Amazon.com Inc said on Wednesday it is buying MGM, the fabled US film studio that houses it James Bond franchisefor $ 8.45 billion, which gives him a huge library of movies and films Television shows and increased competition from streaming rivals, led by Netflix and Disney +.
Privately owned MGM, or Metro Goldwyn Mayer, was founded in 1924, owns the Epix cable channel, and makes popular TV shows such as “Fargo”, “Vikings” and “Shark Tank”.
The deal is supposed to help Amazon Top up the Amazon Prime Video service by retaining customers and paying an annual subscription, which also guarantees fast delivery of purchases from the online store.
“The real financial value behind this deal is the treasure trove of (intellectual property) in the vast catalog that we are working with the talented team at MGM to redefine and develop. It is very exciting and offers so many opportunities for high quality storytelling.” he said to Mike Hopkins, senior vice president of Prime Video and Amazon Studios.
Amazon’s Prime Video faces a long list of competitors including Netflix Inc, Disney + from Walt Disney Co, HBO Max, and Apple TV + from Apple Inc. The companies are increasing their spending and expanding in international markets to match those of the Capture pandemic-induced shift to online binge-watching shows.
Amazon has also placed big bets to attract fans of live sports and secured lucrative licenses to stream games, including a long-term contract with the National Football League that is estimated to cost an estimated $ 1 billion a year.
The growing streaming services are also looking for brands to expand and libraries of older shows and movies. Analysts have said this is great motivation for another round of media properties consolidation after a brief hiatus during the pandemic.
AT&T Inc backed the trend, announcing a $ 43 billion deal last week to outsource its WarnerMedia business and combine it with Discovery Inc, one of the most ambitious in the streaming era.
“Amazon is committed to becoming a more prominent player in the entertainment world and there is no better way to do it than by buying one of the most iconic movie studios in Hollywood,” said Jesse Cohen, senior analyst at Investing.com. “It’s all about content as the streaming war deepens.”
The acquisition is Amazon’s second largest after Whole Foods Market, which the company bought for $ 13.7 billion in 2017.
The price represents a high premium compared to other deals. According to Reuters Breakingviews, the price is roughly 37 times MGM’s estimated MGITDA for 2021 – or nearly three times the value-to-EBITDA multiple of the company that Discovery for the content resources of AT&T.
MGM began a formal sales process in December that was valued at approximately $ 5.5 billion.
The deal can be seen as a doubling of the business strategy that Jeff Bezos, CEO of Amazon, phrased at a conference in 2016: “If we win a Golden Globe, it will help us sell more shoes,” he had referring to Diversity of Amazon said business areas.
In April, Amazon made its fourth quarterly profit in a row and had more than 200 million Prime customers.
Amazon stock rose 0.3% in early trading.
Lucrative franchise rights
Amazon has won the Oscars over the years and has slowly moved from being an art house tariff to being more attractive to content. The MGM acquisition accelerates this step and gives rights to James Bond, one of the most lucrative franchises in film history, which, according to MGM, has grossed nearly $ 7 billion at the box office worldwide.
MGM also has a huge library of classic films including “Rocky”, “Moonstruck” and “The Silence of the Lambs”.
The potential of breaking down that intellectual property through new shows and movies based on popular characters will help Amazon attract viewers to Prime, two former Amazon executives told Reuters.
Still, Amazon’s efforts to take advantage of the MGM library will not be easy or cheap.
In many cases, MGM’s content is tied to multi-year contracts with television broadcasters, according to former Amazon executives. For example, Amazon cannot broadcast MGM’s reality show “The Voice”, which is contractually owned by NBC.
Bringing a new episode of the James Bond saga to Prime viewers could be an especially daunting task, the sources said. The terms under which MGM acquired the franchise leave control to the Broccoli family, the producers of the Bond films.
News of the acquisition came quickly after the return of Jeff Blackburn, the former Amazon Senior Vice President in charge of content and M&A who left earlier this year.
Amazon’s new CEO Andy Jassy had particular confidence in Blackburn after working for decades at Amazon in hopes it would bring about a complicated merger, the sources said.