Amazon buys one of America’s oldest film companies, Metro Goldwyn Mayer (MGM), for $ 8.5 billion. The acquisition could help Amazon in an increasingly fierce battle against other streaming services such as Netflix and Disney +.
On Wednesday, May 26, technology corporation Amazon announced that it is acquiring film production company MGM. The corporation will pay MGM shareholders $ 8.5 billion. MGM remained almost the only independent film company – many of its competitors were bought by large companies in recent years.
MGM is one of the oldest American film companies, founded in 1924. Among the films she shot – a series about James Bond, “Rocky”, “The Silence of the Lambs.” In total, she owns the rights to more than 4,000 films. The company also produces TV series – including The Handmaid’s Tale and Fargo – and owns the Epix cable TV channel. The studio changed hands several times. One of its most famous owners was the American businessman Kirk Kirkorian, who took control of it in 1969. Later, he sold and bought it several times.
In 2010, MGM went through bankruptcy proceedings: it has been experiencing financial difficulties for a long time, the company’s debts are estimated at $ 2 billion. Recently, it has been repeatedly reported that the company is looking for a buyer. Since MGM has still remained private, there is no official data on its financial performance and value, but according to the American media, at the end of last year the company was estimated at $ 5.5 billion.
The MGM purchase should help Amazon Prime, an Amazon-owned video streaming service, in the fiercest competition in this market with Netflix, Disney +, Apple TV + and other similar services.
Last week, Amazon announced the creation of a new media and entertainment content division, and its ambition in this area is reflected in the fact that it has donated $ 465 million to shoot a Lord of the Rings TV series – a record amount for a streaming project. As noted by the American media, so far Amazon’s own content has generally not been as successful as the films and series that the company has bought, and MGM’s acquisition could improve the situation in this regard.
“This is a sign of how competitive this space is,” said Mark Mahani, senior managing director at research firm Evercore ISI, on the deal. “The cost of participating in this club will continue to rise and the stakes are extremely high. You have to be willing to spend, for example, $ 10 billion a year to be a global streaming company, and I think very few companies other than the Big Five can afford that. ” According to Mr. Mahani, the consolidation of this market will continue.
Last year, Amazon spent $ 11 billion on content creation, up 41% from a year earlier.
Netflix in 2020 slightly reduced its content creation costs, but at the same time they amounted to $ 11.8 billion.
It was the growing competition from Amazon and Netflix that analysts explained the purchase of 21st Century Fox by media corporation Walt Disney in 2017 for $ 66 billion. Earlier, Disney acquired such film companies as Lucasfilm, Marvel Entertainment and Pixar Studios. Experts noted that Disney had to think about strengthening its position as Netflix and Amazon came close to it in terms of spending on their own content.
Just a year later, growing competition from Netflix and Amazon forced another member of the “old guard” of the telecom and media market in the US – AT&T corporation – to buy the media company Time Warner, despite opposition from then US President Donald Trump and shelling out $ 85 billion for this asset. Warner was the third largest producer of entertainment content in the world (after Comcast and Walt Disney): movies, TV series, TV shows, including news, cartoons, etc. Then analysts noted that the deal between AT&T and Time Warner could lead to a new wave of mergers in the media market, as Netflix and Amazon will have to defend their consumers with the old guard.