGM’s library for new content. Maybe the world needs it Mystic Pizza remake or a hot tub time machine sequel or something else Weekend at Bernie’s.
“The thesis on acquisitions here is very simple,” Amazon President and CEO Jeff Bezos said at the company’s annual meeting last week. abundant and profound And… we can re-imagine and develop that intellectual property for the 21st century.”
MGM doesn’t have the resources to do that on its own — the company has spent just $6 billion on new and acquired content since 2011, a small fraction in the new world of streaming. Amazon spent $11 billion on film, TV and music content in 2020, up from $7.8 billion in 2019, and the total continues to grow. This includes a new 10-year broadcast deal. Thursday night football For its reported $1 billion per year, Netflix expects to spend $17 billion on content this year alone. Disney said spending on content would hit $16 billion a year by 2024. AT&T’s Discovery and WarnerMedia are expected to spend $20 billion annually on content once the merger closes.
Finally, Amazon will have more than one way to squeeze value out of MGM. The additional content should increase the appeal of Amazon Prime Video, which could reduce the turbulence for Amazon Prime customers and thereby encourage more online shopping.
Amazon also offers an ad-supported video-on-demand service called IMDB.TV, which requires catalog content to survive.
(ROKU); It can populate several new streaming channels with MGM content. One would imagine Amazon creatively digging up new treasures to create not just new movies. It also includes TV series, games and podcasts, while IMDB.TV loads up with a deep catalog of content such as tank girl, rollerball, and biodome.
Lightshed Partners analyst Rich Greenfield told me last week that “A war for time and attention… and MGM owns a lot of intellectual property.” Greenfield said Amazon has spent a lot of money on movies and television content in recent years without showing much in the world. terms of He said the additional features from MGM gave the company more opportunities to improve streaming performance.
Netflix may have Queen’s tricks But imagine that James What can Bond do with a chessboard?
write to Eric J. Savitz at email@example.com