Privately-held MGM, or Metro Goldwyn Mayer, was founded in
1924, owns the Epix cable channel and makes popular TV shows including
"Fargo", "Vikings" and "Shark Tank."
The deal is designed to help Amazon supercharge its Amazon
Prime Video service by keeping customers engaged and paying an annual
subscription that also guarantees rapid delivery of purchases from its online
store.
"The real financial value behind this deal is the
treasure trove of (intellectual property) 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's Prime Video faces a long list of competitors
including Netflix Inc, Walt Disney Co's Disney+ , HBO Max and Apple Inc's Apple
TV+. The companies are increasing spending and expanding in international
markets, aiming to capture the pandemic-led shift to binge-watching shows
online.
Amazon has also made big bets courting fans of live sports
and has picked up lucrative licenses to stream games, including a long-term
deal with the National Football League that was estimated to cost about $1
billion per year.
The proliferating streaming services are also scrambling for
brands that they can expand and libraries of older shows and movies. Analysts
have said this is a big motivation for another round of consolidation of media
properties after a brief hiatus during the pandemic.
Underscoring the trend, AT&T Inc announced a $43-billion
deal last week to spin out its WarnerMedia business and combine it with
Discovery Inc, one of the most ambitious yet in the streaming era.
"Amazon is seeking to become a more prominent player in
the entertainment world, and there's no better way to do that 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 heats up."
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 - according to Reuters Breakingviews.
MGM started a formal sale process in December, when it was
estimated to be worth about $5.5 billion.
The deal can be viewed as a doubling down on 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.
Amazon shares rose 0.3% in early trading.
LUCRATIVE FRANCHISE RIGHTS
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’s earned nearly $7 billion at
the box office globally, according to MGM.
MGM also has a massive library of classic films including
"Rocky," "Moonstruck," and "The Silence of the
Lambs."
The potential to mine this intellectual property, by making
new shows and films based on popular characters, will help Amazon draw viewers
to Prime, two former Amazon executives told Reuters.
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.
News of the acquisition followed quickly on the return of
Jeff Blackburn, Amazon’s former senior vice president overseeing content and
M&A, who had left early this year.
Incoming Amazon CEO Andy Jassy had particular trust in
Blackburn after decades at Amazon together, hoping he'd shepherd a complicated
merger, the sources said.
0 comments:
Post a Comment