28th May 2021
Amazon is buying MGM for $8.45 billion in a bid to boost its Prime Video streaming offering, as the battle for video streaming customers intensifies.
The deal is Amazon’s biggest entertainment acquisition yet and its second largest acquisition in history after its $13.7 billion purchase of Whole Foods in 2017. The driver is Amazon’s desire to compete in the crowded streaming market - following Discovery’s $43 billion deal to merge with WarnerMedia after a spinoff from AT&T that was announced last week.
In MGM, Amazon will get a wealth of content, including a library of over 4,000 films including the James Bond and Rocky franchises, a TV catalogue that includes critically acclaimed shows “The Handmaid’s Tale” and “Fargo” and popular reality TV shows including “The Real Housewives”.
Mike Hopkins, Senior Vice President of Prime Video and Amazon Studios, said: "The real financial value behind this deal is the treasure trove of IP in the deep catalogue 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."
Amazon has over 200 million Prime subscribers, a substantial portion of which make use of the included free Prime Video streaming, so the addition of thousands more films and TV shows could provide a significant boost to Prime subscriber numbers.
For advertisers there could be opportunities for deeper brand integrations in the future, particularly for properties like James Bond, as the movies are well known for showcasing tech, auto and luxury products. With Amazon, deeper integrations with the properties and the connection to commerce would make those brand tie-ins even more shoppable.
There is a lot of value in the premium content from MGM, however it is unclear how the rights are structured for every show and movie in the catalogue, so there could be considerations for how Amazon is allowed to develop franchises like Bond.
Entertainment is not the only content Amazon has invested heavily in as the company also recently signed a deal with the NFL to broadcast Thursday Night Football starting in 2022.
The acquisition of MGM is a continuation of Amazon’s strategy to invest heavily in video content to drive Prime memberships. CEO Jeff Bezos previously said that these investments reinforce Amazon’s “flywheel effect,” in that it attracts more Prime subscribers, who in turn, tend to spend more on the site. So Amazon is able to compete on multiple fronts and leverage its investments in entertainment across a whole digital ecosystem, unlike competitors such as Netflix.