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Amazon Bidding For Acquisition of MGM

By Gary Symons

TLL Editor in Chief

US tech and e-commerce giant Amazon is reportedly negotiating a deal to buy out the iconic MGM film studio for roughly $9 billion, according to an original report by industry publication Variety.

Amazon, which also owns one of the world’s largest streaming video services in Amazon Prime, is said to be several weeks into the talks, which are designed to give the company a leg up in the fierce streaming content wars.

While MGM has reportedly been looking for an acquisition deal for some time, according to a December report in the Wall Street Journal, but now Variety sources say the smoke has turned into flames. Variety says sources have confirmed that Amazon Studios senior VP Mike Hopkins is in direct talks with  MGM board chair Kevin Ulrich, whose company Anchorage Capital is a major MGM shareholder.

In December the company was valued at $5.5 billion by the value of its publicly traded shares, but it’s believed MGM sees the long-term value of its massive content library as having increased value as streaming services like Amazon, Disney+, Netflix, HBOMax, Apple+ and Paramount+ are all pouring billions into the acquisition of both new content and new customers.

The first news of talks between the parties began with a report from The Information, which said Amazon was in talks about a potential deal with MGM, and was then confirmed by sources speaking to Variety.

The reasoning for the high value deal is simple from Amazon’s point of view. Its Prime service now has more than 200 million members globally, but the company faces intense competition for content. Disney+ rocked the industry when it decided to move its content off of competing streaming services and to open its own SVOD, which includes content from Pixar, Disney, Hulu and Marvel. Netflix responded by upping its spending on new and original content, and most analysts say the early entrant into the streaming wars still remains on top in terms of content and viewers. As well, as reported earlier this week in TLL, AT&T has merged its WarnerMedia property with Discovery in a $43 billion deal that, for now, will see Discovery+ and HBO Max operating as a combined entity.

The acquisition of MGM would go a long way to putting Amazon at par with the competition, as MGM owns one of the world’s largest catalogs of premium film and TV content. MGM has more than 4,000 film titles in its library, including premium properties like the James Bond collection, The Hobbit, the Rocky and Creed series, The Terminator, the RoboCop and Pink Panther franchises, as well as hit movies like The Silence of the Lambs, The Magnificent Seven and Four Weddings and a Funeral.

Timing is good for Amazon as well, as the latest and long delayed installment of the popular James Bond franchise, No Time To Die, is due to be released this year.

The company’s catalog of TV properties is equally impressive, featuring approximately 17,000 episodes of programming, including several highly popular hits. The Handmaid’s Tale is a massive hit in the US and around the world, as is the new Fargo series, but MGM has literally hundreds of other hit programs from the past and present, including the various Stargate series, Vikings, Get Shorty, Condor, American Gladiators, The Voice, Survivor, Shark Tank, and much more.

MGM is also a profitable company for the most part, with the exception of 2020 when the collapse of box office receipts during the pandemic led to a sharp decline in revenues. MGM Holdings lost $12.1 million in the first quarter of 2020, but the company is showing it can bounce back, as its quarterly report for Q1 this year shows a 27% increase in revenue to $403.3 million, and the company reported net income of $29.3 million.

While the MGM deal is pricey, for Amazon the price tag would appear to be eminently affordable. As compared to the $9 billion asking price on MGM, Amazon spent $11 billion on content acquisition in 2020, an increase of 40% from the previous year.


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