Amazon Will Buy MGM for $8.5 Billion

Amazon Vies for Viewers’ Attention

Yesterday, Amazon (AMZN) announced that it plans to acquire the movie studio Metro-Goldwyn-Mayer, or MGM, for $8.5 billion. Through this purchase, Amazon hopes to bolster its content catalog as it competes with Netflix (NFLX), Apple (AAPL), and Disney (DIS).
This deal marks Amazon’s second-largest acquisition since it bought Whole Foods for $13.7 billion in 2017.

The move gives Amazon access to MGM’s intellectual property which it can use to develop new content. “The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team,” Mike Hopkins, Senior Vice President of Prime Video and Amazon Studios, said when announcing the deal. MGM’s library includes the James Bond and Rocky franchises, as well as a number of popular TV shows including Fargo and The Handmaid’s Tale.

Deal-Making Abounds

Amazon’s acquisition of MGM comes amid a flurry of media deal-making in 2021. Earlier this month, AT&T (T) and Discovery (DISCA) announced they are combining their media assets in a $43 billion deal to form a new stand-alone public company. ViacomCBS (VIAC), Fox (FOX), Lionsgate (LGFA), and AMC (AMC) are all seen as potential takeover targets for larger media companies in the coming years.

For MGM, the deal with Amazon is a win given that the studio was valued at around $5.5 billion including debt last year when it started looking for buyers. Apple, as well as the cable giant Comcast (CMCSA), had considered purchasing MGM, valuing it around $6 billion.

Amazon the Hollywood Studio

Beyond taking on rivals in the streaming content market, Amazon has set its sights on becoming a major Hollywood studio. Just last week the company announced the creation of a global media and entertainment unit headed by Jeff Blackburn. Amazon is also earmarking $465 million or more for the first season of a Lord of the Rings TV series. This is a record-setting budget for a streaming show.

For years Amazon has relied on a strategy of purchasing hit movies and shows from other studios. The acquisition of MGM marks a change in its business model. Investors and consumers will be on the edge of their seats waiting to see how Amazon’s decision will affect the media landscape.

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