Amazon MGM Deal: Amazon Limits The Players In Streaming War
Amazon.com Inc announced its new acquisition MGM, the U.S. movie studio that gave the James Bond franchise has a huge library of films and TV shows. Now, Amazon has good quality content to compete with streaming rivals like Netflix and Disney+.
MGM (Metro Goldwyn Mayor) is a privately held company founded in 1924 that has created many popular shows that include “Fargo”, “Vikings” and “Shark Tank.”
“The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team. It’s very exciting and provides so many opportunities for high-quality storytelling,” said Mike Hopkins, senior vice president of Prime Video and Amazon Studios.
Amazon Prime Video has been facing tough competition in the streaming war from Netflix, Disney+, HBO Max, and Apple TV+. All these companies are spending huge money to acquire lion’s share in the international markets. The pandemic has given a good opportunity to these streaming service providers to bring their A-game.
In addition, to create new original content, these streaming services are also scrambling for brands and libraries of older movies and shows. Analysts have said this is a big motivation for another round of consolidation of media properties after a brief hiatus during the pandemic.
Is MGM Overpaid In The Amazon MGM Deal?
Underscoring the trend, AT&T Inc announced a $43-billion deal last week to spin out its WarnerMedia business and add Discovery Inc, one of the most ambitious yet in the streaming era. The acquisition is Amazon’s second-biggest after Whole Foods Market, which it bought for $13.7 billion in 2017.
The price represents a lofty premium relative to other deals. The price is about 37 times MGM’s 2021 estimated EBITDA – or almost triple the enterprise value-to-EBITDA multiple that Discovery’s deal implied for AT&T’s content assets.
The deal can be viewed as a doubling down on the business strategy that Jeff Bezos, Amazon’s CEO, articulated at a conference in 2016: “When we win a Golden Globe, it helps us sell more shoes,” he had said, referring to Amazon’s diverse business divisions.
In April, Amazon posted its fourth consecutive record quarterly profit and boasted more than 200 million Prime loyalty subscribers.
Lucrative Franchise Rights From MGM Studios
Amazon has picked up Academy Awards over the years and slowly moved from art-house fare toward content with wider appeal. The MGM acquisition accelerates that move, giving it rights to James Bond, one of the most lucrative franchises in film history that have earned nearly $7 billion at the box office globally, according to MGM. MGM also has a massive library of classic films.
The potential to mine this intellectual property, by making new shows and films based on popular characters, will help Amazon draw viewers to Prime, said former Amazon executives. Still, efforts by Amazon to profit off MGM’s library won’t be easy, or cheap.
In many cases, MGM’s content is tied up in multi-year deals with television networks, the former Amazon executives said. Amazon cannot air MGM’s reality show “The Voice,” for instance, which contractually is in the hands of NBC.
Bringing a new installment of the “James Bond” saga to Prime viewers may be a particularly difficult task, the sources said. The terms under which MGM acquired the franchise leave control in the hands of the Broccoli family, the Bond films’ producers.