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Amazon To Acquire MGM Studios

Amazon To Acquire MGM Studios

Marco de Matos, Anchor Research

According to multiple media reports, retail giant Amazon has set its sights on the iconic Hollywood movie studio, Metro-Goldwyn-Mayer (MGM). MGM is the studio behind the James Bond (the fifth most valuable franchise after the Marvel Cinematic Universe, Star Wars, Harry Potter, and Spider-Man movies), and Rocky franchises and put itself up for sale in December 2020. However, Reuters reports that the status of the discussions are unclear, and it is possible that no deal will be reached between the two parties. Amazon has reportedly offered US$9bn for the studio.
 
Besides the aforementioned franchises, MGM’s library includes 4,000 movie titles and 17,000 hours of TV programming. It also includes movies such as The Wizard of Oz, Ben-Hur, Gone With The Wind, and The Hobbit as well as TV series that include The Handmaid’s Tale. MGM reported US$1.5bn in revenue last year and US$33mn in profit.
 
Amazon has been investing in its media arm recently, spending US$11bn last year on television programming, music, and movies for its Prime service — a 40% YoY increase. Amazon Prime currently has over 200mn subscribers globally and Amazon CEO Jeff Bezos recently told investors that 175mn of those subscribers streamed content on Prime Video in the past year.
 
There has been a flurry of activity in the US media space and Variety first reported on these discussions on the same day that AT&T announced it would merge WarnerMedia and Discovery Inc. into one of the biggest US media companies (with a value of c. US$130bn including debt) pending regulatory approval.
 
The rapid increase of streaming services, including new arrivals such as HBO Max and Paramount+, has put pressure on Amazon to acquire more programming and MGM’s huge backlog will provide it with a vast library of programming at a time when the production of new movies and television shows is still recovering from the COVID-19 pandemic.
 
MGM and Amazon have not commented on the reports and we note that MGM has been seen as a potential takeover target for years. Last year it held preliminary talks with Apple and Netflix, among others, but Bloomberg writes that the price proved to be a stumbling block.

Written exclusively for Moore South Africa by Marco de Matos from Anchor Research.