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Amazon buys MGM for $ 8.45 billion, will ‘reinvent’ top movies and TV brands

SEATLE: Amazon.com Inc. said on Wednesday it would buy MGM, the legendary American film studio that houses the James Bond franchise, for $ 8.45 billion, giving it a huge library of movies and shows broadcasts and intensifies competition with its streaming rivals led by Netflix and Disney +.

The privately held MGM, or Metro Goldwyn Mayer, was founded in 1924, owns the Epix cable channel, and produces popular television shows such as “Fargo”, “Vikings” and “Shark Tank”.

The deal is designed to help Amazon supercharge its Amazon Prime Video service by building customer loyalty and paying for an annual subscription that also ensures fast delivery of purchases from its online store.

“The real financial value of this deal is the treasure of (intellectual property) in the comprehensive catalog that we plan to reinvent and develop with the talented team at MGM. It’s very exciting and offers a lot of high quality storytelling opportunities, ”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, Disney + from Walt Disney Co, HBO Max, and Apple TV + from Apple Inc. Companies are increasing their spending and expanding into international markets, in the goal of capturing the pandemic’s shift to shows to watch online.

Amazon also made big bets to woo fans of live sports and secured lucrative licenses to stream games, including a long-term deal with the National Football League that would cost around $ 1 billion a year.

Streaming services are also proliferating in search of brands they can expand and libraries of older series and movies. Analysts said it was a big motivation for another round of consolidating media properties after a brief hiatus during the pandemic.
Highlighting the trend, AT&T Inc. last week announced a $ 43 billion deal to divest its WarnerMedia business and combine it with Discovery Inc, one of the most ambitious in the streaming age.

“Amazon is looking to become a bigger player in the entertainment world, and there’s no better way to do that than by purchasing one of Hollywood’s most iconic movie studios,” Jesse said. Cohen, senior analyst at Investing.com. “It’s all about content as the streaming war escalates.”

The acquisition is Amazon’s second-largest after Whole Foods Market, which it bought for $ 13.7 billion in 2017.

The price represents a high premium over other offers. The price is roughly 37 times higher than MGM’s estimated EBITDA for 2021 – almost three times the company’s value / EBITDA multiple that Discovery’s deal implied for AT & T’s content assets – according to Reuters Breakingviews.

MGM kicked off a formal sale process in December when it was estimated at around $ 5.5 billion.

The deal can be seen as a doubling of the business strategy that Jeff Bezos, CEO of Amazon, articulated at a conference in 2016: “When we win a Golden Globe, it helps us sell more shoes,” he said, referring to Amazon’s diversity. business divisions.

In April, Amazon posted its fourth consecutive record quarterly profit and had more than 200 million Prime subscribers.
Amazon shares rose 0.3% early in the session.

Lucrative franchise rights

Amazon has won Oscars over the years and has slowly gone from art house fare to more engaging content. The MGM acquisition accelerates this movement, giving it the rights to James Bond, one of the most lucrative franchises in movie history which grossed nearly $ 7 billion at the global box office, according to MGM.

MGM also has an extensive library of classic films, including “Rocky”, “Moonstruck” and “The Silence of the Lambs”.

The potential to harness this intellectual property, by making new shows and movies based on popular characters, will help Amazon attract viewers to Prime, two former Amazon executives told Reuters.

Yet Amazon’s efforts to take advantage of MGM’s library will not be easy or cheap.

In many cases, MGM’s content is tied to multi-year agreements with television networks, former Amazon executives said. Amazon cannot broadcast the MGM reality show “The Voice”, for example, which is contractually in the hands of NBC.

Bringing a new installment of the James Bond saga to Prime viewers can be a particularly difficult task, according to the sources. The conditions under which MGM acquired the franchise leave control in the hands of the Broccoli family, the producers of the Bond films.

News of the acquisition quickly followed the return of Jeff Blackburn, Amazon’s former senior vice president for content and mergers and acquisitions, who had left earlier this year.

Amazon’s new CEO Andy Jassy had special faith in Blackburn after decades at Amazon, hoping he would lead a complicated merger, the sources said.



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