Amazon to buy MGM Studios for $8.45 billion

Amazon announced on Wednesday that it would acquire MGM Studios for $ 8.45 billion. This marks the boldest step into the entertainment industry yet and increases its streaming ambitions.

The deal marks the second-largest acquisition in Amazon’s history, after purchasing Whole Foods for $ 13.7 billion in 2017.

Amazon hopes to leverage MGM’s storied film history and extensive catalog of 4,000 films and 17,000 TV shows to bolster Amazon Studios, its film and TV division.

“The real financial value behind this deal is the intellectual property treasure in the vast catalog that we are working with the talented team at MGM to redefine and develop,” said Mike Hopkins, senior vice president of Prime Video and Amazon Studios. “It’s very exciting and offers so many opportunities for high quality storytelling.”

In a statement, Kevin Ulrich, Chairman of MGM said, “The opportunity to align MGM’s history with Amazon is an inspiring combination.”

Amazon’s stocks barely moved on the announcement.

The deal underscores Amazon’s willingness to spend big bucks to stay competitive in the crowded streaming market. Amazon, Netflix, Disney, and other video streaming services have tried to upgrade their content libraries to attract subscribers, allocate billions to content licensing and original programming development.

At the same time, the media juggernauts were further consolidated to achieve greater scalability to take on Amazon and Netflix. Discovery’s $ 43 billion deal to merge with WarnerMedia after a spin-off from AT&T announced last week is the latest sign of this.

Amazon has long been poised to make huge investments in video content to promote Prime memberships, which now total more than 200 million worldwide. Last year, $ 11 billion was spent on video and music content, up from $ 7.8 billion in 2019. CEO Jeff Bezos has argued that these investments add to Amazon’s “flywheel effect” as they attract more Prime Attract subscribers, who in turn tend to spend more on the website.

Amazon has had hits in both film and television programs including “The Big Sick” and “Manchester By The Sea”, 2017 Oscar winners for Best Original Screenplay, as well as the series “The Marvelous Mrs. Maisel” and “Transparent”. “”

Another closely watched project, an adaptation of Lord of the Rings, is currently in production. “Lord of the Rings” has a price of $ 465 million for the first season, making it probably one of the most expensive television series ever made.

Amazon also made an aggressive push into sports content, signing a deal with the NFL in May to broadcast Thursday Night Football starting in 2022.

Amazon has an experienced agent in Hollywood. The company announced last week that it would be bringing back Jeff Blackburn, formerly First Lieutenant of Bezos, to oversee a new global media and entertainment division that groups its entertainment offerings under one heading, including Prime Video, Amazon Studios, Music and Podcasting Enterprise, Amazon Games and Twitch.

James Bond wears Tom Ford’s knitted sleeved bomber jacket

Courtesy of Sony

MGM will make Amazon’s TV and movie library even more robust. The Hollywood studio owns the James Bond catalog and has made several hit shows including “The Handmaid’s Tale” and “Fargo”. It also owns the premium cable network Epix and several popular reality television shows including “Shark Tank”, “Survivor” and “The Real Housewives”.

MGM, a private company, has been looking for a buyer for several years. Owners include Anchorage Capital, Highland Capital Partners, Davidson, Kempner Capital Management, Solus Alternative Asset Management, and Owl Creek Investments – funds that took control of the studio when it went bankrupt in 2010.

The MGM deal could exacerbate antitrust concerns for Amazon. The company is currently under investigation by several federal agencies, attorneys general and the European antitrust watchdog. The House of Representatives Antitrust Subcommittee released a comprehensive report last October that found Amazon to have monopoly power over third-party sellers in its market.

The announcement of the takeover comes one day after new antitrust claims have been made against Amazon. On Tuesday, DC Attorney General Karl Racine announced that he was suing Amazon on antitrust grounds. He alleged the company’s pricing deals with third-party suppliers wrongly increased prices for consumers and undermined competition. Amazon bucked the claims, saying sellers set their own prices for their products in its marketplace.

Correction: An earlier version had the wrong announcement date in a reference.

– CNBC’s Alex Sherman contributed to this report.

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